If it is baseball or football season, you can pretty much bet that in any group of ten people, at least five of them are somehow involved in fantasy sports. Some do it for fun, and some for the hope of money or prizes. If there is money involved, it’s a form of gambling, and it is illegal in most places. In the State of New York, after shutting down operations by FanDuel and Sports Kings, the General Assembly is changing things. In mid-June, legislation overwhelmingly passed the NY version of the House that would allow fantasy sports with cash entry fees. It is expected to be successful in the NY Senate as well.
Contrast this loosening of the reins on gambling (or maybe the recognition of the State that there is some serious capital to be gained in the regulation of something that is going to happen anyway) with the prosecution by the Manhattan District Attorney’s Office of Robert Stuart, Susanne Stuart, Patrick Read, and Extension Software, Inc. for aiding and abetting illegal gambling and money laundering. Supposedly they sold software to companies outside the US that allowed them to create a Sports Book that people used here in the US. This case already went to trial, but a hung jury, 9-3 in favor of acquittal, means that if the DA’s office wants to continue prosecution, it will have to try the case all over again. The second trial is set for mid-September.
Robert Stuart hired high-powered defense lawyer Ryan Blanch, who remains confident that his clients will prevail. The Manhattan DA must think the same thing, or it wouldn’t expend the resources a second time.
Here’s what happened. Extension Software is a family-owned software company that licenses software to businesses located in countries in which sports gambling is legal. These companies took the software and built a website to interface with the program. The NY mob then allegedly accessed that website and used it to place bets from the U.S. where it is not legal. Confused? You’re not alone.
It’s an interesting case. As Americans, we always want to seem to blame somebody for everything that happens. It reminds me of the song “Your Fault” in Stephen Sondheim’s Into the Woods, where everyone is trying to figure out the triggering event that caused everyone’s downfall. How far back in the chain of events do you go before you find an innocent person? If the flap of a butterfly’s wings in South America really do set off a chain of incidents which result in a Tsunami in Japan, is the butterfly at fault?
It helps if you look at this case through an analogy. It seems to me that it is a lot like the cases against gun manufacturers. If Smith and Wesson legally sells a gun to someone who has a permit, and then that person uses the gun to kill his neighbor, did Smith and Wesson kill the neighbor? Are they legally responsible for the neighbor’s death? Or, to make a closer point, if I sell you a deck of cards, and then you use that deck of cards in an illegal poker game, am I guilty of aiding and abetting your illegal poker game? Would it make a difference if I sold you the cards in Las Vegas and then you used them in Salt Lake City? Would it make a difference if this particular deck of cards was only useful for poker, and not something more innocent like solitaire? (Yes, people under 30 – you can play solitaire with an actual deck of cards.)
Extension Software’s argument is that it did nothing more than sell a deck of cards to someone in Las Vegas. The District Attorney’s argument is probably something like this: since this is software to be used on the internet, which itself has no borders, it was reasonable to suspect that a Costa Rican sports book company would not only have Costa Rican users.
Interestingly, the defendants were offered a low-ball plea bargain – only one of them would be charged, and it would involve no jail time. As a practical decision, one of them should have taken the deal. But they didn’t, reportedly because they had ethical problems with the catch involved, in addition to maintaining their innocence. The catch was that Extension had to build a back door into their program to allow the DA’s office access user information. Given that there is alleged mafia use of this software, user information would be valuable intelligence. The Stuarts were not comfortable with violating their clients’ privacy. I’m just cynical enough to wonder if the whole reason why Extension was prosecuted in the first place (along with the husband, wife, and brother team of owners) was just to pressure them into building this backdoor. And what if the Mafia uses iPhones… should Apple build in an iOS backdoor, too?
And here we come precariously to the edge of the slippery slope: Do software developers need to worry about what purchasers might do with their software? If I wrote an app that allowed you to sell images with ease, and you bought the program, and then used it to sell child pornography, would I be guilty of aiding and abetting your child pornography business? Can the government then pressure me into installing spyware to let them access everyone else’s photos?
As always, I’m better at asking the questions than I am at figuring out the answers. I will be watching this trial, though, to see what happens (with my iPhone turned off… just in case).
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