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Costa Rica: Oasis for Online Gambling
By Julie Dulude
Tico Times Staff
It used to be that English-speaking foreigners bumming around Costa Rica
to surf, travel, or improve their Spanish got jobs teaching their native
language to finance their stay.
Now almost any Gringo under 30 can rattle off the names of three others
who are manning the phones of an Internet gambling operation.
Intel, tourism, coffee, bananas ... these are the things that come to mind
when one thinks of Costa Rica and its economic livelihood - not
sportsbooks and virtual casinos. Increasingly, however, more and more
entrepreneurs in this explosive new industry are choosing Costa Rica as their
headquarters.
Of an estimated 700 online gaming sites worldwide, at least 125 are in
Costa Rica, say industry insiders - probably more.
"Costa Rica is very popular right now, probably because it's one of the most
inexpensive places to get started," said Joe Gallagher, owner of the All
Sports Network, a Dominica-based consulting firm to the I-gaming industry.
"Some of the largest companies in this industry are in Costa Rica.
Companies like NASA Sports International, CHRIS and Casablanca
Sportsbook & Casino."
It's incredible how low a profile Costa Rica's I-gaming sector has, given
how large it is. Even business leaders who usually pride themselves on being
able to speak knowledgeably about any trend in Costa Rica weren't sure
what a sportsbook is - a call-center accepting phone-placed bets on
sporting events from abroad. Congressmen, when asked how big they think
the I-gaming sector is, were at a loss.
Costa Rica's I-gaming sector isn't just big. It's huge! In the modern office
complex behind the Comptroller General's office on La Sabana on the west
side of town, there's at least one company on every floor of building #6,
more in the others.
On the east side, Edificio Equus, a sleek highrise across from the University
of Costa Rica on the beltway to Guadalupe, is a similar story. And how
many of the hundreds of people shopping, waiting in line for a movie, or
licking an ice-cream cone in the Mall San Pedro are aware that right above
them is the 30,000-square-foot office of NASA Sports, which occupies
almost the entire eighth and ninth floors of the mall, and is home to some
350 clerks, lawyers, translators, graphic artists and attorneys?
The Internet is the fastest growing telecommunications medium in history,
and through it, the potential revenues for gambling - already a
multibillion-dollar industry, just in the U.S. - are gargantuan. Only a year
after gambling went online in 1997, the market for Internet gambling had
more than doubled, according to a widely cited report by Sebastian Sinclair
of Christiansen/ Cummings, one of several documenting the industry's
exponential growth. Revenues during that period grew from $300 to $651
million, while the number of gamblers increased from 6.9 to 14.5 million.
Sinclair predicts that in 2001, 43 million people will be gambling on-line,
generating $2.3 billion in revenues.
And that's a conservative estimate. According to the Web site
Gocasino.com, an online casino which recently announced its intention to
move its operations to Costa Rica, one New York industry analyst ifferent
regions, Asians are the biggest spenders; NASA is currently prepping sites
in Mandarin and Cantonese.
Here's how it works. To get started, bettors open an offshore account in
dollars. When clients are ready to bet, they call an 800 number, wagering
anything from $1 on up.
But the betting isn't confined to just the Superbowl, March Madness or the
NCAA Championship. The NASA-sponsored site www.inventabet.com,
covers everything from the Oscars to the U.S. presidential elections. It's
People magazine in an interactive format - "Will Ricky Martin come out of
the closet before the new millennium?" and "Who do you bet Howard Stern
will be seen dating: a) a former guest, b) a topless dancer or c) another
man?" You be the judge, putting your money where your mouth is.
"It's titillating, it's the action, it's being on the edge. It brings the casino to you
- that's the only difference," said Gallagher, adamant that even without the
buzzing slot machines and whirling roulette tables, virtual gambling is just as
much fun as it is at a physical casino.
Along with its business, the I-gaming industry has brought to Costa Rica its
own subculture - the young, single, party crowd that comes with money.
During a walk through the Equus building, one can watch a parade of
20-somethings strolling by on their way to a smoke break - guys in baggy
jeans with bleached hair, women who look like they walked out of a New
York City club - any one would have been a shoo-in for the next MTV
V-jay.
One employee, asked what he likes about his job, said, "It's cool." Said
another: "You see people come in as trainees and they have nothing. Pretty
soon they're talking about putting down a down payment on a car."
This is one instance where U.S. President Ronald Reagan's much
pooh-poohed "trickle-down effect" seems to be working.
Rick Rawson, 27, says the ˘210,000 ($695) a month most NASA
employees bring in on average is at least twice what they could make
elsewhere. Students design their own schedules depending on their classes
and workload that semester.
Employees also enjoy such benefits as a company day-care center and
gymnasium. The company is currently looking into a group health-care
program. The figure is impossible to confirm, but those in Costa Rica's
I-gaming industry believe it provides more than 3,000 jobs. Companies that
"do things right" employ many Tico students, who earn two to three times
what they would in other jobs, and put the money towards school.
But because the industry is unregulated in Costa Rica, and because it's so
cutthroat due to its high stakes, a split has developed between those that
play by the rules and those that don't. Companies that finalize the bet here,
instead of beaming the call to the Bahamas or some other Caribbean
destination for a payment transaction, for example, are frowned on. There
are even rumors of Mafia involvement.
"Which Mafia? - the Italian Mafia, the Asian Mafia, the Colombian Mafia,
the Russian Mafia?" asked Robert Simmons, gaming consultant and owner
of the Costa Rican company Offshore Sites, which helps Internet gaming
businesses with everything from legal assistance to tech support. "'Mafia' is
just one of those words that means guys that live outside the law and know
each other, because they're all working in the same enterprise.
"Anytime there's a large amount of money around in an unregulated
environment, there's bound to be a free-for-all," he continued, noting that a
number of companies have gotten together under the auspices of the
Offshore Gaming Association to set some global standards because of the
problem. "In general, though, there are a lot more good apples than bad,
because word spreads quickly. People want to be in business next year.
There's too much money to be made doing things right to risk customer
rapport."
Other local businesspeople wonder how Internet gambling companies can
operate here without registering their employees with Social Security (the
Caja) or paying other mandatory hefty payroll costs, which amount to 39.5
U.S. cents per dollar in Costa Rica.
Asked about this, an industry executive who wished to remain anonymous
said, "Everyone gets their legal benefits," explaining only that the country's
sportsbooks - like many other foreign-owned businesses - have found
various loopholes in local legislation.
Unlike countries where Internet gambling is regulated, the legality of Internet
gambling in Costa Rica is uncertain. According to José Manuel Echandi,
president of the Social Protection Board, the Gambling Law of 1922 -
which grants the Board a monopoly over the national lotteries - together
with a two-sentence Internet-specific article recently approved as part of a
new labor law, prohibit Internet gaming by anyone else.
However, most lawyers concur that the 1922 law is far too old to be
applied to a technology that has been around only 10 years, and that a
two-sentence provision in a labor law isn't enough to clear things up.
The board has filed charges against various I-gaming companies, said
Echandi, but so far, nothing's happened. To be sure, the government's
complete ignorance of the many companies openly operating here seems to
support the contention of Costa Rican business lawyer Rolando Soto that
anything not clearly designated as illegal is legal.
In fact, the way a sportsbook operates in Costa Rica is to get licensed as a
data processing company. Taxes are paid on an ordinary business license,
while the bets being finalized in the Bahamas go untaxed.
Juan José Sobrado and Jorge Guardia, former attorneys for the company
SGB Global, clarify that the JPS monopoly is only over "games of chance."
Betting on sports is controlled by the National Sports Council, they claim.
Regardless, they say, I-gaming companies aren't treading on the government
monopoly because all that happens here is data processing. And bets aren't
accepted from people on computers showing an Internet service provider
registered in Costa Rica.
As for the future of online gambling in Costa Rica, Soto believes Costa Rica
will follow the example of the U.S.
So far, things don't look optimistic. To the chagrin of the industry, Jay
Cohen, one of 14 managers of Internet companies indicted during a March
1998 FBI "raid," (another seven were indicted later) was recently sentenced
after his Manhattan trial. And bills that would ban Internet gambling are
pending in the U.S. Senate and House.
However, it seems unlikely that a U.S.-initiated prohibition will shut Internet
gambling down. Businesses will simply move to countries where the activity
is legal.
Besides the Caribbean, Australia and a number of European countries have
begun regulating Internet gambling. According to a report published by
River City Group, LLC and Christiansen Capital Advisors, Inc. entitled
"Wagering on the Internet," even with a ban, the market for gambling on the
Internet could grow to more than $3 billion by 2002. People like gambling -
they're not going to stop, said Simmons. Consequently as the drama plays
out, those in the industry keep hoping that the United States will "come to its
senses" and think of a way to regulate it.
"It's ridiculous for the U.S. government to be blackballing Internet gambling.
Internet gambling is here to stay," says an industry insider.
"Everyone knows you can't stop the Internet. Instead of shunning it, they
should be trying to figure out a way to regulate it."
By Julie Dulude
Tico Times Staff
It used to be that English-speaking foreigners bumming around Costa Rica
to surf, travel, or improve their Spanish got jobs teaching their native
language to finance their stay.
Now almost any Gringo under 30 can rattle off the names of three others
who are manning the phones of an Internet gambling operation.
Intel, tourism, coffee, bananas ... these are the things that come to mind
when one thinks of Costa Rica and its economic livelihood - not
sportsbooks and virtual casinos. Increasingly, however, more and more
entrepreneurs in this explosive new industry are choosing Costa Rica as their
headquarters.
Of an estimated 700 online gaming sites worldwide, at least 125 are in
Costa Rica, say industry insiders - probably more.
"Costa Rica is very popular right now, probably because it's one of the most
inexpensive places to get started," said Joe Gallagher, owner of the All
Sports Network, a Dominica-based consulting firm to the I-gaming industry.
"Some of the largest companies in this industry are in Costa Rica.
Companies like NASA Sports International, CHRIS and Casablanca
Sportsbook & Casino."
It's incredible how low a profile Costa Rica's I-gaming sector has, given
how large it is. Even business leaders who usually pride themselves on being
able to speak knowledgeably about any trend in Costa Rica weren't sure
what a sportsbook is - a call-center accepting phone-placed bets on
sporting events from abroad. Congressmen, when asked how big they think
the I-gaming sector is, were at a loss.
Costa Rica's I-gaming sector isn't just big. It's huge! In the modern office
complex behind the Comptroller General's office on La Sabana on the west
side of town, there's at least one company on every floor of building #6,
more in the others.
On the east side, Edificio Equus, a sleek highrise across from the University
of Costa Rica on the beltway to Guadalupe, is a similar story. And how
many of the hundreds of people shopping, waiting in line for a movie, or
licking an ice-cream cone in the Mall San Pedro are aware that right above
them is the 30,000-square-foot office of NASA Sports, which occupies
almost the entire eighth and ninth floors of the mall, and is home to some
350 clerks, lawyers, translators, graphic artists and attorneys?
The Internet is the fastest growing telecommunications medium in history,
and through it, the potential revenues for gambling - already a
multibillion-dollar industry, just in the U.S. - are gargantuan. Only a year
after gambling went online in 1997, the market for Internet gambling had
more than doubled, according to a widely cited report by Sebastian Sinclair
of Christiansen/ Cummings, one of several documenting the industry's
exponential growth. Revenues during that period grew from $300 to $651
million, while the number of gamblers increased from 6.9 to 14.5 million.
Sinclair predicts that in 2001, 43 million people will be gambling on-line,
generating $2.3 billion in revenues.
And that's a conservative estimate. According to the Web site
Gocasino.com, an online casino which recently announced its intention to
move its operations to Costa Rica, one New York industry analyst ifferent
regions, Asians are the biggest spenders; NASA is currently prepping sites
in Mandarin and Cantonese.
Here's how it works. To get started, bettors open an offshore account in
dollars. When clients are ready to bet, they call an 800 number, wagering
anything from $1 on up.
But the betting isn't confined to just the Superbowl, March Madness or the
NCAA Championship. The NASA-sponsored site www.inventabet.com,
covers everything from the Oscars to the U.S. presidential elections. It's
People magazine in an interactive format - "Will Ricky Martin come out of
the closet before the new millennium?" and "Who do you bet Howard Stern
will be seen dating: a) a former guest, b) a topless dancer or c) another
man?" You be the judge, putting your money where your mouth is.
"It's titillating, it's the action, it's being on the edge. It brings the casino to you
- that's the only difference," said Gallagher, adamant that even without the
buzzing slot machines and whirling roulette tables, virtual gambling is just as
much fun as it is at a physical casino.
Along with its business, the I-gaming industry has brought to Costa Rica its
own subculture - the young, single, party crowd that comes with money.
During a walk through the Equus building, one can watch a parade of
20-somethings strolling by on their way to a smoke break - guys in baggy
jeans with bleached hair, women who look like they walked out of a New
York City club - any one would have been a shoo-in for the next MTV
V-jay.
One employee, asked what he likes about his job, said, "It's cool." Said
another: "You see people come in as trainees and they have nothing. Pretty
soon they're talking about putting down a down payment on a car."
This is one instance where U.S. President Ronald Reagan's much
pooh-poohed "trickle-down effect" seems to be working.
Rick Rawson, 27, says the ˘210,000 ($695) a month most NASA
employees bring in on average is at least twice what they could make
elsewhere. Students design their own schedules depending on their classes
and workload that semester.
Employees also enjoy such benefits as a company day-care center and
gymnasium. The company is currently looking into a group health-care
program. The figure is impossible to confirm, but those in Costa Rica's
I-gaming industry believe it provides more than 3,000 jobs. Companies that
"do things right" employ many Tico students, who earn two to three times
what they would in other jobs, and put the money towards school.
But because the industry is unregulated in Costa Rica, and because it's so
cutthroat due to its high stakes, a split has developed between those that
play by the rules and those that don't. Companies that finalize the bet here,
instead of beaming the call to the Bahamas or some other Caribbean
destination for a payment transaction, for example, are frowned on. There
are even rumors of Mafia involvement.
"Which Mafia? - the Italian Mafia, the Asian Mafia, the Colombian Mafia,
the Russian Mafia?" asked Robert Simmons, gaming consultant and owner
of the Costa Rican company Offshore Sites, which helps Internet gaming
businesses with everything from legal assistance to tech support. "'Mafia' is
just one of those words that means guys that live outside the law and know
each other, because they're all working in the same enterprise.
"Anytime there's a large amount of money around in an unregulated
environment, there's bound to be a free-for-all," he continued, noting that a
number of companies have gotten together under the auspices of the
Offshore Gaming Association to set some global standards because of the
problem. "In general, though, there are a lot more good apples than bad,
because word spreads quickly. People want to be in business next year.
There's too much money to be made doing things right to risk customer
rapport."
Other local businesspeople wonder how Internet gambling companies can
operate here without registering their employees with Social Security (the
Caja) or paying other mandatory hefty payroll costs, which amount to 39.5
U.S. cents per dollar in Costa Rica.
Asked about this, an industry executive who wished to remain anonymous
said, "Everyone gets their legal benefits," explaining only that the country's
sportsbooks - like many other foreign-owned businesses - have found
various loopholes in local legislation.
Unlike countries where Internet gambling is regulated, the legality of Internet
gambling in Costa Rica is uncertain. According to José Manuel Echandi,
president of the Social Protection Board, the Gambling Law of 1922 -
which grants the Board a monopoly over the national lotteries - together
with a two-sentence Internet-specific article recently approved as part of a
new labor law, prohibit Internet gaming by anyone else.
However, most lawyers concur that the 1922 law is far too old to be
applied to a technology that has been around only 10 years, and that a
two-sentence provision in a labor law isn't enough to clear things up.
The board has filed charges against various I-gaming companies, said
Echandi, but so far, nothing's happened. To be sure, the government's
complete ignorance of the many companies openly operating here seems to
support the contention of Costa Rican business lawyer Rolando Soto that
anything not clearly designated as illegal is legal.
In fact, the way a sportsbook operates in Costa Rica is to get licensed as a
data processing company. Taxes are paid on an ordinary business license,
while the bets being finalized in the Bahamas go untaxed.
Juan José Sobrado and Jorge Guardia, former attorneys for the company
SGB Global, clarify that the JPS monopoly is only over "games of chance."
Betting on sports is controlled by the National Sports Council, they claim.
Regardless, they say, I-gaming companies aren't treading on the government
monopoly because all that happens here is data processing. And bets aren't
accepted from people on computers showing an Internet service provider
registered in Costa Rica.
As for the future of online gambling in Costa Rica, Soto believes Costa Rica
will follow the example of the U.S.
So far, things don't look optimistic. To the chagrin of the industry, Jay
Cohen, one of 14 managers of Internet companies indicted during a March
1998 FBI "raid," (another seven were indicted later) was recently sentenced
after his Manhattan trial. And bills that would ban Internet gambling are
pending in the U.S. Senate and House.
However, it seems unlikely that a U.S.-initiated prohibition will shut Internet
gambling down. Businesses will simply move to countries where the activity
is legal.
Besides the Caribbean, Australia and a number of European countries have
begun regulating Internet gambling. According to a report published by
River City Group, LLC and Christiansen Capital Advisors, Inc. entitled
"Wagering on the Internet," even with a ban, the market for gambling on the
Internet could grow to more than $3 billion by 2002. People like gambling -
they're not going to stop, said Simmons. Consequently as the drama plays
out, those in the industry keep hoping that the United States will "come to its
senses" and think of a way to regulate it.
"It's ridiculous for the U.S. government to be blackballing Internet gambling.
Internet gambling is here to stay," says an industry insider.
"Everyone knows you can't stop the Internet. Instead of shunning it, they
should be trying to figure out a way to regulate it."
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