Any Given Sunday

Antiguan Online Gambling Company Tested In U.S. Court Case

With the football season just starting, chances are you were watching a game this afternoon. And chances are you had something riding on the game.

Betting on football is more of an American pastime than the sport itself. Millions of Americans bet hundreds of millions of dollars on any given Sunday.

In the past, bettors might have sought out a local bookie to place their bets. But, as 60 Minutes learned when this story first ran two years ago, it is now possible to do it from the comfort of your home - where all you have to do is point and click. Correspondent Morley Safer reports.
It's not just the quarterbacks who take the hits on Sunday and Monday. Countless Americans lose big bucks when they fail to beat the point spread.

It's as if the networks broadcast a weekly bingo bonanza. Almost $400 billion a year is bet on sports, most of it perfectly illegal. But Jay Cohen thought he'd found a way around the law.

Cohen is the founder of World Sports Exchange, the Internet's most popular and profitable online gambling site. He was a successful trader on an equally big bingo game, the San Francisco Stock Exchange, when he and his partners realized how popular their own office pool was. So they decided to expand worldwide on the Web.

“We thought it was a good opportunity to get in on the ground floor of a new industry that was just about to take off,” says Cohen. “It's very similar to the options business. No different than the way people bet on stocks with options. So it was a natural segue.”

The World Sports Web site is simply a high-tech bookie. To place a bet, you simply log on, establish an account with a credit card and make your choices. If you win, World Sports credits your account. If you lose, you lose. Win or lose, World Sports wins. It makes about a 5 percent profit on the total take.

“Ninety percent of our business is what's called traditional wagering, where people bet on the outcome of a game vs. a point spread,” says Cohen. “Football is king.”

The NFL may be king, but World Sports offers a complete menu: professional sports, college sports, baseball, horse racing, soccer and tennis. They even took bets on who might be booted out of "Big Brother."

It's a lot more reliable than your local bookie and a lot cheaper than flying to Vegas. But since sports bookmaking is illegal in this country in every state but Nevada, how do they stay in business?

Well, it's simple. World Sports isn't in the United States. It's on an island in the sun - Antigua, the small island nation in the Caribbean where gambling on sports is perfectly legal.

Cohen and two friends from the stock exchange, Haden Ware and Steve Schillinger, established their company as a foreign corporation, paid the Antiguan government a licensing fee and set up shop.

They say that since the bets are not taking place in the United States, but on the company's computers in Antigua, they are perfectly legal. And Cohen and his partners make no apologies for making an end run around U.S. law.
“Gambling exists in the United States. People are always going to bet on the football games and the Super Bowl,” says Schillinger. “It's either going to be with a legitimate business like ours or it's going to go underground to the bookies and the bars. And we think this is a better way to do it.”

“I look at my job as being very similar to what some guy's doing right now at a day trader account,” adds Ware. “You know, allowing a customer to deposit money and take long shots by buying penny stocks. I mean, if you go to our Web site and you change Boston Red Sox to Boston Market, we're Ameritrade, like that.”
It's just like the stock market, without the fancy address and the pretension.

Located on the second floor of a strip mall in Antigua, just a few dozen computers and some computer-savvy Antiguans take in the bets.

On any given Sunday during football season, World Sports will get in the neighborhood of 20,000 bets, ranging from $10 a pop to $20,000.

Sundays may be hectic at World sports, but casual is the order of every day.

“Last time I wore a tie was probably about four years ago on the stock exchange,” says Schillinger. “Haven't worn socks too much since I've been in the Caribbean.”

And he hasn't missed any golf dates, either. Schillinger and Ware have been in Antigua for four sun-soaked years, about as different from the noisy desperation of the trading floor as you can imagine.

Life is good in Antigua. Every diversion from the workaday screen is easily available. Their old colleagues may be green with envy, while they just count the green.

“It's been real profitable so far,” says Schillinger. “The first year, we were about break even, and our business has been doubling every year, so it's very profitable - more so than the stock exchange.”

In fact, theirs is one of the few Internet companies that actually shows a profit. They won't discuss numbers, but admit World Sports makes multi-millions. The largest of the nearly 1,000 Internet gambling sites, which combined, is projected to be a $10 billion industry. And that's the kind of number that tweaks the curiosity of the U.S. government.

“We thought we set it up totally legally. We checked with lawyers. We were a foreign company licensed to do what we were doing,” says Cohen. “I thought by being totally offshore, we were out of the jurisdiction of the U.S.”

Wrong.

“You can't go offshore and hide. You can't go online and hide,” said former attorney general Janet Reno, talking tough on the subject of offshore, online gambling.

Four years ago, the federal government filed criminal charges against the three partners under a 1960s law, the Wire Communications Act, prohibiting the use of telephone wires for purposes of gambling - a law that did not envision cyberspace.
The charges raised some tough questions: Can the government dictate what's legal or otherwise on the Internet?

“The Department of Justice in Washington, their spokesperson was widely quoted as saying, 'It doesn't take place on US soil. It's out of our jurisdiction. International offshore wagering - there's nothing we can do about.' So it definitely represented a change in the Department of Justice's position on the matter,” says Cohen.

The World Sports partners, who'd broken no laws in Antigua, were now accused criminals in the United States. So Cohen decided to test the American law and announced he was coming home. His two partners remained behind. They are considered fugitives from American justice, subject to arrest if they return.

“Antigua doesn't see us as criminals. We're licensed and regulated by them to do what we do, and we follow their regulations,” says Ware. “So in Antigua, I'm not a criminal. I'm not a criminal to my family. I'm not a criminal to my peers. I'm only a criminal to a handful of fat cats in Washington.”

Schillinger said Cohen went back to prove a point, but “we were not going to close up shop on something we really believed in with all our hearts. So we stayed to keep it running.”

But Cohen has little to celebrate. He was convicted on eight counts. In sentencing him to 21 months in prison, the judge did recognize some of the weaknesses in the government's case. Cohen is out on bail pending his appeal. But his lawyer, Ben Brafman, says the law that convicted him is just plain out of date.

“We have taken the position from the beginning that the Wire Act does not apply to Internet gambling. When the Wire Act was passed and written, the Internet was not even conceived of,” he says.

Brafman adds that the bets do not take place on the phone lines, but on the World Sports computer server in Antigua. He says that the U.S. has no business dictating what's legal in Antigua or on the Internet.

“What they're doing is they're telling Antigua, which is a sovereign nation, 'You can't do this,'” says Brafman. “And if the people who do it happen to be Americans, they're going to prosecute them. The Internet isn't owned by anyone. And if one jurisdiction begins to take possession of the Internet, if you will, you think about the ramifications, it's kind of scary.

Beyond saying the government will vigorously prosecute offshore gambling, the U.S. attorney would not comment on the case. So 60 Minutes talked to Senator John Kyl of Arizona, who supports outlawing all Internet gambling.

“Mr. Cohen's attorney said that this should be a test case. Well, the jury convicted him, and so presumably, the test is answered,” says Kyl. “The law prohibits him from placing a sports bet, either electronically through a telephone or electronically through a computer. The net result is the same. You're placing a bet with a bookie.”

Kyl wants to pass an even tougher law called the Internet Gambling Prohibition Act, specifically designed to update the Wire Act to put World Sports and others out of business. He believes the Internet could lead to a national gambling addiction.

But Cohen disagrees: “If he really wants to talk about what makes it easier for compulsive gamblers to get in trouble, walk into a casino.”

Cohen and his lawyer also point out other hypocrisies in the government's efforts to put World Sports out of business. They say the biggest rip-off in gambling is perfectly legal - the state-run lotteries.

“And the odds of winning are so remote that it's almost highway robbery, and the government benefits from it,” says Brafman. “In the courthouse we were prosecuted in, you could buy a lottery ticket in the newsstand on the ground floor. On the 26th floor, we were being prosecuted for being involved in a gambling business.”

Brafman says going after Web sites like World Sports will never work: “The only way you're going to enforce it is if you penalize the citizens who access the Internet for those purposes. It's not going to work by trying to enforce it offshore.”

And there aren’t enough cops to do that, he says.
Brafman and others believe the U.S. Supreme Court will probably decide the Cohen case. His appeal is expected to be heard next year. As for his partners, they dare not return to the United States.

“If he loses the appeal, I'll stay in Antigua, keep the business going. The business is fantastic,” says Schillinger. “I'll just have to choose not to return to the US, which is a tough decision, but I've made that decision.”

So what are these two poor little rich men to do? They're like a couple of survivors of one of those castaway game shows, where they won every prize except the big one - a ticket home.

“I have no complaints,” says Ware.

“We're real happy down here. When we first came down, it was work, you know, 20 hours a day. But now we're starting to enjoy the life here,” adds Schillinger.

“It would be nice to have freedom to come and go, you know, back to the United States. But if you're going to be trapped somewhere, it's not a bad place to be trapped.”

Since 60 Minutes aired this story, Jay Cohen lost his appeal and has been in prison for almost a year. He has six months left to serve. As for his partners, they are still trapped in paradise, where business is better than ever.

  • Rebecca Leung

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