The panel, entitled ‘The Far-Reaching, Negative Impact of the Illegal Gambling Market’, featured moderator Lindsay Slader, senior vice-president of compliance at GeoComply. Panelists were Kurt Steinkamp, chief of staff of the Michigan Gaming Control Board, Cory Fox, vice-president of new market compliance at FanDuel, Joel Trella, lieutenant at the New Jersey State Police Gaming Bureau and David Rebuck, former director of the New Jersey Department of Gaming Enforcement.

The panel examined how pervasive illegal internet gaming remains in the US, despite the presence of legal, regulated options in many states. “Just this morning from the lobby here, I created an account on an offshore operator utilising an identity that I have access to that is not mine,” said New Jersey’s Trella.

“There is no KYC other than my name and date of birth. The multiple methods of depositing can allow somebody to introduce illegal funds very, very easily. So, you get to a point where there is a very attractive market for criminals specifically to operate in a space that is highly regulated domestically almost with impunity.

“There is no oversight from anybody. There is no financial reporting, there’s no AML compliance. You have a place where these criminals can launder their funds very, very easily.”

Pervasive problem

Rebuck estimated that there are more than 100 illegal igaming sites operating in New Jersey. They advertise on the internet, offering no indication whether or not the site is legal. FanDuel’s Fox noted that advertisements from offshore sites like Bovada that advertise nationally, are readily accessible to children.

Fox said this is because unlicensed operators are not subject to any of the compliance or consumer protection requirements that licensed operators must undergo.

“I started at FanDuel when we were an unregulated daily fantasy sports company,” Fox said. I “helped guide the company through this transition from an unregulated daily fantasy sports company to a regulated daily fantasy sports company, to a regulated online casino and online sports wagering company. And being a regulated entity really does define everything throughout the company, in every department.”

He added that the requirements of regulation go beyond the company itself.

“When you think about the requirements that we have for licensing, it’s not just the entity licensing, but making sure that all of our vendors are licensed, making sure that our executives go through key licensing” and more. Fox quipped that executives must “turn over their life history” and reveal “how much their couch is worth”.

Regulated gaming platforms must go through occupational licensing from executives to customer-service agents. And, Fox said, fraud departments work with testing labs to qualify products and make sure operators comply with anti-money laundering regulations.

“Obviously, none of this is going on in the unregulated world,” he said. “We’ve set up our entire business in order to meet these requirements and hopefully exceed them.”

Effective action

Panelists offered examples of actions that have been effective in curtailing illegal platforms in legal gambling states.

“It’s obvious to everyone that illegal offshore operators engaged in online gambling and sports betting are pervasive, and operating within every state,” said Rebuck. “In New Jersey, we recognised that and went after them in a number of ways.”

One effective method is cease-and-desist letters. The MGCB has employed these with success. Steinkamp said the fact the orders are reported publicly shines unwanted light on the illegal operators.

“We are fortunate enough to have very clear laws in Michigan – all gambling is illegal unless expressly established by law,” Steinkamp said. “In 2021, the Michigan Gaming Control Board was given authority to investigate anyone who was operating internet games in the state without a licence and one of our key strategies was to issue cease-and-desist orders.”

He said the MGCB has proffered 11 cease-and-desist orders so far, including two just last week. “The other nine all have taken steps to prevent people in Michigan from registering for accounts within the state. So cease-and-desist is having an impact.”

He said Bovada, one of the largest illegal operators, has taken steps to restrict access to its site in every state where they were issued cease-and-desist orders.

Asset seizure an effective deterrent

The public nature of the orders, panelists said, can enable a potentially more effective measure – asset seizure, not only directed at the illegal sites but to their legal vendors, such as payment processing companies.

“The more exposure we get to the issue, the more partners we can get,” Steinkamp said. “We’re very vocal about what we’re doing. When you’re public about what you’re doing and the word spreads like wildfire, other companies in the legitimate sector like payment processors become aware. The pressure points coming from public coverage of this issue will help us build better relationships with the federal government.”

Trella said the potential effectiveness of asset seizure measures comes to light when considering the nature of the vendors who operate legitimate businesses, like payment and marketing companies.

“For the site I created an account on this morning, one of their game designers is one of the companies on the (Global Gaming Expo) floor,” he said. “When you look at the supply chains, they’re very intertwined. And what can the regulations do for that? But from a critical perspective, one of the big tools that we have is the ability to seize assets and actually seize funds from these companies. Money talks in the business world.

“I’m in law enforcement, but if I take your money, chances are you’re going to be upset and there are going to be repercussions. From a law enforcement perspective, the seizure of assets is a very big tool that we can use to (battle) those illegal operators.”

US DoJ getting involved

Steinkamp said state law enforcement is beginning to see results in persuading the US Department of Justice to act on curtailing offshore gambling sites. “They’re stealing hundreds of millions in tax revenue. It’s been a pervasive problem for a number of years. The US Department of Justice has responded that they are the right agency to act, but will there be sweeping action like there was in 2011 with the poker sites?”

Said Rebuck: “In New Jersey, I had resources to battle all types of crime; in other states they don’t have it. There needs to be partnership between law enforcement and stakeholders. Our structural inefficiencies give benefits to the illegal operators.

“It’s incumbent on all of us as operators, but even as state law enforcement as well, to go to the federal government and say, we need your assistance here. This is something we should all be engaged on. There are a number of pinch points that we’ve been describing, like payment processors, like internet service providers, like big advertising platforms, where the federal government could put pressure to reduce the prevalence of illegal sites.”

Industry must work together

Fox said outreach to the federal government should come from the industry as a whole.

“At FanDuel, we are a relatively big company and we could have a little more success on our own. But I do think it is really the right way for the industry to come together through the AGA and other trade associations to get the federal government’s attention.”

“There are many aspects of federal law enforcement that can be leveraged to combat illegal gambling,” said Trella. “We need to be creative, look outside the box and target federal agencies that are able to tackle this in a way that’s creative and effective and the best way to do that is to hit them in the pocketbook.”