Lowtax Network

Back To Top

Your Lowtax Account

Costa Rica: E-Commerce


ISP and Hosting Services

Telecommunications services remain a government monopoly in Costa Rica, with Grupo ICE and Racsa providing most Internet services. Other ISP's operate, but their legal status is unclear.


The development of Costa Rica's e-commerce infrastructure enabled numerous companies - mainly US-based - to establish online gaming operations in the region. However, this US connection was scuppered to a large extent by the introduction in October 2006 of the US Unlawful Internet Gambling Enforcement Act. For more detail on this, see below.

In May, 2001, Sportingbet.com, the Channel Islands-based bookmaker, acquired Betmaker.com, a Costa Rica-based internet gambling site, in a deal worth about GBP15m. The acquisition gave Sportingbet.com a toe-hold in the US online gambling market.

Meanwhile, in February, 2003, Costa Rica's government announced that the economy ministry would establish a registry of online gambling companies, and would charge each one between 10m and 24m Colons (US$26,000 to $63,000) according to the number of persons employed.

The initiative followed congressional legislation that established taxes targeted at gaming companies. In December, 2002, provisions to tax casinos and online betting operators were approved in the National Assembly by a margin of 45 to 5.

Slot machine operators had protested that plans to tax them between US$250 and US$300 per slot machine, per month would drive smaller operators out of business, and in the event the rate per machine was reduced to US$20. Computer terminals used to place bets were to have been charged US$1,000 per month, but this was revised down to US$500.

The increase in Government attention came at a bad time for the gambling industry, which was at that point under threat from the looming United States legislation seeking to prevent US citizens from utilising offshore gambling services.

Fearing that online gambling operations based offshore could act as a conduit for money launderers and financiers of terrorism, the Bush administration has led a crackdown on foreign operators in the US. The Unlawful Internet Gambling Enforcement Act, passed by Congress in 2006, effectively shut down the US industry for these companies by prohibiting the use of payment instruments by financial institutions to handle the processing of any form of internet gambling that is illegal under US federal or state law.

Betonsports and 12 individuals were indicted in 2006 by a federal grand jury. Charges include racketeering, mail fraud and facilitation of gambling across state and national boundaries. Trading of Betonsports stock in London was suspended on July 18th at the company's request.

Founder Gary Kaplan and British CEO David Carruthers were among those indicted. Carruthers, 48, was arrested in July 2006 as he changed planes in a Dallas airport. At a hearing in August, Carruthers pleaded not guilty to the charges of fraud and racketeering in St Louis.

The company announced on 11th August that BetOnSports would no longer accept bets from US customers, and that it would refund customer money when it became available.

In the wake of the Congressional passage in October 2006 of the US Unlawful Internet Gambling Enforcement Act, gaming firm Sportingbet announced that it had sold its US-facing sports betting and casino business to Jazette Enterprises Limited for $1.

Sportsbook.com, the US operation, announced that it would operate from offices in Dublin, Antigua, Vancouver and Costa Rica.

Sportingbet went on to announce that it would retain its Paradise Poker business, but had ceased taking deposits from US resident customers.

The US online gaming ban has been a subject of much controversy, and US laws have been the subject of a challenge under World Trade Organisation rules by the Caribbean country of Antigua & Barbuda, a major offshore gaming domicile which relies on the industry for much of its income.

The Costa Rican online gambling sector, along with the gaming industries in many other countries, suffered another blow in mid-2007, when it was announced that under rules which came into force on September 1, gambling websites based in jurisidictions other than those which had met strict new regulatory standards (initially just the Isle of Man and Alderney) were banned from advertising in the UK.

In January, 2008, judicial authorities in New York announced that twelve individuals had been charged with gambling and money laundering offences relating to the operation of a Costa Rica-based gambling website and call centre that served sports books in the US.

Michael J. Garcia, the US Attorney for the Southern District of New York, and Mark J. Mershon, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation, announced the unsealing of an indictment, filed in Manhattan federal court, alleging that from December 2005, Carmen Cicalese operated an internet website and telephone call center, known as a wireroom, in Costa Rica which charged United States-based sports bookies weekly fees of approximately $15 to $30 for each gambler that the bookie registered with the 'Cicalese Wireroom'. In return, registered gamblers were able to place bets on sporting events at odds set by the Cicalese Wireroom via a toll-free phone number, and through various websites maintained by the Cicalese Wireroom, including datawager.com and betwestsports.com.

The indictment stated that the Cicalese Wireroom did not itself take an interest in the outcome of these wagers; paying winners and collecting from losers was the responsibility of the bookies.

US bookies are said by the authorities to have paid the fees owed to the Cicalese Wireroom to representatives of the Cicalese Wireroom in the United States. It is then thought that the collectors, or 'runners,' in turn transferred the money back to the Cicalese Wireroom in various ways, including by using couriers, debit cards, and electronic funds transfers. According to prosecutors, on one occasion, the Cicalese Wireroom used a Pakistan-based "hawala" money transfer organization to move money collected from United States bookies.

The Cicalese Wireroom is believed to have serviced several hundred bookies, each of whom had registered numerous gambling customers, and received millions of dollars in revenue. All twelve defendants were charged with gambling and with conspiracy to engage in gambling.

In March, 2008, Costa Rica reached a compensation settlement with the United States over its gaming legislation, accepting a US offer of greater access to other service markets, including research and development, storage, technical testing and analysis, in compensation for the closure of the US online gaming market to Costa Rican operators.

This agreement is supposedly very similar to the deal that Washington struck with the European Union late in 2007 which, according to the European Commission, provides EU service suppliers with new trade opportunities in the US postal and courier, research and development, storage and warehouse sectors. Costa Rica's Foreign Trade Minister Marco Ruiz, was quoted in a written statement as welcoming the agreement with the US. “The agreement has been satisfactory for the country,” he stated.

A 2% tax on gambling activity applies to resident betting call centres.

Internet banking was late in coming to Costa Rica but arrived in 2001 courtesy of Interfin Bank's Inter Banca site which offered online request forms, general information, and corporate and personal banking services via the Internet, as well as other providers including Credomatic and Banco Nacional.

Online banking services are also provided by various international banks with Costa Rica-based operations.



Back to Costa Rica Index »