The online gaming sector is reeling this morning after BetonSports CEO David Carruthers was seized by The Feds in the US, while waiting to transfer onto an aircraft destined for Costa Rica, where the company’s customer services centre is based.

Carruthers, an outspoken pro-gaming lobbyist, heads up a company that generates about 90% of its business from the US, where online gaming is considered illegal under the 1961 Wire Act.

BetonSports is listed in the UK – shares fell more than 20% in early trading as a reaction to the news (mirrored elsewhere in the sector – PartyGaming and Sportingbet also dropped sharply).

BetonSports said it is “currently seeking clarification as to the basis of the detention”, though it doesn’t take a genius to figure out that it is almost certainly related to his online gaming activities.

Worryingly for Carruthers, there is a precedent. WorldSportsExchange founder Jay Cohen was detained and spent 20 months in prison for running an online gaming operation from Antigua, a state that provided him with a gaming licence.

Every year in the US there are attempts at passing new legislation to prohibit betting over the internet, mobile phone, or telephone. This year isn’t an exception, with the right-winger Bob Goodlatte once again making all sorts of bad noises against online gaming, which he considers “a scourge on society”. Some feel that these efforts are simply about raising profiles and appealing to conservatives in election year.

Last week the Senate approved Goodlatte’s bill to ban internet gambling by prohibiting banks and credit card companies from processing payments for online bets. It isn’t law though, not yet, and the clock is ticking – the bill must be passed before lawmakers break for the campaign season. I for one don’t think it will make it, not if history is anything to go by (this seems to happen every year).

Carruthers also thinks the bill will fail. Only last Friday he said: “We continue to believe that the likelihood of the bill passing the Senate is remote.” I wonder whether his comments are connected to his detention.

The reason why Goodlatte has aimed his bill at the banks – rather than the operators or US citizens – is simple. US law enforcers will find it incredibly difficult to prosecute licensed operators based in regulated markets, like Antigua, or the UK for that matter.

“These offshore, fly-by-night Internet gambling operators are unlicensed, untaxed and unregulated and are sucking billions of dollars out of the United States,”
says Goodlatte, somewhat incorrectly. So why not regulate and tax then, if it is about money? After all, the US, like many other countries, has a poor record when it comes to prohibition.

Goodlatte has positioned himself as something of a moral stalwart. He has previously voted against implementing the Kyoto treaty and strongly opposes abortion. He has an exemplary pro-gun record, having voted on reducing the waiting time for guns from three days to one.