Feds Accuse Chicago Man Of Running Illegal Online Sports Betting Operation

Chicago is currently a major feeder market to Indiana’s nascent retail and online/mobile sports betting industry. Meanwhile, the federal government recently took one alleged underground Chicago bookie offline. The government said he had been illegally taking bets in the area for nearly a decade.

According to an indictment from the U.S. Attorney’s Office for the Northern District of Illinois filed Oct. 11, a Costa Rica-based sportsbook operation catering to the Chicago area was allegedly orchestrated by 35-year-old Michael Frontier. He allegedly provided bettors access to accounts at the offshore book, in a common arrangement known as “pay-per-head.” Authorities said he paid a service fee to the book for use of its platform and personally settled bets with cash.

The portal Frontier allegedly used was referred to “Company A’s website” in the indictment. A separate court filing referenced 1betvegas.com as a website he allegedly facilitated bets through. Frontier had agents working for him, too. From the complaints:

As further part of FRONTIER’s business, certain bettors with FRONTIER became his agents, including Agent 1, Agent 2, Agent 3, Agent 4, Agent 5, and others (collectively, the “agents”). The agents recruited additional bettors for FRONTIER, provided them with gambling accounts on Company A’s website, and 3 collected and paid out money to their recruited bettors. In exchange, FRONTIER provided certain of the agents a commission based on a percentage of the recruited bettors’ gambling losses

The indictment made public Thursday also alleges that Frontier concealed his bookie income during a 2009-12 civil case involving negligence in a motorcycle accident.

Size of sports betting operation unknown

Frontier was charged with five counts of money laundering, five counts of making a false statement in a bankruptcy case, two counts of bankruptcy fraud, one count of conducting an illegal gambling business, and one count of making a false declaration before the U.S. Bankruptcy Court.

The illegal gambling business charge refers to an alleged violation of Illinois law.

He’s potentially facing decades in prison under the current charges.

Frontier’s case isn’t a unique one in the history of enforcing state gambling laws pertaining to alleged underground sports betting. In some cases, there’s an estimate of the size of the operation in terms of handle. In the Frontier indictment there is not, which actually isn’t all that surprising.

While the indictment doesn’t state a handle for his alleged sports betting operation, it does mention alleged incidents of money exchanges, in the amounts of hundreds of dollars. The lack of a handle speaks, in part, to the difficulty authorities have in investigating offshore betting operations, especially when alleged local bookies use cash. Federal authorities in Northeast Ohio are currently pursuing a similar case against an alleged underground bookie. A handle size for that case is also absent.

As recently as 2018, Americans were betting about $145 billion on sports through illicit channels each year, according to the American Gaming Association.

In May 2018, the U.S. Supreme Court overturned a federal prohibition on state legalization of sports betting (exception: Nevada), a move that was widely applauded by the gaming industry and officials in state governments across the country. It gave states the power to legalize and regulate sports gambling, bringing the activity out of the shadows and creating a regulated market instead of a black one. It is said to be to the benefit of consumers and to state coffers.

Rather than expend exorbitant state resources to try to deal a meaningful blow to the robust black market, the idea is to replace it with a regulated one.

Like Indiana, Illinois legalized sports wagering in 2019. However, the Prairie State is still a ways off from crafting regulations and implementing the new sports betting law.

There are concerns among the gaming industry that Illinois’ high 15% tax rate for sports betting revenue, hefty licensing fees, as well as an in-game data mandate to benefit sports leagues, will help keep the underground market alive in the state. Among other downstream effects, legal Illinois books might not be able to offer prices (odds) that are as good as what black market operations have, which could become a lingering issue for the state.