The online sports betting world was shocked out of its server-based senses when Pinnacle Sports last week announced it was closing down its U.S. operation.
Pinnacle — the largest, most popular and most influential of all off-shore sports books — said it would no longer accept bets from U.S. citizens effective Thursday, January 11.
The Curacao-based sports book had been booking wagers from U.S. citizens since 1998.
Known for its liberal betting limits and flexible betting odds, Pinnacle said it would rely solely on business from outside the U.S., which in the past accounted for 60 percent to 65 percent of Pinnacle’s overall business.
"Fortunately, 35-40 percent of our current gambling business is non U.S. driven, and perhaps more importantly, we are experiencing stronger growth in Europe and Asia, than we are in the United States," said "Henry," the founder and primary Pinnacle owner in an interview with Eye On Gambling executive Ken Weitzner.
Very few people know the real identify of Henry, who is understood to be a Harvard graduate and former member of the Computer Group betting syndicate of the 1980s.
When asked why Pinnacle decided at this time to abruptly cease accepting bets from the U.S., he cited a "drying up" of international funding sources and pressure from U.S. authorities.
"Since the Internet Gambling Bill went into effect (last November), we have lost the ability to do business with many quality banks," Henry said. "When the U.S. focuses on something and says ”˜enough,’ and when they go to ”˜war,’ no individual company can possibly win in a fight of this nature."
That "fight" became bare-knuckled last summer as the U.S. Department of Justice (DOJ) began criminal prosecutions of high-profile online gambling executives.
In July, David Carruthers, president of Costa Rica-based BetOnSports, was jailed while on a layover at a Dallas airport. He is currently on house arrest in Missouri awaiting trial for a number of charges, including mail fraud, transmission of wagers/wagering information, interstate transportation of gambling paraphernalia and interference with administration of Internal Revenue laws, among others.
Legal experts speculate that Henry’s name could have landed on the DOJ’s "most wanted" list, while others believe that pulling out of the U.S. market voluntarily would place the company in a better position to re-enter the domestic market, if and when online sports betting is ever legalized and regulated.
If Pinnacle had become a target of federal authorities, there could have been a national crackdown not unlike the Prohibition crackdown of illegal bootleggers of the 1920s. That’s because Pinnacle employs thousands of agents in the United States — at least 1,000 in Los Angeles alone — who handle wagers and make payments to bettors.
These agents — who receive a percentage of the bettors’ overall volume or their losses — actually handle the cash and most likely would be treated as illegal bookmakers.
In its announcement, Pinnacle promised to pay all remaining account balances to U.S. patrons in a timely manner.
Shortly after Pinnacle’s announcement, other online sports books launched recruiting campaigns to lure gamblers to their sites.
Cris Sports, for instance, offered an immediate 21 percent rebate on new sign-ups and 8 percent rebate on horse wagers.
Other top online books that still accept U.S. customers are Cascade, Olympic, Bodog, Bet365 and WSEX (World Sports Exchange).