DOJ Responds to States’ Correspondence About Illegal Offshore Gambling

Jessica Aletor
By:
Jessica Aletor
11/09/2023/
Legal
Slots Machine shows 777

Highlights

  • Back in April, the Michigan Gaming Control Board joined a coalition of seven states that urged the US Department of Justice to tackle offshore wagering.
  • About four months later, the DOJ responded to the coalition’s correspondence and assured that it placed a premium on combating illegal gambling.
  • The response of the DOJ notwithstanding, the American Gambling Association confirms there's a loss of over $13.3 billion in tax revenue to illegal gambling.

Several months ago, the Michigan Gaming Control Board, along with authorities from Nevada, Colorado, New Jersey and four other states wrote to the DOJ. In the letter, they pressured the US Department of Justice to offer assistance in combating the growing menace of unlicensed offshore gambling in the nation. The letter which was forwarded to the Attorney General’s office would not get a response until the final week in August.

And unlike the coalition of states would have wanted, the response only gave vague assurances without specifics of new action. Below is a rundown of how the DOJ is approaching the fight against illegal offshore gambling.

Reviewing the MGCB’s Stand Against Offshore Gambling

The MGCB was one of many state regulatory bodies to write to the DOJ on April 28. Other signatories were Illinois, Colorado, Louisiana,  New Jersey, Nevada, and Mississippi. The coalition advocated for more federal measures to crack down on online casinos and illegal offshore sportsbooks. Michigan was ably represented in the letter, thanks to a detailed message by Henry Williams, the MGCB director, which detailed the state’s position on the issue.

Williams, like other authorities, pointed out the risks that come with using offshore gambling sites that are not legal. First among many is that offshore operators are not subject to the same regulations as those based on state law. So, this prevents the MGCB and other coalition regulators from resolving consumer disputes between residents of their state and offshore service providers in court.

Some other issues are the absence of age restrictions and the loss of potential state tax which could have funded major sectors like education and healthcare. Other issues ranged from the non-existence of responsible gaming efforts, rife money laundering activities and unfair practices, typically involving non-payment of wins to customers. And due to their easy access, offshore sites had a direct impact on legal Michigan online gambling, both financially and otherwise.

DOJ's Reassurance a Mere Echo with No Fresh Steps in Sight

In a letter signed on July 12, 2023, the DOJ finally responded to Kirk Hendrick, Chairman of the Nevada Gaming Control Board, with all coalition states also receiving a copy of the letter. While describing how the DOJ is using its resources to combat offshore gaming, the letter effectively accepts the concern of these governments.

However, there are no indications that they intend to change tactics or increase their focus. The DOJ, through Megan Bennett, its Intergovernmental Liaison, stated that it has undertaken measures to investigate illegal gaming in collaboration with the Federal Bureau of Investigation. Should allegations of illegal gambling be substantiated, the Department noted that the appropriate federal prosecuting authority would press charges.

Chairman Hendrick reproduced the letter on the official X handle of the Nevada Gaming Control Board. The tweet is available below.

Unfortunately for the states, this is less action that they would have expected. But as a first step, an acknowledgement of the problem by the DOJ and the FBI may well be a step in the right direction.

Billions Slip Through the Cracks as a Consequence of Illegal Offshore Gambling

This year, the American Gaming Association estimated that $510 billion is lost annually to illegal gambling in the United States. This further results in a loss of tax revenue for the states of $13.3 billion, which is more than the $11.7 billion revenue which all seven states legally generated in 2021.

Moving forward, the AGA detailed the effects of the black market and lack of government oversight on legitimate gaming operations. Back home, though, the MGCB has increased its focus on illegal gambling machines in the state. Impressively,  373 illicit slot machines were seized in 2022 and 17 people were convicted of gambling-related crimes.

At Gamble Online Michigan, we recently reported that the Michigan Gaming Control Board conducted a successful raid at The Flint Arcade. This raid led to the seizure of two gaming machines,  48 computers and $13,260 in illegal gambling profits. The raid occurred at the same location as an earlier raid in August 2022, when the building was still known as The Cellular Vault.

Jessica is a news contributor to Gamble Online Michigan. She holds a Bachelor's degree in Economics but has over three years of experience working in the hospitality and gambling industry. Despite her core finance and investment banking background, she has been a casino feature writer for N1 Interactive Limited and multiple gambling affiliate sites. Her work has been featured on the bet365 blog, casino.zone and Max Force Racing. She spends her time between Michigan and California, staying up-to-date on the latest industry developments