Illegal online gambling still a cash cow despite measures

For Betsson, a publicly listed Swedish online gambling company, this ban of online gambling in Turkey did not create much difficulty for the firm -- a firm with a market cap well over $500 million and $179 million in revenues for 2009. M. Gökhan Ahi of the Ahi Taygün law firm, speaking to Sunday’s Zaman, stated that despite the law clearly stating that it is illegal to play or provide online gambling, firms like Betsson continue to evade Web filters to provide Turkish citizens with access to games. For Betsson, circumventing filters and continuing to provide services to Turkish residents are risks worth taking: More than 26 percent of their revenues come from Turkey, according to a report by Goldman Sachs.

“There could be quite severe circumstances [for Betsson], but Turkey is too big of a chunk of their revenue. If they were to decide tomorrow to shut down their operations toward Turkish citizens, it would have a big effect on their earnings and their stock prices,” said Martin Arnell, an analyst for Carnegie Investment Bank in Stockholm. Despite the fact that what they are doing is illegal by Turkish law, Betsson continues to enjoy great profits from Turkey, even with the risk attached to such transactions.

In 2008 Sportingbet, a UK-based publicly listed betting Web site that also has gambling products catering to Turkish customers, saw two of its employees arrested in Turkey while they were traveling to the country on vacation. Although they were later released, this frightened the company enough so that they slowly scaled down their services to Turkey. “They could be saying and reporting that they are leaving, but they are still there,” said Arnell. At the time of writing, their Turkish Web site, SuperBahis, was still online and accepting bets for upcoming football matches.

Betsson, however, continues to argue that what they are doing is completely legal, even though sources both in the government and the gambling sector have pointed out that their services to Turkish citizens are illegal for gamblers and for the firm itself. In their year-end financial results, however, Betsson, in reference to Turkey’s anti-online gambling regulation, states, “According to legal experts, the law is in breach of EU law and less conformable with the association agreement between EU and Turkey.” Arnell notes that this is how Betsson defends itself against the fact that the EU members to which it caters, such as Germany, France, Hungary and Portugal, among others, also heavily regulate online gambling.

In other words, Betsson argues that EU law trumps national law, and therefore it is allowed to provide services in those countries. As for Turkey, “Well, Turkey is not an EU member,” states Arnell. Betsson therefore has no legal backing for providing services to Turkish citizens. “They know that the authorities think that what they are doing is wrong,” Arnell stressed. The situation, simply put, is that Betsson, a publicly listed company, is breaking the laws of a sovereign nation for millions of dollars in revenue and profits -- a source of income that they are not willing to easily let go of.

Fredrik Rüdén, the CFO of Betsson’s administrative office in Stockholm, speaking to Sunday’s Zaman, argued that they could provide gambling products to Turkish citizens because their gambling operations are run in Malta. He stressed several times that Betsson has no physical presence in Turkey and that what they were doing was legal. When asked if Betsson, much like SportingBet, would gradually close up their virtual shop, Rüdén continued to affirm that what they are doing is legal. “If we had operations in Turkey, then we would consider [closing].” When reminded about the two SportingBet employees who were arrested after coming to Turkey for vacation and then asked about whether he would come to Turkey, he hesitantly replied with, “I am not sure if I would do that.” Pontus Lindwall, the CEO of Betsson’s Swedish office, did not return our calls for comment.

Sportingbet also made a similar argument about the legality of providing gambling services to Turkish citizens after two of their employees were arrested in 2008 on Turkish soil, stating that not having a physical presence in Turkey meant they could still serve those in Turkey. After joining the group of countries to ban online gambling in 2006, the US arrested Sportingbet’s chairman, Peter Dicks, on online gambling charges but released him shortly after when then-Governor of New York George Pataki refused to sign a warrant that would have allowed his extradition to Louisiana, where the arrest warrant was issued.

The Information Technologies and Communications Board (BTK) went after Betsson’s site and banned access, but Betsson has jumped around the filter by continuously changing IP addresses, making it nearly impossible for the authorities to stop access. At the time of writing, Betsson had added the digits 509 to the end of its URL. Ahi stated that this number would change constantly: “When the BTK would block 310, they would default to 309, and if that was blocked, they would quickly change to another number.” Ahi reiterated the difficulty for the Turkish authorities to block such sites due to the complexity of the Internet and stated that companies like Betsson would do whatever is necessary to make sure that their illegal and enormous revenues are not hindered by technological barriers. Even with the banking restrictions, Ahi noted that gamblers increasingly use one-time-use debit cards that can easily be used on these Web sites without much difficulty.