The Quandary of Business Decisions as Evidenced by Draft Kings

draftkingsAs an Internet consultant since the late 1990’s, I have been watching and participating on the growth of the Internet as an important component of business activities across many economic spectrums. Unknown to many of you, I actually got started in online development working on two projects for one client. The first project was a very rudimentary online portal for a financial services client to offer its clients, across the world, a way to check their account activities. The second project involved developing a gambling site for the same client.

From a technical aspect, the second project was very challenging. It involved developing technology that did not exist at the time. As challenging as that was, there was another issue that was slowly becoming apparent to me as I continued to work on it that made me rethink what my responsibilities, as a developer, are.

I like to gamble, as a matter of fact, I know Las Vegas very well. I have no personal problem with gambling and frankly, I do not believe the government should be limiting gambling.

However, as business owner and developer of software and systems I have obligations that are not as apparent to many. As a business owner I understand that I have ethical obligations to report wrongdoing by my clients, if I become aware of them while having them as a client. The ethics govern at what point I need to stop doing business with a client and at what point I should be reporting them to the proper authorities. I am not a police agency so it is a grey area on when I may suspect illegal activities to what is actually an illegal activity. There are obvious instances where a business owner is obligated to report illegal activity, such as narcotics trafficking or other serious crimes but most of the time perception is not a crime. The question though, is what ethical obligation does a business owner have when asked to develop a computer program to facilitate Internet gambling?

Keep in mind that the Internet crosses various international jurisdictions and in some jurisdictions it is illegal to gamble while in others it is perfectly legal. Making it even murkier, is the notion of facilitating a crime by providing a mechanism from which the crime is conducted.

As if that wasn’t difficult enough, there are countries, notably Spain, that have taken it upon themselves to prosecute crimes committed outside of their domain. These types of prosecutions have been increasing as a way for certain governments to impose control on Internet activities. The United States has successfully prosecuted individuals for creating work-arounds to copyright protection schemes even though the individuals that created the work-arounds were not in the United States when they created the program and were citizens of other countries that had no laws restricting the creation of such software.

As a Mexican citizen, at the time I was working on this project there were no laws against developing gambling software because the Internet was so new. I do not believe there are laws in place against such activity in Mexico today, but I could be wrong.

As I have written previously, as a resident of the United States I am subject to its laws.

Many of you know that gambling is strictly regulated in the United States in much of the country. It does not take a legal scholar to know that many jurisdictions in the United States are so anti-gambling that they will use every tool in their domain to eradicate it. US jurisprudence has always been creative and there are many instances of individuals unrelated to the actual crime being arrested and prosecuted as an accessory or facilitator either to end the practice or as a means to go after those making the money.

Creating software or systems can make someone an accessory to a crime, especially in areas like online gambling where government officials must get creative in order to enforce local laws in a medium that crosses borders unimpeded. In my opinion it is not fair but it is what it is.

When I realized this it put me in a quandary about my position as a developer and dealing with complicated criminal implications. The quandary is that I was working on an extremely lucrative project but it was exposing me to potential problems.

It was an extremely difficult situation for me because as far as I knew I was not breaking any laws. Personally, I see nothing wrong with gambling but I knew it is severely restricted in the United States and in Mexico. However, I was not living in Mexico, or the United States while developing the software. I was living in Europe. I was not even a resident of the United States and thus I was not under its jurisdiction at that time.

To be clear, at the time of this project, I was barely beginning to understand the implications of multi-jurisdictional applications of laws across borders. Also, to be fair, in 1998, many legal experts probably hadn’t begun to comprehend application of laws for Internet activities on actions outside of their jurisdiction.

In many ways, extra-jurisdictional prosecutions will take many years to sort out but in the meantime many individuals will be caught in its web. Many prosecutors in many countries will argue that the ends justify the means.

It is something that as business owners and software developers we have no control over but we may unwittingly be caught up in it.

The gambling project for me did not become an issue because my client ran out of money before it was launched and therefore I did not have to make the decision to abandon it. However, about a month ago I was approached by someone asking me for a price quote to develop something akin to Draft Kings. As with all my clients, I have an initial meeting with them to understand what their goals are and more importantly, to ascertain whether they have the financial resources to pay for the project they have in mind. This potential client seemed to understand what they wanted and seemed to have the financial wherewithal to accomplish it.

It was also potentially a very lucrative project for me.

However, it was also fraught with serious legal implications for me should I accept the project as a developer. It just wasn’t worth it for me.

The problem though is that the boundaries of the Internet are pushed not by the well-known companies like the eBay’s or the Amazon’s of the world but by the companies that are questionable to many individuals.
Most of you understand that Amazon, eBay and Uber are disruptive in nature. They change the way we do business. What many do not acknowledge is that the underlining technology is developed by companies that many do not accept as ethical companies. Porn peddlers were the vanguard of video streaming and graphics delivery systems that makes the Internet today. They are disruptive in their own way as evidenced by the changing face of Playboy but nonetheless any business associated to porn is automatically discarded as an unmoral business entity.

From the online porn industry the first business disruptors emerged. Today, most of us happily enjoy and pay for iTunes as a way to listen to music and watch movies. If I mention Napster, many of you might get a negative vibe about them because in the end what many remember is that they were shut down for illegally giving away free music. It is much more complicated than that but the end result is that they were shutdown. Today, iTunes, Netflix and many other streaming services are fundamentally based on the technology and business model that Napster pioneered.

The owners and stockholders of Apple and Netflix are making money because of Napster’s technology but do not carry the stigma of Napster’s business disruptions. In many ways, Uber is both disrupting a business industry and acquiring a stigma for doing so. If it continues, Uber’s business pioneering may end their business but not their business model. Others will pick up where they left off but without the stigma of being Uber.

Some of you may know that Draftkings and FanDuel, two online channels of an online gambling company, are facing class-action lawsuits and at least one criminal investigations by the attorney general in New York. It is likely other attorney generals may soon step in.

For me this is an interesting case because not only does it bring me back to when I first started working on the Internet but also because it gives me an opportunity to clarify for myself whether I made the right decision to step away from a potentially lucrative project.

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