Offshore Betting: The Gift that Keeps on Giving 

Richard Schuetz argues that the US will struggle to rein in offshore betting operators until it tackles the issue through diplomacy, warning that the threat of players migrating to less-regulated markets is also holding back domestic safeguards.

“If at first you don’t succeed, try, try, try again.” – William E. Hickson 

I am pulling a Four Tops here and playing that same old song again. Over the last decade, I have written about this topic twice. Moreover, I’ve brought it up in speaking engagements and one-on-ones. From these experiences, I feel like I am talking to the wall. It feels as if the US sports betting industry doesn’t really want to get rid of offshore betting shops. 

I am going to give it (at least) one more try, because it is important to understand this: A readily available, efficient offshore market generally has fewer betting frictions than a domestic supplier. This lets the domestic operator lobby against added requirements, suggesting they will drive the domestic player offshore to a lower-friction alternative. This is an example of what Bill Eadington used to enjoy telling me, “Markets generally work.” 

One topic that fits in the betting-friction basket is responsible gambling and problem gambling controls. Offshore sites generally have weak or nonexistent controls in this area, making the offshore environment more attractive to players who want to avoid these frictions. The concept of channelization is an effort to both describe and measure this reality. 

In sports betting, a friction is anything that adds costs, complexity, risk, or time and effort to the betting experience. Examples of friction include mandatory income checks, betting limits, higher vig, and geolocation requirements. As mentioned, responsible and problem gambling controls are clearly frictions. 

To get to the point, I believe that if offshore sports betting markets didn’t exist, domestic producers would want to invent them.  

Now, when the government, whether a state legislature, Congress, or a regulatory entity, proposes new controls and safeguards, the domestic provider can argue that a portion of its market will migrate offshore, reducing tax receipts, domestic employment, and the like. At this level, governing entities often resist actions that could damage their state’s fiscal conditions or a politician’s ability to fundraise from the industry. In essence, the real or perceived threat of player migrations to offshore operators slows the imposition of controls and regulations in domestic markets.  

One of the first efforts to address offshore betting markets in the US was the Merrick Garland Letter. This letter, dated April 28, 2023, was sent by the top regulators in Nevada, New Jersey, Michigan, Illinois, Colorado, Louisiana, and Mississippi. Basically, the request asks US Attorney General Garland to prioritize stopping these offshore books from accepting U.S. wagers.  

I have been critical of these efforts since I first heard about them, and my reasoning comes from my experience of working offshore.  

My task was to help an offshore island introduce casinos. In my offshore life, I came to understand that the U.S. Department of Justice wasn’t the right entity to drive behavioral change in foreign countries.  

That is not to suggest that one doesn’t cross paths with U.S. agencies in the offshore environment. I met agents from FinCEN, Homeland Security, and the FBI on the island where I lived. This is common, and I found it comforting that they arranged visits with me.  

We would meet at the US Embassy, a highly secure environment. After introductions, they asked whether I felt safe, comfortable, and secure, and what was going on in general. Their first concern was whether I felt safe, which I always thought was a nice statement, and it made me proud to be an American. They were looking out for me. 

As an aside, for anyone planning to work offshore, one of the first questions to address is the Ghostbuster question…that being, if something starts to go wrong, who you gonna call? In my case, I learned the answer was the American Embassy. 

I also believe that if the United States wants to get an offshore site to change its behavior, they start with the State Department. 

To understand offshore environments, you need to know how they work, and that is often complex. In betting, ownership of these shops may be tied to powerful people in the jurisdiction’s political realm. In this case, rushing in and insisting they close to American wagers could strain relations between the US and the foreign jurisdiction. The betting environment could also be an important source of foreign exchange, and most offshore environments crave dollars. The betting operation could also be an important employer, make political contributions, or who knows what? 

The point is, if anyone believes Merrick, or any AG, will enter a sovereign nation with a badge and tell the betting shop to stop what it’s doing, they are in LaLa Land.   

President Trump gets this. He was troubled, as every American should be, about the substantial amount of illegal drugs brought into the US from offshore sources. He did not go to the Attorney General about this. He went to the military and had them start bombing boats that were allegedly involved in the drug trade. Without due process, these attacks took place in international waters in the eastern Pacific Ocean and the Caribbean Sea. I would guess this has gotten the attention of those alleged offshore providers of drugs to the US. 

I am not suggesting this is the right approach, but I am suggesting it is an effective one. 

I suppose President Trump could also get our military to start dropping napalm on offshore betting sites that were dealing to players in the US. My guess is this would fairly effectively slow them from accepting American-based wagers. As an aside, imagine winning a big bet, and the betting shop owes you a nice payoff, and then you find that our president has removed that shop from the face of the earth. Hell of a bad beat. 

I would argue a better approach is to go through the State Department, because these people are attuned to the economies they deal with and are excellent horse-traders. Shut down the betting shops to US players, and the foreign country can improve trade relations, qualify for foreign aid, get help financing infrastructure, get favorable tariff treatment, and so on.  

This is what the State Department does, and they are the most qualified to do it. And for the life of me, I can’t understand why the US gaming folks don’t get this. It sometimes seems that they just don’t want these offshore shops closed to the US player.  

If no one has noticed, a growing chorus in the national press is talking about what’s happening with betting in the US. Much of this energy comes from reported betting casualties, and many of them are young. Stricter responsible-gaming controls in the domestic market could serve them well. Introducing these controls too slowly will cause more casualties, and if that happens, betting in the US could face a political backlash neither operators nor bettors will like.  

I suppose that the US can continue to piss and moan about the offshore sites, and continue to attempt efforts that do not have a prayer’s chance of success…but make good PR. Or they can get real about how the world works and address this issue through the State Department. 

And if that doesn’t work, I suspect there is always napalm.