Eradicating illegal gambling takes a village

Effective collaboration among licensed online gaming operators, state law enforcement, and the federal government is critical in the fight against unlicensed offshore iGaming websites, according to leading experts at the Global Gaming Expo (G2E) held in Las Vegas.

The panel discussion, titled ‘The Far-Reaching, Negative Impact of the Illegal Gambling Market’, was moderated by Lindsay Slader, Senior Vice President of Compliance at GeoComply. Panelists included Kurt Steinkamp, Chief of Staff at the Michigan Gaming Control Board (MGCB); 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 Division of Gaming Enforcement.

The discussion highlighted the alarming prevalence of illegal internet gaming in the United States, which continues to thrive despite the availability of regulated options in various states. “This morning, from the lobby here, I managed to create an account on an offshore operator using an identity that is not mine,” Trella revealed. He emphasized the lack of robust Know Your Customer (KYC) protocols, stating that the only required information was a name and date of birth, which makes it alarmingly easy for criminals to exploit the system. “This creates a highly attractive environment for illegal operators to function with minimal oversight, circumventing anti-money laundering (AML) regulations,” he noted.

The Pervasive Problem of Illegal iGaming

Rebuck estimated that over 100 illegal iGaming sites are currently operational in New Jersey alone, many of which market themselves without clear indications of their legal status. Fox pointed out that these unlicensed operators, like Bovada, pose significant risks as their advertisements are readily accessible to minors.

Licensed operators, on the other hand, are compelled to comply with rigorous consumer protection and regulatory standards—a necessity highlighted by Fox’s own experience transitioning FanDuel from an unregulated to a fully regulated entity. “Being a regulated business transforms every aspect of our operations across all departments,” he stated. Moreover, regulatory requirements extend beyond the operator itself. “It’s vital that all vendors are properly licensed, and that executives undergo thorough vetting processes,” Fox explained, humorously mentioning how executives have to disclose their personal histories during the licensing process.

Regulations dictate occupational licensing for everyone, from top executives to customer service agents, as well as the necessity for fraud departments to work alongside testing labs to ensure compliance with AML standards. “The unregulated market lacks these essential checks and balances,” Fox emphasized. “We have structured our entire operation not just to meet these requirements, but to exceed them.”

Implementing Effective Actions

The panelists shared several effective strategies that have been utilized to combat illegal online gambling in states with legal frameworks. Rebuck expressed concern over the pervasive nature of illegal offshore operators across all states. “In New Jersey, we recognized the issue and took action through various means,” he stated.

One significant approach has been the issuance of cease-and-desist letters, which have proven impactful. Steinkamp highlighted the MGCB’s success with these letters, mentioning that their public nature shines a spotlight on illegal operators, exposing them to potential reputational damage.

“Michigan is fortunate to have clear laws—gambling is illegal unless explicitly authorized,” Steinkamp noted. After acquiring authority in 2021 to investigate unlicensed internet gaming in Michigan, the MGCB has issued 11 cease-and-desist orders, with growing success. “The response has been effective; for instance, Bovada has restricted access to its services in states where such orders have been filed,” he elaborated.

Asset Seizure: A Potent Deterrent

According to the panelists, the visibility of cease-and-desist orders can lead to further effective measures, such as asset seizures. These can target not only the illegal sites but also their legitimate vendors, including payment processors. “Public awareness around our initiatives fosters partnerships,” Steinkamp commented. “When our actions gain visibility, it pressures legitimate businesses to cooperate with us against these illegal operators.”

Trella emphasized the interconnectedness of legitimate business operations within the gaming ecosystem. “For the offshore operator I antagonized this morning, one of their game designers operates on the G2E floor. The supply chains are deeply intertwined, giving us leverage. The ability to seize assets presents a powerful tool in our fight against illegal operations,” he stated. “The potential backlash from asset seizures can serve as a significant deterrent in the business world.”

Collaborative Efforts with the U.S. Department of Justice

Steinkamp revealed that state law enforcement bodies are beginning to witness tangible results in lobbying the U.S. Department of Justice (DoJ) to address the rising tide of offshore gambling enterprises. “These illegal operators are depriving states of substantial tax revenues, an issue that has persisted for years,” he said. The DoJ has responded affirmatively, indicating its role in curtailing illegal gambling, although the extent of potential actions remains to be seen.

“In New Jersey, I was equipped to confront various forms of crime, while other states may lack similar resources,” Rebuck pointed out. “There needs to be collaboration between law enforcement and industry stakeholders to tackle illegal operations effectively. Our structural inefficiencies inadvertently benefit these illegal operators.”

A Unified Industry Front

Fox stressed the importance of industry-wide cooperation in outreach initiatives to federal authorities. “As a sizable operator, FanDuel might have more leverage, but it is imperative for the industry to unite through associations like the American Gaming Association (AGA) to compel federal attention,” he said.

“Numerous facets of federal law enforcement can be leveraged to combat illegal gambling,” Trella added. “We must be innovative, engaging with federal agencies creatively to target illicit operations effectively, particularly by addressing financial revenue streams.”