The Wall Street Journal online reports this evening that the US DOJ is prosecuting the founder of an online gambling firm, BetonSports.com, as well as a number of the executives of that company. A press release from the DOJ issued today can be found here.
The press release indicates that the DOJ is going after these people (and some have been arrested in the U.S.) under felony charges, including violation of the Wire Act, RICO, and tax violations. A gambling excise tax applies to certain bets, and given that these folks allegedly took in more than $3.3 billion from the U.S., even the small percentages involved in wagering excise taxes could add up to a lot of money.
The prosecution here should be considered a shot across the bow of a number of online gambling firms who are taking bets from U.S. citizens. The House recently passed a bill that will make it easier and clearer for online firms and those who aid and abet their operations to be prosecuted, but this action will demonstrate whether that authority exists already. (My own view: it does.)
Moreover, it will be interesting to see how tax laws are applied against these defendants.
To the extent that this prosecution is hindered by a lack of clarity in U.S. laws, the Senate will face considerable pressure to move on the Internet gambling bill.
The press release also indicates that phone companies were ordered to stop facilitating calls to the internet firm. This illustrates that there are a lot of other businessess that benefit from offshore illegal activity. Some of them advertise it; others facilitate payment or communication. These firms will also step up and notice such prosecutions. Executive types react strongly to possible incarceration - and they will act accordingly for self-preservation.