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Across the United States, billions are being made outside the law. Illegal gambling may conjure images of mobsters, bookies and threats of violence — and while that underground world still exists — technology has made illegal gambling much more accessible and somewhat less shady. The same computer you use for work or to connect with friends can be used to wager outside the law. It's a thriving illegal business hiding in plain sight.
CNBC Investigates takes you inside the high-stakes world of illegal gambling where some people are cashing in while others face prison terms or even death.
Click ahead to learn more about the varied world of illegal gambling.
Millions of Americans gamble illegally every year, and sports betting is by far the biggest money maker. Of all the money bet on sports, most of it goes through an illegal bookmaker, according to PreGame.com, a sports betting information site.
Pregame's founder R.J. Bell estimates $10 billion are wagered on the Superbowl alone every year, and $12 billion is put down on the NCAA men's basketball tournament. Pregame.com, a sports betting information site, estimates that for every $100 bet on sports, $99 are wagered illegally.
"We believe that 1 percent of the action or so is in Nevada, which is strictly legal based upon the United States laws," Bell says. "And we believe that it's about 50-50 after that between online sports books and what we call the bar-room bookies — the guy down the street who's taking the bets."
According to one full-time professional gambler and handicapper who goes by the name Vegas Runner, illegal betting is so popular because of simple economics. Bookies charge a lower fee.
"If they were to increase their vig (the fee charged by a bookmaker) I would have to find a new profession, because then their edge would be too great and ... you just wouldn't be able to maintain a winning percentage high enough to be able to beat the sports books."
Though Vegas could be prosecuted for placing bets, law enforcement tends to focus on the bookmakers, not the bettors.
"Paul" makes his living as an illegal bookmaker. He runs his own Web site, which is part of a much bigger conglomerate based in Costa Rica.
Paul charges his clients an 8 percent vig, or fee, on every bet. In a good year, he says he can make six figures, but the hard part — besides constantly being on his toes for law enforcement — is collections. Threats often backfire, as Paul learned when he left an angry voicemail for a deadbeat bettor.
"The next morning I woke up and I listened to my voice mail and he said 'Hey, if you ever call me again I will go right straight to metro.'" Paul dropped the collection attempts.
Illegal gambling's historic involvement with organized crime is well documented. It's the Chicago mob's No. 1 money maker, the grease that keeps the wheels turning. But unlike online bookmakers, the mob doesn't stop at angry voicemails when a bettor doesn't pay his debts. Or when a bookie steps out of bounds.
Chicago restaurant owner Nick Sarillo openly defied the mob by running his own freelance bookie operation. When he refused to stop, the mob blew up his van — with Sarillo inside. He survived, but he stopped his sideline bookie business.
Scott Damiani wasn't in the mob, but his bookies were. When he started losing — and losing big — he made sure he paid his bookies first, at the cost of keeping up with his bills, even his mortgage. The low point came when he found himself more than $50,000 in debt.
"I called my mom, who was a widower," Scott recalls. "I didn't know it at the time, she had the early stage of Alzheimers, and I told my ma 'Go get some money off your house',— because I knew the house was paid for — 'so I can pay all these guys off or you'll never see me again.' That was probably the low point in my life."
Sixteen years later, Scott now runs an outreach program for other problem gamblers.
In recent years, gambling has moved onto the Internet, where entrepreneurs like Jay Cohen take full advantage of the new technology. After the attorneys sign off, Cohen and his partners launch World Sports Exchange, serving sports bettors across the globe from their headquarters in Antigua.
Business takes off, Cohen is written up in the Wall Street Journal and the Washington Post, portrayed as a smart entrepreneur bringing book making out of smoky bars and into the world of venture capital.
But some of Cohen's clients are federal agents who are secretyl gathering evidence for what will become a massive criminal case. And Cohen will become the first American to be prosecuted for running on online bookmaking operation.
At trial, Cohen doesn't dispute the facts. Rather, he challenges the law used to prosecute him.
"My first position was 'We're out of your jurisdiction. We are running a legal business in another country.' Prosecutors, however, said any time he dealt with someone in the US, though, there was illegal activity going on. The jury found him guilty and he served nearly two years in federal prison. Ironically, he could see the glow of the Las Vegas strip from his prison cell just a few miles outside the city.
Upon returning to Antigua after serving time, there was no going back to the good old days. The laws were changing ...
In 2006, the United States passed the Unlawful Internet Gambling Enforcement Act, making it illegal for Web sites like World Sports Exchange to collect money from gamblers in the United States.
"It certainly hasn't eliminated all Internet gambling by any means, but surveys that I've seen indicate that fewer than half as many online gambling operations are offering their services in the United States than were before this law took effect," an author of the legislation, Rep. Bob Goodlatte, R-Va., says.
The law had a devastating effect on the industry, including Antiguan businesses. Jay Cohen and his advisors persuade Antigua to take the case to the World Trade Organization, where Antigua wins. The WTO says Antiguan online gambling operators should have access to the US market. So far, the US has ignored the decision. World Sports Exchange is still a going concern.
The lack of regulation of illegal sites means some gamblers steer clear of sites that seem a bit suspect.
That's the case for Todd Witteles, a professional poker player who plays at card rooms like those in Vegas, and also at online sites. He stumbles upon what seems to be a novice player, who ends up cleaning him out of about $6,000 in 20 minutes. He studies the player, noting he dominates every table, often raking in $50,000 pots. To Witteles, something doesn't add up.
"It was the way he was playing, it was that he always knew what to do," Witteles says. "He knew if you had a weak hand. He kept raising you...So this guy was always sure, this guy knew everything, and it's just not possible."
Like Witteles, David Paredes started noticing a player who was winning far more than he should be, quickly taking $70,000 from Paredes' online account.
A serious student of the game, Paredes enters the player's hand histories into an analytical tool called Poker Tracker. It shows the player is winning at 10 times the win rate of the very best player in the world.
"That would be the equivalent of, you know, hitting the Power Ball jackpot three times in a row, which is basically impossible," Paredes says.
It turns out Paredes and Witteles weren't alone. Hundreds of players across the world began to suspect cheating on the sites absolutepoker.com and ultimatebet.com.
"Here's the problem," Witteles says. "When you're playing online the question everybody always has for you is how do you know that it's legitimate...and the short answer is, you don't."
And there's no legal recourse if there is cheating.
An outside investigation of the sites, both owned by the Kahnawake Tribe near Montreal, reveals that $800,000 has been stolen by a cheater on AbsolutePoker.com and $22 million on ultimatebet.com, making it the biggest cheating scandal in the history of online gambling.
According to the report, almost all of the accounts are linked to one man — a former owner of Ultimatebet.com.
The Kahnawake Gaming commission report says that the former owner, Russell Hamilton (pictured), retained access to software that allowed him to see his opponents' cards after he sold the site to Joe Norton, a former Grand Chief of the tribe.
Meanwhile, Hamilton declined through his attorneys to speak with CNBC. And the Kahnawake Gaming Commission will not say how much, if any, of the $22 million is kept by Hamilton. But more than $22 million was ultimately refunded to Paredes, Witteles and hundreds of others.
"The United States needs to finally legalize and regulate online poker," Witteles says. "Because when they don't, this is what happens."
Legalization of gambling is an argument that's now gaining some traction in Washington, DC, where some lawmakers say online betting should be brought out of the shadows. Rep. Jim McDermott, D-Wash., is the sponsor of a bill that would regulate and tax online card games.
"Accept the fact that people want to gamble," he says. "Let's admit that that occurs and then we will control it through the legislation and the rules and regulations written by the Treasury.
"Usually, when we talk about putting a tax on people, we get all kinds of a storm against it. They're saying legalize it, please, and tax us. We want to be taxed. It's the only industry I know that says make it legal and tax us."