16 Oct Cash Drops and Keystrokes: The Dark Reality of Sports Betting and Daily Fantasy Games
This shadowy exchange in June 2012 was remarkable for two reasons: The bag contained $350,000 in cash, proceeds from an illegal Internet gambling ring; and the woman who took it was a New York real estate developer and prominent gay rights activist who has donated nearly a quarter of a million dollars to political candidates and causes. The previous month, the same woman — Joy Tomchin — accepted another bag with $335,000 in cash.
In both cases, Ms. Tomchin said she had taken the cash on behalf of her brother, Stanley, who prosecutors say helped run the kind of gambling operation that has proved so difficult to stop: old-style bookmakers and money collectors, assisted by modern technology that enables offshore computers to record sports bets and payouts, illegal in the United States, beyond the reach of American law enforcement.
In 2006, Congress tried to help prosecutors defeat these criminal rings. With legislators rushing toward adjournment, they passed a bill just after midnight to make it more difficult to gamble on the Internet, and to preserve the integrity of college and professional sports, by prohibiting online payments for illegal bets.
By almost any measure, the law has been a spectacular failure, an investigation by The New York Times has found.
The law could not stem the tide of illegal betting because the industry thrives not on online payments but on an old-fashioned shadow banking system where billions of dollars pass through paper bags, car trunks, casino chips and various money-laundering schemes.
At the same time, Congress failed to grasp the power of the inexorably evolving Internet, or how difficult it would be to regulate. By allowing entrepreneurs to exploit a legal, if suspect, exemption, the law unwittingly opened the way for the now-ubiquitous fantasy sports games that increasingly resemble gambling.