These sites conduct business from offshore safe havens outside the reach of US laws. In the years since the internet has come to prominence, dozens of these sites have absconded with millions of dollars in player funds. Several have been involved in cheating scandals.
And according to a recent New York Times story, the potential problems these sites cause may go well beyond lax consumer protections and shady business practices.
“Working overseas is a huge incentive for young hackers, since many North Koreans have little chance to leave their impoverished, isolated country. As long as the hackers meet their government-set targets, they are allowed to live abroad and often get the added perk of running illegal gambling sites online, generating profits they can share with supervisors.”
It’s reasonable to assume that some of these North Korean sites are operating in the US. Most states’ unwillingness to legalize online gambling has created thriving black markets.
In New Jersey, Nevada and Delaware, state regulators oversee licensed online sites. Beyond those jurisdictions in the US, anyone registering an account at an online gambling website is willingly handing over their personal information and sensitive banking data to what could very well be a team of North Korean hackers.
It is worrisome to think an offshore site may disappear overnight, taking its customers’ money with it, or that insiders may be skewing the odds or outright cheating customers. But the idea that North Korean hackers are behind some of these sites should be a clarion call to bring this industry out of the shadows and into the light.
Legalizing and regulating the industry is the only way to accomplish this.
Every day legislatures fail to act on online gambling legislation is another day that customers are at risk of:
Taking the next logical step, users could also be opening themselves up to having hackers hijack their computers, infecting them with malware for who knows what reason.
But let’s set aside the doomsday North Korean scenarios for a moment. The annals of online gambling history are rife with scandal and mismanagement. The customer routinely plays the role of the victim.
From Full Tilt to Lock Poker, online players have unfortunately trusted such sites to handle their money properly. But this type of mismanagement and bad business practices are only the tip of the iceberg.
More worrisome is what occurred at Ultimate Bet and Absolute Poker. The software featured ‘backdoors’ that allowed insiders to mercilessly cheat the sites’ players. The scandal continued even after people discovered and proved this was going on, with the cover-ups fueled by a lack of transparency and accountability.
Following the cheating scandal at Absolute Poker (which went unchecked for years due to a lack of regulation), the company was purportedly sold. Scott Tom and the other owners were cleaned out.
However, the Department of Justice announced indictments on April 15, 2011 — known as Black Friday in the poker world. It came to light that Tom was still a part of Absolute Poker. He was an owner of Ultimate Bet to boot, as the two disgraced companies had come under the same umbrella in the years prior.
Absolute Poker customers in 2011 were under the assumption that Tom and the other alleged cheaters were long gone. They believed the company was under the control of legitimate actors. It was all a smokescreen.
Ultimate Bet and Absolute Poker cheated their customers. When they were caught, they tried to cover it up as best they could. They created shell companies so the existing ownership could remain in place. They gave the appearance that the people behind the cheating were gone.
Any reasonable investigation by a legitimate regulatory body would have discovered this. But because ‘paper tigers’ were regulating sites like Absolute Poker, nobody cared to know.
In the end, it was the players who suffered. Absolute and Ultimate Bet eventually folded and player account balances were never repaid.
It’s one of several cautionary tales that could be avoided with online gambling regulation in the US.