“Spanky,” Gadoon Kyrollos, one of the top sports bettors, and my client and friend, invited me to speak at his 2024 BetBash.  In return, I gave a talk on a topic his attendees would appreciate:  When does betting, especially on sports, become a crime?

Spanky has been running BetBash for years, though this is my first time.  It’s a sports bettors’ networking event, for players who can spring for $699 to $1,549, plus a few days and nights in Las Vegas.  So, these are serious bettors, and I am going to give a serious talk.

Like this:

For professional bettors, there a few things to remember.  Law enforcement does not care about you, even if you are in a state where betting is illegal.  Unless . . . they think you are connected with organized crime, or you are not paying your taxes, or you are pulling a commercial scam on the public, or . . . they make a mistake.  A big bettor in Texas had his computers seized, because the cops thought he was a bookie.  When he sued to get his equipment back, the prosecutors said, “We’ll come up with something to charge him.”

Federal law is almost always limited to:

1)  Being in the business of gambling; and

2)  Being in the business of illegal gambling, meaning violating a state law.

Professional bettors do want to be in the “trade or business” of gambling, but only for federal income tax purposes.  There are also some states, like Minnesota, which will not allow gamblers to deduct their losses from their winnings for state income taxes, unless they are in the business of gambling.

But for federal criminal laws you don’t want to be in the business of gambling.  And you don’t want to be helping anyone in the business, such as helping them collect gambling debts.

You want to be just a bettor.  To be exact, you want to be a “mere bettor.”  If you provide “services that are necessary or helpful to the gambling operation,” as courts warn, you fall outside the “sanctuary of bettordom.”

There have been some prosecutors, and even a judge or two, who declared full-time, professional gamblers to be in the business of gambling.  But in every case, it looks like the “mere bettors” were laying off bets or giving inside information to illegal bookies.  I have not found any reported case in which full-time professional bettors, even those with partners, were held to be violating the Wire Act for making bets with legal sports books.

The Wire Act is the main federal anti-gambling law that bettors, and only those who bet on sports and races, have to fear.  All other federal laws, except anti-lottery laws, require that the gambling violates a state law.  The Wire Act applies to anyone in the business of gambling who sends information useful in the making of bets, across state lines.

For all the other federal anti-gambling laws, the gambling must violate a state law.  The states themselves usually don’t care, especially if you are only a bettor.

There are a lot of old state laws still on the books that make betting a crime.

The most important for professional gamblers are the anti-messenger and anti-proxy laws.  In the 1930s, when states legalized horse races, bets had to be placed at the track.  Laws were enacted to prevent bookies from claiming they would take bets to the track.  These have often not been updated, outlawing only messenger pari-mutual wagers.

When Michigan expanded its legal gambling, the State Legislature did amend the anti-messenger law, but only to prohibit a person “present in a licensed casino” to “place a wager on behalf of another person who is not present in the casino.”  The obvious legal impact of this is that a person in Michigan can place bets for other bettors with legal Internet casinos and sports books.

Even if a state allows messenger or proxy betting, it is much safer for the person placing the bet to have some of their own money at stake, and to not charge a fee for placing bets for another person.

One of the big questions is the legality of partnerships.  States almost always require that the person making the bet be physically in the state.  But they rarely have specific prohibitions on staking or other arrangements to share winnings.

Nevada, at least, has answered that question.

Gambling debts are not generally enforceable in Nevada.  But the State Supreme Court had no trouble treating a staking agreement – the backer supplied the funds for a poker player to enter legal tournaments, in return for a promised 20% of the winnings – as just another legitimate business arrangement and not a gambling debt.   And the U.S. Ninth Circuit uphold an arrangement where players pooled their money to bet with licensed Nevada operators, with a share going to a guy who advised the others what bets to make.

Operators’ Terms and Conditions often fill in that hole.  But T&Cs are only contracts.  A mere breach should never be a crime.  Crimes require due process, like adequate warnings; operators can change T&Cs at any time, without warning.

One federal law, the Computer Fraud and Abuse Act, has led to convictions for violating T&Cs, but only when there was something more – almost always forbidden hacking into the site.

Online operators are trying a new countermove: threatening patrons with perjury. Caesars Palace Online Casino in Michigan states and winners cannot collect unless they sign “Under penalties of perjury” that “no other person is entitled to any part of these payments.”

That would work in some states, but not in Michigan.  In 1988 the Michigan Supreme Court ruled that signing that statement on a form is not enough.  There must be a person administering the oath.

So, there are potential criminal penalties for professional bettors.  But don’t believe everything an operator tells you.