What legal options does the Michigan government have at its disposal to force an illegal offshore gambling operator based in another country to stop taking bets from people in the state? More than you might think, global gambling law expert Michael Lipton told PlayMichigan.
Lipton is a senior partner in the Toronto office of Dickinson Wright, which also has six offices in Michigan. He stressed he has been called to the bar in New York and Ontario, not Michigan. Still, he has extensive legal knowledge of cases where governments have gone after illegal offshore gambling operations.
On May 29, the Michigan Gaming Control Board began a name-and-shame campaign by sending a cease-and-desist letter to major offshore gambling operator Bovada. The operator, based in Curacao, was given 14 days from the receipt of the letter to stop taking bets from people based in Michigan.
It’s not known, exactly, when Bovada may have received the letter. So, we’re not exactly sure if the 14 days has expired. But, it appears the MGCB and Bovada are headed for a showdown.
As of Monday afternoon, Bovada was still accessible in Michigan. This is now Day 19 from the day the letter was sent.
Lipton: State of Michigan has many legal options at its disposal against Bovada
That means the other legal shoe may still drop.
What legal options does the state of Michigan have against an offshore company based on an island in the Caribbean? Lipton (right) documented several.
“They could run the full gamut of sealed indictments, seizure of websites, seizing funds, if they’re available in the jurisdiction, name and shame, the cease and desist and going after third party facilitators,” Lipton told PlayMichigan.
“The bottom line is, while governments have a number of tools at their disposal, they may be hesitant, in many cases, to pursue each and every one of them unless they’re absolutely certain that they’re going to result in something of a positive nature.”
The MGCB has been mostly mum about next steps, but did provide some hints.
MGCB Public Information Officer Lisa Keith told PlayMichigan in an email:
“If Bovada continues to offer illegal gambling to individuals located in Michigan, we are prepared to take further legal action, the details of which we have no comment on at this time.”
Though, it seems targeting Bovada’s US-based suppliers is a strong likelihood.
“Bovada’s U.S. suppliers may also face consequences,” Keith said. “Certainly, any business relationship with an illegal operator will very likely prevent a company from being licensed to do business in the very large Michigan gaming market.”
Putting pressure on third-party suppliers a strong tactic
Lipton said going after third-party service providers to Bovada — particularly payment service providers and money processors — is possible.
“If you’re a [payment service provider],” Lipton said, “and you get a letter from a state government saying that the people that you’re supporting are acting illegally and by you doing the facilitation of their financial transactions, you are aiding and abetting. Therefore [you may be] subject to being in violation of certain state and federal laws, and we’re giving you this warning. If you’re the president of the company, what are you going to do? You’re going to take every action to make sure that you cease aiding and abetting.”
Cases of Jay Cohen and David Carruthers provide legal precedence
Lipton said sealed indictments against the principals of offshore gambling companies have also worked in the past.
He cited the case of Jay Cohen, once the co-owner of World Sports Exchange based on the island of Antigua.
In 2000, the US Department of Justice indicted Cohen on charges he violated the federal Wire Act. Lipton said Cohen came back to the US from Antigua to fight the charges, arguing that the act of any bets through his site took place entirely in Antigua and therefore the US did not have jurisdiction.
Lipton said the government, “took the position that the bet occurred in both places, and that there was jurisdiction for the US Federal authorities to to prosecute this man. And, guess what? He went to jail.”
Cohen was sentenced to 21 months in prison.
Lipton also cited the 2009 case of David Carruthers the former CEO of BetonSports based in Costa Rica.
Carruthers was also charged with violating the Wire Act. He was arrested in 2006 en route to the UK from Costa Rica when he changed planes in the Dallas.
“When he got off the airplane, somebody was waiting for him because they had a sealed indictment for sure,” Lipton said. “They arrested him, and he ultimately went to jail.”
Carruthers served 33 months in prison.
Why Michigan is pursuing this case against Bovada now
Bovada has been taking bets illegally from people in Michigan going back as far as 2011. Online gambling has been legal in Michigan since January of 2021.
So, why is Michigan pursuing Bovada more than three years after launching a legal online gambling sector?
Lipton believes it has to do with Michigan signing on to the Multi-State Internet Gaming Agreement. In January of 2023, PokerStars joined forces with New Jersey to offer a two-state poker pool for online players in either state. In May of this year, WSOP formed a three-state pool between Michigan and New Jersey and Nevada.
“You now have a poker network between New Jersey, Michigan and Nevada,” Lipton said. “The issue of liquidity effectively means that you’re going to allow companies to create a pool amongst a number of different jurisdictions. So, to that extent, those who are involved in sharing that pool and operating the pool… better be on the right side of the law in all of the jurisdictions which formed the pool.”
It’s important to note that both New Jersey and Nevada are among the five states where Bovada currently cannot be accessed. Those states previously sent cease-and-desist letters to the illegal operator and Bovada complied.
Apart from its ongoing campaign against illegal gambling, Lipton’s belief is the MGCB is trying to line up with New Jersey and Nevada when it comes to Bovada.
Bovada may be weighing the risks versus the rewards
As to why Bovada has yet to comply with Michigan’s cease-and-desist order, Lipton said, “any respectable Internet gaming operator has a restricted territory list. And that restricted territory list is updated on a regular basis. And indents are projected according to risk. There may be dark black, there may be dark gray, there may be light grey. So it’s an issue really determining whether a particular jurisdiction is going to be included in that list.
“To a large degree that will depend upon the risk of enforcement that may be incurred by an entity in that particular jurisdiction. If the enforcement risk is not great, measured against the economic risks that can be gained by doing business there — by taking bets from certain jurisdictions — operators will certainly incur that risk. Whether they say, ‘Well, you know, it’s not a big risk. There’s lots of money to be made. We’re gonna give it a try’ depends on their risk appetite.”
It remains to be seen if Bovada will challenge Michigan’s authority in this case.
