A bad bet

Jay Cohen was too smart to set up his online gambling business in the United States, but that didn't keep the feds from nailing him.

Published February 29, 2000 5:00PM (EST)

Jay Cohen is the youthful co-founder of the World Sports Exchange, an offshore Internet gambling outfit based in Antigua that allows sports fans to wager digitally. For more than a year now, Cohen, 32, has also been battling the U.S. government, which claims that his Web site is illegal and wants to put Cohen behind bars for five years. His fight has also become a cause cilhbre for Internet gamblers who fear that their favorite wagering sites will be taken away.

As one fan on the Net gambling news site the Prescription complains, "This case is about a misguided and hypocritical assault by the federal government on a licensed and regulated visionary offshore gambling business."

Monday brought bad news for Cohen and his fans alike, when Cohen was found guilty on eight counts of illegal Internet wagering. As a result, the future of offshore Internet gambling -- or any other online activity that is regionally illegal -- looks dicey.

Although there is no current Net gambling legislation -- an oversight that several senators are trying to amend -- Net gambling is generally considered illegal under the dusty Interstate Wire Act of 1961, which prohibits interstate wagering via phone or telegraph wire. As a result, when Cohen, a former stock trader from San Francisco, founded the World Sports Exchange in 1996 with two friends, he moved to Antigua -- where gambling is legal -- in order to safely found his company.

But that didn't protect World Sports Exchange from a sweeping FBI sting in 1998. In the spring of that year, 21 individuals from nine different offshore gambling Web sites were indicted by the U.S. government for allowing a resident of New York (a state where gambling is illegal) to place sports bets.

Jay Cohen, along with his partners, was among those 21; Cohen, however, was the only World Sports Exchange partner to return to the United States to face the charges. He was also the only named defendant in the FBI sting to protest the charges; he argued that the United States has no jurisdiction over a company fully licensed by the government of Antigua. Just because an American resident can visit a foreign gambling site, does that give the United States the right to extend its laws to that country, he queried.

According to a New York jury, which spent the weekend in deliberations, the answer to that question is yes. The decision strikes to the core of the issue of nebulous boundaries and laws in cyberspace. Cohen was an American citizen, making the offense more visible; but would United States courts also be able to prosecute a native of Antigua for the same offense? The international ramifications are also significant: With this precedent, could an American be prosecuted by the Singapore government for a pornographic Web site? A German by the Israeli government? A Pakistani by India?

Benjamin Brafman, Cohen's attorney, believes that the decision is far from finished. He argues that the jury was biased by the judge's explanation of the Interstate Wire Act. "I believe that the legal instructions provided by the court gave the jury no choice but to find Mr. Cohen guilty," says Brafman. "I do not believe that this verdict will survive appellate review and we have every intention of pursuing a vigorous appeal on Mr. Cohen."

Americans based in states where gambling is already legal may be incensed to think that their favorite offshore sites might be dismantled: If they can walk down to the casino, why shouldn't they be able to log on to visit it, too? Still, even if Cohen loses his appeal, it's unlikely that the United States is going to start hauling every foreign offender into court -- foreign-based vice sites are innumerable. But thanks to the court decision, it's probably a good time to start hedging those bets.

By Janelle Brown

Janelle Brown is a contributing writer for Salon.

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