I've Got The Shakes

Telling someone they can't read about or play poker during the World Series is like giving a raging alcoholic a job as a bartender.

I still have not played any poker since Sunday. I could not keep myself from reading about it, however. I have not cracked an instruction book, but I can't stop logging into Cardplayer.com and the other assorted blogs to get my WSOP updates.

This is the story that's been on my mind the last couple of days.

DJ THE SKEPTIC: Bad Bets
(This story was originally published Tuesday)

By Arindam Nag
A DOW JONES NEWSWIRES COLUMN

LONDON (Dow Jones)--Internet betting in the U.S. was once dubbed "the crack
cocaine of gambling." It now seems the British online gaming industry is
falling victim to an overdose.
The CEO of BETonSPORTS Plc has been taken into custody in the U.S. amid
authorities' long-running efforts to curb online gambling. The company's
shares have been suspended in London and those of peers have been hammered by
investors.
What has puzzled some is why was BETonSPORTS was singled out when several
others have been enticing U.S. citizens to place bets on their websites.
The answer may have to do with the U.K.-listed company's role - revealed
last week - in an identity theft ring where several U.S. bettors may have seen
private information exposed to a bunch of hackers.
The documents are in the public domain - the U.S. Attorney of the Southern
District of New York put out a press statement on July 13 on its website. The
statement says a "common thread" linking a number of victims whose identities
were compromised was that they had engaged in betting using BETonSPORTS.
It may be that the company was nothing more than an innocent vehicle for
scammers, and that the detaining of its CEO has nothing to do with the
identity theft case. But given that BETonSPORTS is prominently mentioned in
the federal statement, the company needs to clarify this incident to U.K.
investors.
The company's spokeswoman in London was not immediately available to comment
on the identify theft question.
The identity theft case came to public light during the hearing of Lanre
Elekede, 30, a Nigerian native.
"During Elekede's guilty plea hearing, the investigation revealed that a
common threat linking a number of the victims whose identities were
compromised was that they had engaged in sports-related gambling over the
Internet with a Costa Rica-based web site known as BETonSPORTS.com," the U.S.
Attorney's statement said.
It also said a number of victims had submitted forms to the U.K.-listed
company in which they mentioned their names, addresses, telephone numbers,
social security numbers, mother's maiden names and credit card numbers - all
important data for online commerce.
For investors, the key question is how could BETonSPORTS, whose business has
been turning around recently on the back of a jump in U.S. revenues, allow its
systems to be compromised like this? Was it a straightforward online break-in,
or something else?
U.S. authorities take privacy laws very seriously. The FBI and other federal
agencies including the Federal Trade Commission have been aggressively
pursuing any loopholes arising out of identity theft. In a country where
online companies like eBay and Amazon.com have prospered, this is only
natural.
BETonSPORTS' U.S. business growth has accelerated with signups and customer
deposits up 70% year-over-year. But the latest turn of events makes it seem
the company's internal controls aren't up to the mark.
Even while the bigger case of its executives' troubles drags on, the company
must explain how its name got dragged into the identity theft ring case, and
must assure investors its internal controls are bulletproof in all non-U.S.
markets as well. All told, BETonSPORTS may be on weak ground when it comes
to the bigger issue of U.S. Internet gambling. In the United States vs. Cohen
case in 2000 the U.S. Attorney from the Southern District of New York won a
case against Jay Cohen for violating the 1961 Wire Act - the same law cited in
the current case against BETonSPORTS' executives.
Cohen's Antigua-based company World Sports Exchange specialized in online
sports gambling. The government argued that his firm violated federal laws by
enticing Americans to contact the firm via phone or the Internet to open a
betting account.
Cohen argued that the Wire Act did not apply to Internet gambling because it
was passed prior to the advent of the Internet. But that tack failed: Cohen
was sentenced to 21 months in prison, and fined.
Whether BETonSPORTS can rally enough industry support and initiate a change
in U.S. laws is anyone's guess. But on its own the company has not helped its
case by exposing its internal controls to a ring of identity thieves.
That means that well before it can take on U.S. Senators over the pros and
cons of online gambling, the company must launch a convincing cleanup process.
(Arindam Nag has covered business and finance for 15 years in Asia, Europe
and the United States. He can be reached at +44 207-842-9289 or by e-mail:
arindam.nag@dowjones.com)

(END) Dow Jones Newswires
07-19-06 0145ET
Copyright (c) 2006 Dow Jones & Company, Inc.

This really sucks. I just bought 1000 shares of Party Poker at 2.05 about 3 days before this happened. It is now at 1.75. Even if these legal problems are specific to BetonSports, every gaming company is going to be painted with this brush.

I have already read that Bodog has canceled a convention in Las Vegas and that some obscure poker sites have stopped taking money from US citizens and have frozen their accounts.

I would hope that the big companies with the most to lose will start to fight back. Party cannot just stop taking deposits from the US since they would lose over 60% of their business. They have a lot to fight for and I think they would be willing to do it.

If the US Senate puts off voting on the Internet Gambling act, then someone is going to have to fight a battle in court to get this thing settled. I don't think we can wait for the US Government to finally come to their senses and propose regulating it instead of banning it. That could take years of watching the UK make billions before it sinks in.

In other legal news, some of my favorite pro players have sued the World Poker Tour over the release agreement. I can't believe the WPT has dug their feet in on these stupid issues. Do they really believe they are going to make a shit load of money on using player likenesses in advertising or video games? Now they are going to have to spend money defending themselves in court, when all they had to do was copy the release from the WSOP and everyone would have been happy.

I predict the World Poker Tour will be bankrupt inside of 5 years.