How to Successfully Run a Gray Market Business

Gray businesses may bring up images of bathtub moonshine and urban bookies, but a sudden legal change may make even your company less stable. For instance, in April, the government suddenly shut down Full Tilt Poker and several other online poker websites based on an older law that made the $16 billion Internet gambling business arguably illegal. For a while, these poker sites were allowed to thrive. Then, just as quickly, the powers that be shut them down.

On The Live One program last week, I joined CBS Producer Priya David Clemens, and BNET editor David Hamilton to chat with Jared Gurfein, a corporate attorney and co-founder of the absinthe business Viridian Spirits. Gurfein helped bring the first legal absinthe to America in almost a century, taking in $10 million in revenue for his company.

Here are a few tips we discussed that will help keep your gray business in the black -- and, ideally, on the right side of the law.

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Show the laws need to be updated: Laws are based on current social norms, so creating a movement could make your quasi-legal service perfectly legal. Sometimes it is just a matter of showing that the laws need to be updated.

Gurfein told us that he worked fully with the Alcohol and Tabacco Tax and Trade Bureau (TTB) while simultaneously updating its perception of absinthe. Rumored to cause hallucinations and even death, absinthe was actually the victim of a century-old smear campaign by competing alcohol companies. Gurfein realized that these outdated ideas were part of the reason why absinthe was banned in the first place, and he shared his knowledge and research with the TTB.

Present the benefits of making it legal: Two months after the online poker shutdown, Texas Representative Joe Barton and Massachussetts Representative Barney Frank are pushing bills to make Internet gambling legal. Barton and Frank see the massive tax possibilities, opportunities no doubt encouraged by people within the $16 billion online poker industry.

Diversify your business: Your business may have been established on questionable goods, but that doesn't mean that the goods themselves need to be your big money maker. A poker company could easily use its brand to sell merchandise, sponsor or create card apps, and a dozen other clearly legit opportunties.

Corporate lawyer Gurfein has an even simpler suggestion: "Keep your day job."

Photo courtesy of cito // CC 2.0
Related:

• The Perfect Market Opportunity - If Only It Was Legal
• Ante Up: Congress Wagers That Legal Only Poker Could Be a Jackpot
• Busted! How the Federal Poker Shutdown Will Actually Benefit the $16B Business
• Video: 10 Tech Tools for Business Owners

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