Where Have all the Sportsbooks Gone?

September 29th, 2006 was a significant date for online gambling. On that day the United States Congress pushed through The Unlawful Internet Gambling Enforcement Act, which was signed into law by President Bush the next month. The law attempts to ban online financial transactions with betting sites thereby stopping U.S. players from wagering over the Internet. While the U.S. Government had until mid-July 2007 to process the regulations, the effects were apparent by the end of last year. The question is what does this ultimately mean for the future of online sportsbetting?

The new Unlawful Internet Gambling law targets the online banking companies that provide players with the ability to make real money deposits in order to place a bet on their favorite teams. By making online wire, checking or credit card transactions between U.S. players and sports betting sites illegal, the U.S. government has effectively cut off the lifeline of the sportsbooks industry.

In January 2007, Stephen Eric Lawrence and John David Lefebvre, co-founders of the online payment system Neteller, were arrested in the U.S. on charges of money laundering. Although Neteller is not located in the U.S., many U.S. players rely on its banking services for making wager deposits at online sportsbooks. It remains to be seen what kind of jurisdiction the U.S. authorities can claim over foreign owned payment companies. The outcome of the Neteller case will ultimately provide a road map for the future of online gaming.

U.S. owned Paypal, one of the biggest online payment systems in the world, used to service the online gambling industry until it was bought out by Ebay.com in late 2002. The management at Ebay.com ended Paypal’s online gambling deposit methods after paying a $10 million (USD) fine shortly after the acquisition was completed.

When Paypal pulled out of the online betting business, non-U.S. companies like Neteller and 900Pay quickly filled the vacuum.

In the last months of 2006 major sportsbooks began making dramatic changes. Top rated sites went up for sale, several major betting sites began buying up the Internet real estate and U.S. players were put on notice to close out accounts.

Vip Sports made a huge buyout sweep and shortened its name to VIP. The sites purchased by VIP in 2006 included top rated Bet19, WSSBSport, 5 Card Charlie, Fairdeal, Bet On Races and Bet On Games. VIP may continue its buying spree to maintain their advantage in the changing online gambling landscape. As they no longer accept U.S. players, they must reach into other territories to maintain their dominance.

In a similar move, Bodog, purchased all Betcorp online gambling subsidiaries including the top rated BetWWTS. U.S. visitors to BetWWTS are referred to Bodog’s site for wagering. And Canadian visitors were directed to Bowmans’ site.

Bowmans, a prestigeous five-star rated U.K. sports betting site serving a large U.S. audience since 1985, sold off their client base and name to Bet365, a top U.K. competitor. Bet365 stopped accepting U.S. players and requested they cash out their accounts at the end of 2006. Bet365 has maintained the Bowmans’ web presence by name, and existing members’ can login using their old account information.

In mid-January of 2007, Pinnacle Sports (a leading online sportsbook in business since 1998) announced they would no longer take bets from U.S. players and would instead focus their attention on European markets. An executive at Pinnacle Sports was quoted as saying: "When the U.S. focuses on something and says 'enough,' and when they go to war on something, no individual company can possibly win in a fight of this nature."

BetOnSports was another one of the major sites to close business to U.S. players.

Some analysts believe that as much as 50% of total online wagers are made by U.S. citizens. If these numbers are correct then many more online sportsbooks may soon sell their business to competitors or close due to huge financial losses caused by a lack of U.S. players, the largest consumer base in the online gaming market.

In the meantime, many of the other top service providers such as Wall Street Exchange, William Hill, and BetCris, seem to be operating on a business-as-usual basis.

Politicians such as Congressman Bob Goodlatte (R-VA), Senators Bill Frist (R-TN) and John Kyl (R-AZ) have been working for over a decade trying to push through legislation banning online gambling which, until October of 2006, operated in a legal gray zone. While legislation can be introduced at any time, laws can also be overturned or amended in the future.