This May Hurt Business

by Ed Meyer

posted on December 23, 2008 in News | No Comments >>

A decision by a leading offshore bookmaker to stop carrying North American horse races certainly is significant, even if the reasons for the decision are unclear., which bills itself as the “Internet’s leading sports betting site,” offered little in terms of explanation when it announced it would stop carrying United States races on December 15.

“Due to the various changes in the North American racing industry, Pinnacle Sports finds itself in a position where we are unable to offer horse racing to our satisfaction,” the site announced. “This, added to the declining interest of our clients in racing in general, has prompted us to discontinue wagering on daily North American horse racing.”

A company spokeswoman confirmed the Pinnacle decision, but added that the company does not comment on reasons for its business decisions.

The decision could be a result of the U.S. turning up legal pressure. Based on Wire Act violations, the Justice Department has arrested executives of some offshore gambling sites. Also, enforcement provisions of the Unlawful Internet Gambling Enforcement Act of 2006 that focus on blocking gambling transactions at the financial-institution level are coming on line.

Bill Kisby, an expert on offshore financial investigations, said more and more offshore gaming sites are choosing to stop marketing to U.S. players. He said these companies are looking at how much business they are doing with U.S. customers and weighing that against potential legal ramifications.

“More and more of these sites are making the decision that marketing to U.S. players is no longer worth the legal risk,” Kisby said.

The U.S. allows pari-mutuel wagering through licensed advance-deposit wagering sites but does not allow betting on offshore sites that book wagers. Because wagers at the bookmakers do not go into the pari-mutuel pools, racetracks and horsemen lose revenue.

North American pari-mutuel wagering on Thoroughbred racing will be off by about $1 billion this year, and could finish below $14-billion for the first time since 1998. The decline has been blamed on the bad economy, an ADW dispute that has caused content restrictions for pari-mutuel sites, and customer migration from licensed outlets to offshore bookmakers.

With its 7% rebate on race wagers, Pinnacle — and sites like it — are attractive to bettors. This year, the ADW dispute gave bettors another reason to move to offshore outlets, which offer a full menu of signals. For instance, bettors using licensed sites have been unable to wager on tracks like Churchill Downs and Calder Race Course this year, but Pinnacle has offered both.

With offices in London and Willemstad, Curacao, Pinnacle said it does not accept U.S. customers, a policy put in place in 2007. But information on circumventing that requirement is readily available on the Internet. The fact that the site had carried North American races certainly suggested it was continuing to accept U.S. players.

The change at Pinnacle surprised Ian Meyers, chief executive officer of licensed ADW site Premier Turf Club, which has tried to attract offshore bettors back to its licensed site. He was not sure about the reasons for Pinnacle’s decision. Perhaps more sites will follow the lead of Pinnacle, although Meyers is not yet convinced.

“There are still more than enough offshore bookmakers to go around, though,” Meyers said. “I don’t believe that it helps U.S. racetracks all that much.” The coming months should be telling as a new administration will address Internet gaming issues.