Receiving permission to enter legal gambling markets after years of black market operations is extremely difficult. That hasn’t stopped one of the world’s largest offshore sportsbooks from trying.
5Dimes, formerly based in Costa Rica, has just scored a massive victory in that effort. The company announced on Wednesday that it has received a gaming license from the Isle of Man Supervision Commission.
It will now relaunch its international product from that jurisdiction. The Isle of Man itself is a tiny market, with a population of less than 100,000. However, its Supervision Commission has international recognition. Whereas Costa Rican sites are effectively unregulated, an Isle of Man license is an assurance to other countries that the operator is playing by the rules.
“This licensure is an exciting milestone for the 5Dimes brand,” said Laura Varela, speaking for the company’s Board of Directors. “The Isle of Man is a Tier-1 jurisdiction, known for its advanced approach to gambling and e-gaming legislation and its exceptional reputation in the international gaming community. The Isle of Man sets high standards for its gaming operators and players, and we look forward to upholding the same level of principles and innovation with the launch of 5Dimes.”
Varela is the widow of the company’s founder, William Sean “Tony” Creighton. Tragically, he was kidnapped in 2018 and later found murdered.
Creighton’s death left the company in Varela’s hands. It’s under her leadership that 5Dimes began to try to clean up its act. This began with a settlement made with the US Attorney’s Office for the Eastern District of Pennsylvania, to the tune of $46.8 million.
Initial skepticism may still prove warranted
The key in all of this is that Varela herself hasn’t been accused of any wrongdoing. In fact, an investigation by US authorities found that she had no part in the company’s black market operations while Creighton was at the helm. Moreover, she entered into the settlement arrangement with the Pennsylvania authorities of her own volition.
That fact forms the basis on which Varela is attempting to steer the company towards legitimacy. Regulatory bodies vary in the extent to which they separate companies from the people who run them. Some take the position that a company’s misdeeds will follow it no matter who is at the helm. However, others are more receptive to the idea that a change in leadership can wipe the slate clean.
5Dimes suddenly stopped taking bets from US customers at the beginning of September last year. This turned out to be related to the settlement the company paid to the Pennsylvania authorities. In return for admitting to the company’s misdeeds and paying the fine, Varela received immunity from further prosecution – for herself and the company – for any crimes committed prior to September 30. US customers received instructions to withdraw their funds prior to that date.
There are still causes for concern, however. Back in September, there were reports from some US-based customers that 5Dimes representatives had directed them to another offshore site, BetAnySports. This company offers a near-identical set of products, right down to a large portion of the copy on its website. Meanwhile, 5Dimes continues to serve many gray market countries, despite having pulled out of the US and a handful of other regulated jurisdictions.
These residual stains don’t seem to have impacted its ability to get a license in the Isle of Man. Other regulators may see things differently, however.
Not all offshore regulators are equal
To someone unfamiliar with the industry, switching from Costa Rica to the Isle of Man may not seem like a big deal. Both are, in some sense, “offshore” regulatory jurisdictions. Neither can serve US customers legally, as states require companies to host their servers locally.
However, when it comes to offshore regulators, there is enormous variation in terms of level of oversight.
Costa Rica falls at one end of the extreme. Though many companies claim to be “licensed” in the country, there is in fact no such thing as a Costa Rican gaming license. Companies will pay a small amount – $4500 up front and $1950 per year – to register in the country. However, they have no oversight whatsoever, and pay no taxes so long as they don’t serve Costa Rican customers.
At the opposite extreme are the Isle of Man and Malta. They have each made a commitment to providing strict oversight to online gambling companies. That, combined with favorable tax rates, have turned international online gambling into a major industry for them. In September 2012, they pushed further in establishing their trustworthiness by entering a mutual data sharing agreement. Through this, they’ve each improved their regulatory standards, and developed the ability to assist each other in investigations.
Not every legal online gambling country insists that servers be hosted locally. Those that allow reputable, regulated offshore sites to operate tend to look for licenses from the Isle of Man and Malta. Virtually every company you’ll see operating legally in the US will have a license in one or both of these places, if it serves international customers. This includes Flutter, Entain, 888 Holdings and their various brands, among others.
PokerStars was the exception that proves the rule
After settling with US authorities, 5Dimes claimed it would apply for a New Jersey license. It hasn’t received one yet, but it hasn’t been formally rejected either. It’s unclear whether the application was ever filed, if it is still pending, or has been withdrawn.
5Dimes is popular because it has favorable lines and a good reputation compared to other offshore sites. US sports bettors are therefore hopeful about its chances. Those without a personal stake in the matter are more skeptical, however, and for good reason.
We know that it’s not impossible for a company to clean up its act and make it into legal US markets. There is exactly one example of that, namely PokerStars. It served US customers illegally from the 2006 passage of the Unauthorized Internet Gambling Enforcement Act (UIGEA) to the 2011 crackdown known as Black Friday.
That illegal activity has prevented PokerStars from getting licensed in Nevada. Other state regulators, however, have been more charitable. PokerStars is currently active as a poker room in New Jersey, Pennsylvania and Michigan, while its associated sportsbook Fox Bet is in all of those plus Colorado.
However, PokerStars’ entry to the US demonstrated the effort required to do so. It transformed its corporate identity and went public via a reverse merger with a much smaller company. It distanced itself not only from its original owner, Isai Scheinberg, but all its executives from that era. Finally, it spent years bending over backwards to show a proactive attitude towards compliance. That’s an effort which continues to this day.
If 5Dimes has to go to similar lengths, then its Isle of Man license is only the first of many hoops. It is, however, an important step. Moreover, the speed with which it managed it should give doubters at least a little pause.