In the late 1990s, Susan Bala was basically the architect of an entire industry. She didn't just participate in the world of horse racing; she built the legislative and technological pipes that allowed it to function across state lines from a hub in North Dakota. Her company, Racing Services, Inc. (RSI), was the engine. It was moving hundreds of millions of dollars.
Then, the government took it all.
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You've probably heard bits and pieces of the story if you follow the gambling world—a massive federal raid, a 12-count felony conviction, and a forfeiture order so large it sounded like a typo: $99 million. But if you stop there, you’re missing the actual ending. It’s one of the most significant "wrongful prosecution" cases in the history of the American gaming industry, and yet, it's often buried under old headlines from 2005.
The Rise of an Industry Pioneer
Susan Bala wasn't a gambler by trade. She was a business strategist. In the late 80s, North Dakota's governor asked her to look into whether horse racing could actually work in the state. She did the study, and then she did the work. She helped draft the laws. She convinced the legislature that "account wagering" was the future.
Basically, she saw that the internet and satellite technology would change everything. By the mid-90s, RSI was the sole licensed service provider in North Dakota. She wasn't just running a betting shop; she was running a high-tech clearinghouse. She was even a delegate for the U.S. Department of Commerce.
At her peak, she turned a $100,000 investment into a business processing $500 million in betting volume. Honestly, it was a tech success story before "tech" was a buzzword in the Midwest.
When the 1318 Site Changed Everything
The trouble started with a building at 1318 23rd Avenue South in Fargo. This became known in court records simply as "1318."
RSI moved its account wagering—where people deposit money and bet via phone or computer—to this location. The government later argued that this specific site was unlicensed. They claimed that because 1318 didn't have the same charitable tie-ins as the other OTB (Off-Track Betting) sites, the money flowing through it was "illegal gambling."
In February 2005, a jury agreed. They convicted Bala of 12 felonies, including money laundering and conspiracy. She was sentenced to 27 months. They took her company, her personal assets, and even tried to go after her life insurance policy later on. She spent 17 months in federal prison.
The 8th Circuit Reversal: "Insufficient Evidence"
This is the part most people forget. In 2007, the U.S. 8th Circuit Court of Appeals didn't just "tweak" the sentence—they threw the whole thing out.
The court was pretty blunt about it. They said the government failed to prove any of the charges. The judges pointed out that the North Dakota Racing Commission’s own rules were a mess. They weren't clear on how charities were supposed to be paid from account wagering.
Basically, the court told the feds that they had taken a complicated regulatory disagreement and tried to turn it into a criminal empire. One judge essentially noted that if there were violations, they should have been handled in state regulatory hearings, not a federal criminal trial.
"The result was a trial at which the government failed to prove any of the offenses charged." — U.S. 8th Circuit Court of Appeals.
The $15.8 Million Refund
Even after she got out of prison and her name was technically cleared of the crimes, the battle wasn't over. Her company was in bankruptcy. The state had collected millions in taxes that, it turns out, it didn't even have the legal right to collect.
It took another decade, but in 2017, a federal bankruptcy judge ruled that North Dakota had to pay back $13.5 million (which grew to about $15.8 million with interest) that it had illegally taken in taxes. The state legislature actually had to allocate the funds to pay it back.
It was a total vindication, but it came 12 years after she was first hauled into court.
Why the Susan Bala Story Still Matters
If you look at the current gaming landscape—apps like FanDuel, DraftKings, and the massive growth of international betting—you’re looking at a world Susan Bala predicted in 1990.
Her current venture, Phoenix Global Technology, focuses on the very things that caused her so much trouble: regulation, compliance, and digital security. She’s now advocating for transparent gaming laws in places like Brazil and the Philippines.
There are a few key takeaways from the Global Gaming Group saga that still apply to the industry today:
- Vague Regulations are Dangerous: The ambiguity in North Dakota's 2001 laws is what allowed prosecutors to "interpret" their way into a criminal case.
- Asset Forfeiture is Violent: The government sold off Bala's assets before the appeal was even heard. Once those assets are gone, they're gone, even if you win the case later.
- The Tech Moves Faster Than the Law: Bala was doing "account wagering" years before the legal system knew how to tax it or regulate it properly.
Practical Insights for Gaming Entrepreneurs
If you’re working in the gaming or fintech space, the Global Gaming Group story is a cautionary tale about "Regulatory Risk."
First, never assume that a green light from a state commission is a shield against federal overreach. The 8th Circuit noted that the commission basically handed the case to federal authorities because they didn't know how to handle the "1318" situation themselves.
Second, documentation is your only defense. Part of Bala’s defense was that her employees hadn't kept her fully informed about how certain sites were being used, but in the eyes of the initial jury, the "boss" is always responsible.
Finally, understand the difference between a "conviction being overturned" and a "certificate of innocence." Even though Bala won her appeal and got the tax money back, she spent years fighting for a formal certificate of innocence to help with civil damages. The legal system is designed to be slow; make sure your compliance is fast.
If you are researching the history of US parimutuel laws or the evolution of offshore-to-onshore wagering, the court case United States v. Bala, 489 F.3d 334 is required reading. It sets the precedent for how the Wire Act and state gaming laws interact—or fail to.