Betting industry gone missing
As Bermuda struggles to launch a long-promised casino industry, another form of gambling on the island has disappeared — at least, officially. Punters who fancy a flutter no longer have the option to visit a local bookmaker. The Royal Gazette explores the disappearance of Bermuda’s betting shops and looks at records finally released by the Bermuda Gaming Commission about the sector before it vanished.
David Burt tabled a Bill in Parliament in March 2021 which, he told MPs, would improve the island’s “betting regime” and be beneficial for Bermuda, demonstrating a “commitment to a modernised approach to regulation”.
Mr Burt, the Premier and Minister of Finance, said the Betting Act 2021 was long overdue since the “somewhat outdated” legislation it would replace was from 1975 when “concepts such as due diligence and anti-money-laundering standards were not fully developed”.
The new Act, bringing all betting activity under the regulation of the Bermuda Gaming Commission, came into effect on August 1, 2021.
The new regulatory requirements included completion of a 22-page betting licence application form, a 67-page multijurisdictional personal history disclosure form and permission for the BGC to run background checks.
Eight months after the legislation was enacted, when it was time for the island’s betting shops — Seahorses, Triple Crown Racing, GameTime and Paradise Games — to apply for licences to the commission, they all closed.
None of the shop's owners have spoken publicly before about why they shut.
But a Triple Crown Racing spokesman told The Royal Gazette last week: “We felt the personal disclosure was too intrusive and, with the business being marginally profitable, we decided to give up our licence and close the business.”
Marc Bean, who owned Paradise Games with wife Simone Smith-Bean, said yesterday: “We hit a regulatory brick wall.”
He explained the new legislation required operators to have a $100,000 guarantee and the commission insisted it be given “in perpetuity” — a condition Mr Bean, former leader of the Progressive Labour Party, said wasn’t acceptable to the financial institution providing the assurance.
“For me, that was the final straw,” he added.
The couple’s company, Axum Ltd, applied for a judicial review to the Supreme Court challenging the commission’s powers, but lost the case.
There was no written ruling, but the BGC told the Gazette that Puisne Judge Larry Mussenden gave an oral ruling on April 19 last year, which found that “based on the information provided”, Axum “could not say they have completed an application for renewal of their betting licence”.
The BGC said Axum claimed the “commission’s decision to close Paradise Games down” was “unfair, illegal and irregular in the circumstances”, but the judge disagreed.
The Premier, in bringing forth the new legislation in March 2021, was finally responding to concerns about the island’s betting sector, which were raised well before the PLP came to power and were flagged up to him when he was Opposition leader.
Warnings were made repeatedly by Richard Schuetz during his two-year tenure as executive director of the Bermuda Casino Gaming Commission, as the BGC was initially known.
Records released recently by the commission under public access to information reveal that Mr Schuetz highlighted what he described as the “unregulated nature of the gaming product” soon after his arrival in Bermuda in September 2015, when the One Bermuda Alliance was in government.
Minutes show that at an April 2016 BCGC meeting, chairman Alan Dunch told commissioners that he and Mr Schuetz “have had an opportunity to express certain concerns to the [then] Minister of Finance [Bob Richards] regarding unregulated and illegal gaming on the island”.
Five months later, Mr Schuetz wrote to Mr Dunch that the issue of the “absence of any semblance” of anti-money-laundering controls at the betting shops was gaining traction.
He said it had been embraced as a “critically important action item” by the National Anti-Money-Laundering Committee, the Bermuda Monetary Authority, the Financial Intelligence Agency, and finance ministry, “especially the finance minister …”
Mr Schuetz explained to the chairman that his reason for wanting to “clean up” the “outdated and flawed” Betting Act 1975 was driven by a desire for betting to be offered at the island’s casinos when they opened.
“I saw this as an important revenue source and marketing tool for the integrated casino resorts, given that there is no legal betting in the majority of the North American feeder markets for Bermuda,” he wrote.
The executive director noted: “ … there was little interest in this topic among all of those we initially approached on this issue and there was certainly not an appetite to do anything about it.”
Mr Schuetz said the commission agreed during discussion with the finance minister to regulate “all of the island’s gaming products” — including the betting shops — if it could draft a new Act and regulations.
He added: “The whole topic then seemed to disappear from our radar, at which point I drafted the letter to the [then] Premier [Michael Dunkley] noting my concerns over the risks associated with these unregulated gaming areas.”
Mr Schuetz also described how when he met the Attorney-General [Trevor Moniz] to discuss amending the legislation “ … the AG clearly stated there would be no changes made to the Betting Act, and that this was the decision of Cabinet, and that this decision was based on political considerations”.
The conversation prompted the casino regulator to withdraw its “willingness to oversee the other gaming products” on the island, on the grounds that “those areas would simply be dumped on us, and we would have absolutely no tools to manage them”.
Mr Schuetz, a decades-long US casino industry executive, was still banging the drum about betting shops in March 2017 when he wrote a memorandum for Mr Dunch to send to the finance minister urging the betting shops to be shut down.
The warnings contained within could not have been clearer. He said the minister should be told there were “essentially no regulatory controls on the betting shops”.
“These entities most certainly are ripe to evade taxes, are not subjected to suitability tests, have no controls resembling best practices in bankroll protections, game integrity checks, revenue and tax recognition and other common regulatory concerns and, most importantly, are totally noncompliant with global Financial Action Task Force standards,” wrote Mr Schuetz.
He added: “Mirror betting [when customers place each-way bets] and the issuing of draft refunds for wagering accounts are ideal vehicles to facilitate the laundering of drug proceeds on this island.”
Further, he warned: “There is a high probability that offshore betting transactions are being facilitated through the improper coding of these transactions through the Bermuda banking system.”
There was no suggestion that anyone involved in the island’s gambling industry was doing anything illegal. Mr Schuetz was warning that the lack of regulation could create a loophole for criminals to exploit.
Mr Bean said yesterday: “We certainly were never involved in anything illegal.”
The spokesman for Triple Crown Racing, which was owned by Wendall Brown and Andrea Joseph, said: “TCR did not engage in any illegal activities.”
All efforts to reach Albert Steede, owner of GameTime and Seahorses, were unsuccessful.
Mr Schuetz did allege that “illegal” games were being offered within the different betting environments that “violate provisions of the United States Code that are designed to stop the laundering of money, counter terrorist financing and disrupt the use of the proceeds of crime”.
The Gazette reported in 2018 that the commission had obtained a legal opinion in 2016 which found the sale of American lottery tickets at Paradise Games appeared to breach “numerous” laws in the United States, including some designed to stop money-laundering. Previously, a police investigation was launched here to see if any local laws were broken at four betting shops in Hamilton, but no charges were brought.
Mr Schuetz, in his March 2017 memo, warned of the “substantial reputational risk to the financial brand of the island” — at a time when the country was trying to launch a casino industry and needed to convince a local bank and its US correspondent bank to handle the proceeds of gaming in Bermuda.
He wrote that he and Mr Dunch should recommend the finance minister “use his powers to ensure that these facilities are closed until an appropriate regulatory regime can be in place to mitigate any material damage to the island”.
Mr Schuetz didn’t stop at the Premier and Deputy Premier. He wrote to the Governor at the time, John Rankin, later the same month to say: “ … Bermuda has a maze of legislative efforts directed at different gaming products offered on the island, and all of these efforts follow a model where some gambling product is legalised, the Government makes an attempt to monetise it through a fee or tax, and then it is essentially regulated by prayer”.
He said such an approach meant those products could become a “conduit for millions of untraceable dollars flowing through unregulated and poorly understood channels”.
Mr Schuetz added: “An observation I have had as an outsider is that Bermuda has, and continues to claim, a pristine reputation in offering state-of-the-art controls for all things financial.
“I do believe that as one spends time on the ground in Bermuda that parts of this notion can appear to be illusory.”
He told the Governor he questioned whether anyone outside the commission cared about the “sorry regulatory environment”.
Mr Schuetz resigned in July 2017, on the eve of the General Election which brought the PLP to power, saying in his resignation letter that the island lacked the will to regulate gambling properly.
“The Bermuda I have come to know has indicated a lack of respect in making a reasonable effort to adhere to generally accepted international standards for anti-money-laundering activities within its existing betting products, in particular the betting shops,” he wrote.
Mr Richards told the Gazette recently: “I was supportive of encompassing betting shops into the gaming legislation.
“I recall that the research that was done revealed that the scale of money flow through those betting shops was quite material, despite their modest physical store fronts.
“Therefore, they posed a real risk to our efforts to comply with Caribbean Financial Action Task Force requirements.”
Mr Richards added that he could not comment on internal Cabinet discussions.
Mr Moniz would not comment and Mr Dunkley did not respond to a request for comment.
In December 2017, the new administration amended legislation to bring the independent commission under ministerial control, giving the tourism minister the ability to fire commissioners without cause. Mr Dunch quit.
The BGC later obtained a Supreme Court gag preventing Mr Schuetz from talking about his work at the commission — and banning anyone else from enabling him to do so.
The betting shops went about their business but their revenue plummeted, according to figures from the Office of the Tax Commissioner.
Licensed bookmakers have to pay a 20 per cent tax to the Government on all bets made, received or negotiated.
In the financial year 2015-16, the shops declared $7.2 million in bets and paid betting tax of $1.4 million, the OTC said.
In 2019-20, only $703,000 in bets was declared — a 90 per cent decrease on four years before — and only $81,000 was paid in betting tax.
Three of the betting-shop businesses have been in tax arrears in recent years, with two businesses owing almost $450,000 as of 2021-22.
An OTC information officer said: “The OTC did query a taxpayer in reference to a fall in revenue when they provided revised tax amounts in 2018 for the 2017-18 fiscal and the previous year.
“Unfortunately, the officer in question could not retrieve the correspondence after a careful search of e-mail. There has been no recent correspondence regarding overall declared betting revenue numbers.”
By the time the Betting Act 2021 came before the House of Assembly, gaming fell under Mr Burt's finance portfolio.
He admitted the “path to realising a properly regulated gaming industry for Bermuda has been a challenging one”, but insisted it was now on course.
Did the Premier, in his quest to make casinos a reality here, come to the conclusion that the betting shops were one of the key barriers to achieving this?
He told MPs there had been “wide-ranging consultation” with stakeholders, including the betting operators.
But the Axum lawsuit, the comments from Mr Bean and Triple Crown Racing, and recent minutes from BGC board meetings suggest the sector was not on board with the changes.
At a BGC meeting on March 31 last year, it was noted that licences for all the shops expired that day.
“ … operations will cease effective immediately, to which the operators have been made aware and Premier has also been briefed,” stated the minutes. “The Bermuda Police Service are on standby to assist.”
The shops were discussed at subsequent meetings, including in April last year when commission chief executive Charmaine Smith said they had been given well over two years to prepare for the new legislative framework, but none met the deadline. She told commissioners: “Further extensions would likely be futile.”
Whether the disappearance of the small but problematic betting-shop sector will solve the casino-banking issue remains to be seen.
Mr Dunch told a gathering of business leaders in 2016: “If we can’t get the banks to bank casinos … there won’t be any casinos.”
In autumn 2021, Mr Burt said success in developing a casino industry was “dependent on the willingness and support of correspondent banks to allow for the movement of funds in and out of Bermuda”.
So far, no bank has agreed to bank the proceeds of casino gambling in Bermuda.
St Regis, the only potential operator with a licence from the BGC, has delayed opening its facility and is silent on its plans (see separate story).
Developing a gaming industry is one of the keystones of the Government’s economic recovery plan.
But without a timeline for a casino — or even, now, any betting shops in existence — observers may wonder what the odds are of it contributing significantly to Bermuda’s financial prosperity.
Mr Bean said ten employees were let go when Paradise Games closed. One full-time and two part-time employees lost their jobs at Triple Crown Racing.
The Premier was asked questions by the Gazette about the betting shops. A government spokeswoman declined to comment on his behalf on the collapse of the industry, the number of jobs lost, or what feedback the operators gave during consultation on the Betting Act 2021.
The Bermuda Police Service have been approached for comment.
March 2022: “Effective March 31, 2022, all betting shop licences will have expired and operations will cease effective immediately, to which the operators have been made aware and Premier has also been briefed. The Bermuda Police Service are on standby to assist. Notices will be issued today, March 31, 2022. Chairman advised the commission now needs to be ready for media inquiries.”
April 2022: “There has been no change in the licensing status of the betting shops. To date, a completed application has not been received."
“Commissioner [Jonathan] Smith inquired whether consideration should be given to amend the legislation in a manner that would assist the operators in the licensing process. [Chief executive Charmaine] Smith stated that the industry participants had been given well over two years to prepare for the new legislative framework and requirements. Numerous attempts by the commission to assist operators in understanding and meeting their legislation requirements, regrettably, none of the operators met the legislative deadlines. Further extensions would likely be futile.”
June 2022: “To date, there have been no applications received from previous operators or new business.”
August 2022: “There has been no response from the former betting operators to date.”
September 2022: “There has been no response from correspondence circulated to the betting-shop operators regarding new application submission [redacted].”
October 2022: “There have been no further developments with the betting operators to reopen [redacted].”
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