DraftKings Fights Proxy War With New Jersey Regulators, Comes Up Craps

In the gambling industry, proxy betting used to be big business. Now, it’s a big crime.

In basic terms, proxy betting is the practice of placing a wager through a private intermediary, most often across state lines.

For example, a gambler living in a state without legal brick-and-mortar or online sports betting could call up an acquaintance living in a legal betting state and have them either place the desired wager with a local regulated bookmaker or log in to a state-based Internet betting site and wager that way.

For sports betting, this works very well.

For casino gambling, of course, there’s really no such thing as proxy betting, as the gamblers themselves actually have to be front and center to play the games in question.

A proxy bettor in such a circumstance would be little more than some guy gambling for free on your dime. Good work if you can get it, but it’s basically pointless. (Feel free to kick us a buck a month on Patreon if you want to sponsor our gambling habit, by the way…)

So, proxy betting is almost exclusively an issue with sports betting.

See, for the longest time, Nevada was the only place to legally wager on sports in the United States. If you didn’t live in Nevada, you couldn’t place a bet without going the black-market route.

This is because the 1961 Interstate Wire Act prevented licensed bookmakers from accepting bets across state lines. While sold to the public as a way to combat organized crime from “runnin’ numbas,” it worked out to be the mechanism by which – with the passage of 1992’s PASPA law – secured a total national monopoly on sports betting for the Las Vegas casino and tourism industries.

No state but NV could offer sports gambling, and no Nevada venue could accept wagers remotely. You had to travel to Sin City if you wanted to bet on sports. Unless, of course, you knew someone local who could place your bets for you.

Well, proxy betting was eventually outlawed to close that loophole, and while PASPA is finally a thing of the past, the Wire Act remains on the books.

However, the reason proxy betting – and associated crimes of proxy betting – haven’t been in the news all that often is that they’ve become exceedingly rare over the last 15-20 years.

With the advent of offshore online sportsbooks and online casinos, legal real-money gambling became a casual commodity. Anyone with a computer and an Internet connection could sign up and place as many wagers as they wished.

Today, with total mobile Internet ubiquity and smartphones in every pocket and purse, the offshore market is even more readily available. And because the operators in question are headquartered outside of US borders, the Wire Act has no jurisdiction over their activities – or yours.

That’s why it’s so surprising that DraftKings just got popped for their part in facilitating a proxy betting scheme on behalf of a high roller from Florida (where sports betting was briefly available but is now hung up in legal limbo).

In this case, a Florida resident visited New Jersey and opened a legal online betting account with DraftKings Sportsbook. Because he was physically inside NJ at the time he created his account, he was allowed to place wagers and gamble freely.

However, those privileges ended the moment he traveled outside of NJ.

To continue gambling using his account, the FL bettor got a buddy in New Jersey to keep placing big-money wagers – often as much as $50,000 – in his stead.

The problem for DraftKings, of course, is that they knew about this and allowed it.

Truth be told, proxy betting is probably fairly commonplace, but it’s one of those things where the operator can’t really be expected to know it’s happening.

Smart players – those who keep things small, tidy, and private – can likely get away with this stuff forever. It’s inconvenient and annoying and pointless given the fact that legal offshore betting sites exist, but many folks aren’t aware of this side of the market.

But the second a sportsbook operator finds out that proxy betting is taking place, they’re legally obliged to put a stop to it and alert their gaming commission.

In New Jersey, the Casino Control Act expressly bars proxy betting and outlines the reporting procedures required when proxy betting is detected.

DraftKings, apparently, didn’t follow the rules. In fact, they even seem to have encouraged the scam.

Per Casino.org (emphasis added):

“New Jersey gaming regulators alleged that the high-stakes sports bettor in Florida had an informal agreement with DraftKings that allowed him to wager as much as $50,000 per game remotely through his associate. The state also contended that the whale attended Super Bowl LIV in February of 2020 at Hard Rock Stadium in Florida as an invited guest of DraftKings and sat in the sportsbook’s suite. …

DraftKings denied that it knowingly allowed the individual to bet remotely. However, the book agreed to the $150,000 settlement fine.

The Division of Gaming Enforcement says its review of the incident led to the conclusion that the individual in Florida began running a separate similar scheme through Pennsylvania with the same friend once New Jersey regulators began closely monitoring his play. DraftKings banned the customer from its platform in October of 2020.

Too little, too late.

While the fine won’t do much to deter DraftKings from this kind of behavior in the future, we suspect that they’ve learned their lesson about proxy betting. The next infraction won’t be a simple slap on the wrist, after all.

And the player from FL and his acquaintance aren’t totally off the hook, either. They could both be charged with wire fraud in federal court.

So again, why even bother?

If you live in a state that hasn’t yet legalized sports betting – or which doesn’t yet have convenient online sports gambling options – just use a trusted offshore service.

There are no laws to break, so there’s nothing to lose.

Unless you bet on the Dolphins. Never bet on the Dolphins.