Costa Rica Gambling – The Stakes Are High in Paradise

Strange as it may seem, there is a whole aspect to living in Costa Rica that is passing me by and that’s because I’m not an avid gambler.

To be accurate, by living here as a resident, I am legally banned from placing a bet through one of the 150 or so online casinos or sportsbooks that have appeared on the Costa Rican cyber scene in the past nine years.

Around one hundred fifty electronic gaming outfits: that is a big number of companies who have seen fit to choose this ecologically acclaimed, peace-loving piece of Paradise for business. Somehow, capuchin monkeys and casinos don’t quite go together.

So how has this come about?



Millions of people ‘out there’ want to play and their chosen entertainment is gambling. Online gambling is even more attractive since you don’t have to leave your homes and travel miles to play. The problem is that in the United States online gaming is illegal (except for a single, controlled horse racing site run by Gemstar -TV Guide International Inc. in 12 states).

Although some kind of commercial gaming is permitted in all bar two states (Utah and Hawaii) it is tightly controlled and well taxed. One way round this has been the development of electronic gambling sites run from outside America, and since the mid-1990s, Costa Rica has become one of the places in the world for the cyber gaming industry.

One estimate gives that $6 billion (1) is generated annually world-wide of which 73% comes from bettors in the States!(2) Just in case any of you have been as hazy as I have about what goes into online gaming (or I-gambling, Internet gaming, sportsbook or electronic casinos, call it what you will), it seems you can bet on or play at all sorts of things from sporting events, lotteries, card games, what celebrities might get up to – just about anything.

Bettors are helped by e-mail or over the phone to explain rules and handle any questions or problems. With online casinos, you make instant gambling decisions at your own PC screen. This highlights the core of the U.S. block, since an obscure 1960 Wire Act declares illegal the use of wire or telephonic communications for gaming purposes.

What’s on the cards for Costa Rica?


I-gaming companies have been setting up at a rate of 12 businesses annually (3) in recent years and the main draw, apart from gorgeous scenery and a near-perfect climate, is the political and economic stability combined with a highly educated English-speaking work force. Fiber-optic cable connections to the U.S. mean reliable high-speed voice and data transfer instead of expensive satellite systems.

Since no specific legislation exists to either regulate or outlaw I-gaming set-ups in the country (although this looks set to change), the businesses are legal since no laws exist to say otherwise. It’s a cock-eyed kind of logic but it gives work to upwards of 7,000 Ticos.

Since it can cost as little as $10,000 to set up an online business in Costa Rica as opposed to some $250,000 in other Caribbean countries, it makes business sense too and companies can offer salaries over the national average, appealing to English-fluent university students needing help to pay for their studies. They work shifts assisting with online bets, answering phones and earn between $4-7 per hour.(4)

This all sounds like a win-win situation for the country, but Costa Rica, possibly due to pressure from the U.S. remains ambivalent about how to proceed.

It sees the need to regulate the industry and also, logically, wants to get in on the lucrative returns it generates. Government have created an official register of online casinos and gaming companies but since some chose to blur their missions by calling themselves ‘technology corporations’ or ‘data processing firms’ or ‘call centers’, it isn’t easy to calculate just how many concentrate solely on electronic gambling. A temporary license was imposed in 2003 depending on the number of employees per online gaming company, calculated at roughly $1,000 per worker.

Even with this makeshift law and other company taxes, 2003 fetched the government $1.380 million (5) in this sector This may not seem much but with a new tax bill being debated in the National Assembly that, in addition to the annual license, hopes to levy a 1% tax on clients placing bets, the potential revenue income isn’t something that any government is going to walk away from in a hurry. This will consolidate the government’s recognition of how important the industry is to Costa Rica.

“The current climate is in fact very pro our industry and it’s likely to get really enshrined into the legal system here if it’s included in the most significant new legislation affecting taxation that has been passed for the last 30 years,” said Cole Turner, CEO of BoDog.com, a locally based cyber-gaming company.

The only restriction in Costa Rica, is that nationals and legal permanent residents do not use their local servers to place bets or play games, so you can’t be physically in Costa Rica to play. All payments and betting transactions have to take place in another country, usually via offshore banks.

This basically means that the online companies in Costa Rica manage the software to make sure that gaming transactions are correctly carried out and customers’ needs are met and if it means calling overseas to help them, that isn’t illegal here even though gambling may be prohibited in the country that the company is calling.

There’s always a catch.

When the licensing tax was implemented in early 2003, the Banco Nacional blocked transactions with several online company accounts and it is now prohibited for national banks to do business with I-companies. The consensus was that pressure came in from the U.S. with the hint of possible trade embargoes especially so close to completing the CAFTA (Free Trade) deal.

The U.S. Justice Department is concerned that unscrupulous Internet casinos are involved in money laundering. Their worry is that minors with access to computers could be corrupted and tempted into gambling and unregulated sites could stack the odds to favor the house. At the end of 2002, a campaign was started against online gaming with the threat of legal actions.

The Department pushed credit card companies to block transactions with gaming sites and the major names (VISA, MasterCard, American Express) generally refuse to process a gaming transaction. However, these measures mostly meant that online businesses moved to billing clients by using third-party companies to disguise payments as miscellaneous product purchases.

It’s all becoming, from what I can see, a catch-as-catch-can situation. Loopholes are blocked, laws are passed but technology and human ingenuity being what they are, alternatives are quickly found to keep this incredibly lucrative industry up, running and placing those bets! They are even talking about e-cash as a digital way of storing funds from a pre-paid plastic card onto your hard drive and sending payments electronically without third party clearance. The transaction is secure and difficult to trace.

It is very hard to catch an online gambler who does all his or her transactions via an offshore bank account, or to make a case against operators based overseas. In a recent twist to get the ‘baddies’, the U.S. Justice Department recently seized $3.2 million paid to media firm Discovery Communications by a Costa Rican based sportsbook for some high-profile advertising on American airwaves.

The advertising was blocked and the sportsbook did not get its money back. Discovery, as a U.S. company was charged with a felony for aiding and abetting illegal online gambling sites, which prosecutors hope will knock on to putting the pressure on I-businesses operating outside federal jurisdiction.(6) A bill (Unlawful Internet Gambling Funding Act) now pending will oblige U.S. banks and credit card companies to block all online betting transactions.

Even though these laws only apply to U.S. based companies, the sportsbooks could lose business with their American clients. “The greatest danger is for the American citizen, once these restrictions are applied, that places the player in a criminal category since the desire to play is there and this would be considered against the law,” said Eduardo Agami, president of the Asociacion Costarricense de Empresas de Apuestas.(7)

It’s all becoming a watch-this-space situation.

Placing bets on the future

Although some of the gambling website companies in Costa Rica may be thinking of packing their bags and heading out to Panama or Belize who are luring the industry with a lower tax base, available national banking, cheaper English-speaking wage earners and possible subsidized telephone fees, many companies here are well established with costly infrastructure and close family ties.

The companies here won’t want to move unless forced. After all, in the split-second, high pressure speeds involved in bets, races and rolling the dice, just which second do you chose to up sticks and relocate?

Maybe online gambling will be legalized in America as some are predicting and the government can then develop the necessary controls and share in some of the profits. After all, Prohibition against alcohol in the 1920s didn’t work either.

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Written by Vicky Longland who has spent all her adult life in Latin and Central America originally as head of the translation department for an international human development organisation and currently working as a freelance translator and writer for several national and world-wide publications, specialising in people’s issues, the environment and lifestyles.

1. Interactive Gaming Council – a trade group of 70 online gaming companies

2. Estimate of Bear Stearns – international finance firm.

3. Luis Diego Quiros, 21/07/04 – www.teletica/com

4. www.ahciet.net Asociacion Hispanoamericana de Centros de Investigacion y Empresas de Telecomunicaciones,14/07/2003

5. La Nacion 09/01/2003 – Las Apuestas ‘online’

6. www.onlinecasinonews.com 06/07/2004 DOJ seizes online gambling ad cash

7. La Republica 16/08/2003 Casinos electronicos en la mira de EE.UU – Karen Retana

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.