BetonSports cops plea, agrees to testify against Kaplan and Carruthers

BetonSports, an Internet sportsbook that stopped taking wagers in July 2006 after its former CEO David Carruthers was arrested in Dallas/Fort Worth International Airport, has pleaded guilty to federal racketeering charges.

"The government has pretty much said 'All right, we're done with the corporation,'" said Joseph Kelly, professor of Business Law at Buffalo State. "The corporation has been liquidated, so it's not like they could go after anything there anyway. But now the other directors of the corporation don't have to worry about future litigation and should be able to travel in the United States without fear of being arrested."

BetonSports has agreed to provide witnesses and evidence against Carruthers and company founder Gary Kaplan. In return, U.S. Attorney Catherine Hanaway will bring no further charges against any BetonSports executives.

"This plea, combined with the terms of the civil junction, should put an end to the BetonSports illegal gambing empire," Hanaway said in a statement. "This plea constitutes a submission by the company to the U.S. justice system."

The plea is an admission by BetonSports that it conducted an illegal gambling operation and laundered money. The company faces a fine and the plea agreement also requires BetonSports to repay U.S. account holders who have had money frozen for nearly a year.

The announcement came just one day before Carruthers submitted a motion to dismiss his case based on a World Trade Organization ruling that the United States was violating its General Agreement on Trade in Services (GATS) commitments because it allows American companies to accept some kinds of Internet wagers – specifically on horse races and lotteries – while effectively blocking overseas competition for those same bets.

The government will be able to file a response to the motion, and it could be several months before a decision is made on whether to proceed with the case.

"I find it difficult to believe that (the federal magistrate) would say that she'll throw out the case based on the WTO ruling," Kelly said. "But I never would have expected her to ask for these motions on her own either, which is exactly what she did."

Kaplan ran illegal sports betting operations in New York and Miami before setting up BetonSports in Antigua and Costa Rica. Carruthers, who helped turn the company into a trusted, publicly listed brand, argued vociferously for Internet gambling regulation in the United States and led BetonSports advertising efforts on American airwaves and in sports venues.

"I always thought that Carruthers was a minor character in this," Kelly said. "The real person they seem to be going after is Kaplan. But I think the liability (in both cases) seems to be open and shut. Everybody seems to be in agreement that sports betting is illegal."