By WILLIAM BERLIND

Costa Rica is highly prized by the world's backpackers and sightseers for its unspoiled natural beauty, but it's easy to forget that when arriving in its grimy capital, San Jose. The newly remodeled airport is surrounded by chain hotels, freshly paved roads and shiny corporate plazas. After that it goes rapidly downhill. A dusty highway heading vaguely toward downtown takes you through the poorer suburbs of San Jose, packed with families in corrugated-tin-roof shacks. Above them, on the sides of the surrounding hills, Costa Rica's elite live behind high, fortified walls. The entire valley is blanketed with smog from auto fumes, brush fires and burned trash.

This Costa Rica doesn't make for much of a postcard, but to a small group of men, Americans mostly, it is alluring, enchanting and brimming with possibilities for adventure. The men are bookmakers taking bets and dispensing winnings over the Internet, and Costa Rica has exactly what they need -- a government that welcomes new investment in almost whatever form it takes, a well-developed business environment that makes it possible get phone lines hooked up and computer equipment serviced and a sizable English-speaking population capable of manning the phones and helping customers place their bets. Legal prostitution, as well as a plethora of strip clubs, seedy casinos and bars festooned with Budweiser signs, round out the atmosphere.

 
Betting operations are now among San Jose's most lucrative and visible enterprises, and their success has transformed the city. One prominent suburban landmark is an office building occupied by an outfit called BETonSPORTS.com. Throughout its nine floors, 1,500 Costa Ricans are employed (in mostly clerical positions) and offered amenities like on-site day care and classes to improve their English.

 
Most of the bookmaking companies, though, are a good deal smaller and harder to see, tucked away in strip malls and shadowy side streets. The American proprietors are generally in their 30's and 40's, and for them, the Internet provides not only the means to escape the reach of American law, but also a chance to turn what had been the equivalent back home of small, local shops -- sustained by personalized attention and all the headaches that involves -- into booming, virtual superstores that can rake in action from all over the world. The experiences of these men in Costa Rica, as well as of those elsewhere in Central America and the Caribbean, started out as thrilling adventures in what seemed to them like Las Vegas in the 1950's. But as betting operations multiplied, the offshore business has become hotly competitive and complicated. Worse, in recent years lawmakers and ambitious prosecutors back in the States have been mounting ever more serious legal challenges. Returning home to a normal life now means facing the possibility of going to prison. And so, many of the bookmakers who started out so optimistically are finding themselves locked into an isolated way of life that with each passing day seems a worse bet.

 
In the early 1990's, a young man in California known to his associates as K.C. was trying to figure out a career for himself. He knew one thing. He liked sports, and even more, he liked betting. While in college, he gambled obsessively on dog racing and football, and after graduating, he ran a sports handicapping service, which was a legal enterprise, though it catered to an industry -- sports betting -- that is illegal in every state but Nevada. Trying a clean break from the sports and gambling world, he sold cellular phones door to door. But he couldn't stop betting, and for a brief time after giving up the salesman life, tried to make it as a full-time professional gambler. As his losses piled up, he observed that his bookie was making out far better than he was, and that this might be the best vocation for him too.

Suddenly, after years of losing, K.C. was turning a profit and nurturing a growing portfolio of clients. He ate in the best restaurants. He sat in the front row at Lakers games. K.C. was the bookie you went to if you were a somebody and you wanted to place a bet. He was plugged into that airy society of bookmakers, gamblers, agents and team managers who live off athletes. ''When I was really rocking and rolling, I loved it,'' he said. ''Every girl knew me. I felt like I was the man.''

K.C. was more than comfortable with the morality of his profession. In fact, in his view and that of every bookmaker, the laws are vastly hypocritical -- in a typical state lottery, as he is apt to remind you, the government skims a third of the pot and offers each player an impossibly minuscule chance of winning. Meanwhile, the law demonizes bookmakers, who take 10 percent of the bet and give their clients a 50 percent chance of winning.

Still, it was a tough way to make a living. K.C. was forever trying to evade the police. More troubling, he had been raised by traditional Orthodox Jewish parents in Chicago, and the fact that he was now a criminal in the eyes of his family as well as of the law deeply affected him. The guilt wasn't enough to make him quit bookmaking -- K.C. was a gambler and a sports nut through and through -- but his feelings gnawed at him, especially when he would come home for Thanksgiving and have to sneak away from the dinner table to an upstairs phone to take bets on a Dallas Cowboys game.

 
It was only when some of his fellow California bookmakers started getting arrested that K.C. began to seriously reconsider his career. His bookmaking business had grown so prosperous that it seemed only a matter of time before he would be nabbed.

K.C. had a few friends in the business who had already moved to Costa Rica, and he decided to join them. He took a position in Skybook.com, a small, newly formed sports book. Life there certainly was not like California. K.C. worked long hours and also drank too much. ''When I first went down there people robbed me all the time,'' he says. ''They hacked into my computer. I got ripped off on Internet bandwidth. They just looked at me as a sucker. It was like the Wild West.''
K.C., with a new wife and infant daughter in tow, settled into a small, dark apartment on the outskirts of San Jose. They didn't have many friends, and they had few opportunities for making new ones. There was a growing population of bookmakers, but no community. Bookies are by nature private and often paranoid people, and even the relaxed setting of Costa Rica couldn't change that. For all the drawbacks, though, K.C. was doing what he loved and, for once, doing it legally, or so it seemed at the time. ''My parents came down to Costa Rica, and they were so proud of me,'' he says. ''They said, 'You're finally a legitimate businessman.'''

Among the bookmakers K.C. encountered when he first moved down to Costa Rica was L.R., at Cascadesportsbook.com, a small operation formed in 1996. L.R. is a stocky, soft-spoken man. Like many of the bookmakers, he's fond of wearing athletic warm-up gear, though he doesn't exercise much or play ball. His life is about bookmaking.

 
Cascade's no-frills offices reflect L.R.'s character. The firm is situated in a colorless, two-story building on the side of a ravine some 20 minutes outside San Jose. As you enter, a sleepy guard in a worn blue uniform points you up a flight of stairs. There are two rooms with slatted windows looking out across a cracked road on a stand of thin, dusty pine trees; fast-food wrappings hang in the nettles. Occasionally a truck will rumble by spewing diesel exhaust, but aside from that it's quiet.

Cascade's offices consist of two rooms, a small back office and a larger room connected to it. In the larger room there are 10 or so rows of long, straight desks with computers on them, lending the place the air of a classroom. Behind the computers local employees sit on mismatched office chairs fielding calls from gamblers and tracking the bets being placed over the Internet, which now accounts for 30 percent of Cascade's business. (The remaining volume is still conducted over the phone.)

 
When I arrived one Saturday afternoon at the end of the college basketball season, the office was half full. L.R. was seated at the front of the large room on a foot-high rise. Known as ''the stage,'' a feature common to nearly every sports book, this is where the head oddsmaker monitors all the action. There are seven large TV's suspended from the ceiling above the stage and a few smaller ones on the desk tuned to games in progress or to ESPNews.

L.R. arrives at his office at 7 in the morning to enter his lines for that day's games on his site. He has spent the previous night and the early morning studying the games being played that day, speaking with the sources and handicappers in the United States who help him decide how to shade his lines. To do it right, he has to keep track of an impossible number of details, things like whether Marquette's star guard has recovered from his ankle sprain. Sites that expect to do significant business have no choice but to offer a huge range of games, even obscure college match-ups that would never be shown on national television. A professional shop requires a minimum capital base of about $1 million to cover overhead and keep the lights on during a losing streak.

 
Bookmakers make their money by extracting a percentage out of every bet being made, which is called the vigorish or ''the juice.'' That means the gambler has lost 10 percent of his bet regardless of whether he wins or loses. If the bookie can win 50 percent of the games (which if he sets his lines right, he should be able to do), he'll break even on the betting, clear the 10 percent for each one, and, after expenses, eke out a profit of about 3 percent. With such a relatively small margin, the key to the business is volume.

And that's why the Internet is so useful. With the power to receive scores and other game information instantly, on-line bookmakers can generate extra betting volume by offering a tantalizing variety of propositions -- the total points scored in each quarter of basketball and football games and in each inning of baseball games. There are even lines offered for specific achievements, like, will Allen Iverson score 30 points, or will Keyshawn Johnson be the first person to score in the Super Bowl.

Around 11 a.m. gamblers back in the United States start making their bets. Bookmakers use a point spread to equalize unevenly matched teams. Football, college and pro, generates the greatest action. Basketball is also popular. Based on how much betting action he receives for each team, the bookmaker then adjusts his spread. For instance, if his bettors are heavily betting the favorite team, he'll adjust his line to give more points to the underdog, in order to attract betting on the underdog. His objective always is to maintain approximately 50 percent of the gross betting action on either side of the game. If he does this, then no matter the result of the game, he takes his 10 percent cut. While the gambler tries to figure out weaknesses in point spreads -- games where the bookmaker may have misjudged the strengths of the teams or is unaware of a critical injury -- the bookmaker's job is to anticipate how the public is going to bet and adjust his line up or down to split betting action on both sides of the line. (Once a bet is placed at a particular spread, that number holds for that bettor, even if the spread subsequently moves.)

Every sports book has its own personality, formed by the number and type of gamblers it attracts and the manner in which it moves its line. Cascade's gamblers range from small-time guys making $50 bets to professional gamblers betting $10,000 on 10 different games -- the latter type attracted to Cascade, in part, because L.R. is regarded as one of top bookmakers offshore.

 
As the bets roll in, L.R. watches two things. One window on his computer is open to Cascade's back-end software, which tracks all the bets and the gamblers who make them. Each of Cascade's gamblers has a profile, with a betting history and personal information, which flashes onscreen when the bettor places a bet. Another window on L.R.'s screen is open to DonBest.com, a subscription service that is like the Bloomberg of sports betting. On Don Best many of the prominent offshore sports books, including Cascade, show their lines in real time. When a book changes its line, it is immediately registered on Don Best. It's a way for bookies and serious bettors to keep tabs on the lines that sports books are offering for a particular game. While L.R. and I were talking, a bet came in to one of the employees in the pen. ''Lafayette for five dimes,'' she shouted out. L.R. quickly glances at the screen to see who was making the bet. ''Twelve point five,'' he said reflexively. ''And that's it.'' What had transpired was this: the University of New Orleans was playing a basketball game against the University of Louisiana at Lafayette that afternoon, and most of the books on Don Best including Cascade, had Lafayette favored by 12.5 points. When to move a line is a point of great philosophical debate among bookmakers. According to traditional bookmaking practice, a bookmaker only moves his line on the basis of a bet that has come in. After bookmakers receive a big bet, they will typically adjust their line to try and draw action for the other side of the game. By letting the betting determine the line, a bookie should, theoretically, be able to maintain his 50/50 split and preserve his profit margin. But frequently, bookies move their lines for other reasons- for example, when a well-regarded sports book has moved its line on DonBest.com, a practice known as ''moving off air.'' Or they might do it because they have a particular bias or hunch about a game, in which case they're essentially throwing their 3 percent margin out the window and gambling with their own money.

 
L.R. tends not to operate this way, and in the case of New Orleans versus Louisiana Lafayette, he was simply waiting for a solid bet before moving his line. And then it came. A guy sitting behind a computer screen somewhere in the United States wanted to put $5,000 on New Orleans and take the 12.5 points. L.R. accepted the bet and changed his line to 12. He cut the guy off from making any more bets on the old line. L.R. suspected it might be a professional gambler, so he was being particularly careful.

 
The bookmaker and the professional sports bettor, known in the business as a ''sharp,'' are engaged in a constant game of cat and mouse. Average bettors don't put much thought into their bets, often betting on their alma mater or home team, regardless of the spread. But sharp sports bettors make their living by constantly trolling for weak lines. The sharp holds the advantage over the bookie in this because his sources usually run deeper than the bookmaker's, sometimes even into the inner sanctum of a professional or collegiate team, like a team doctor or an assistant coach. More important, the sharp can be selective. While the bookmaker has to put up a line on every game -- on this Saturday there were more than 100 college basketball games, along with a golf tournament and a tennis tournament -- the sharp gambler carefully chooses the game he bets on. It takes just one nugget of inside information on some obscure game between, say, Alabama A&M and the University of Arkansas at Pine Bluff, to give a sharp the advantage he needs. And while all sports books have limits on the amount of money a single gambler can bet, usually between $3,000 to $10,000, depending on the sport, the professional gambler can easily exceed these limits by using a ''syndicate,'' or a crew of ''beards,'' who have accounts at multiple offshore sports books and spread bets around for him.

 
Because of the high-risk nature of the business, and because of the tremendous amounts of money the Internet allows bookmakers to traffic in, a herd mentality has developed among bookmakers. When one sports book on Don Best changes his line, it doesn't take long for the others to follow suit. And this is what happened after L.R. moved his line on the New Orleans game to 12. Cascade's line for the game flashed red at 12 on Don Best. Immediately several other books on changed their lines from 12.5 to 12.

 
L.R. and every other bookie in Costa Rica go through rituals like this hundreds of times a day, microscopic dramas that run morning to night. It's precision work, requiring a superhuman ability to process reams of information all at once. By 10 or 11 at night -- when the West Coast games finally start -- the day's betting is done and L.R. goes off into the night with hundreds of thousands of dollars riding on a hundred college basketball games and the 19-year-old kids who play them.

There are many varieties of gambling establishments in San Jose, ranging in size and reputation. In terms of size, books like Cascade and Skybook fall somewhere in the middle of the pack. They try to expand their business through word of mouth, and they don't advertise that much. BETonSPORTS, meanwhile, advertises vigorously and gives elaborate parties to reward its big spenders; last year's celebration to mark the beginning of the football season featured celebrity guests like the television star Ashton Kutcher, apple martinis and a Carmen Electra burlesque act. Despite these glamorous trappings, BETonSPORTS tries to keep out sharp bettors -- like other high-volume books, it focuses on reeling in large numbers of ''squares,'' the industry term for gamblers who make small, uninformed bets on sentimental favorites. A subset of the square is ''the whale,'' a square who bets a lot of money. Bookies love squares, but they really love whales and will do anything to get their business.

The bookies come in different shapes and sizes, too. L.R. is an example of the ''bookie's bookie,'' a type that usually has some background as a gambler or bookmaker in the United States. He tends to be a sports freak, the guy who in grade school could name the only left-handers ever to play third base in the majors, and grew up wondering how he would ever be able to parlay knowledge like this into a career. A variation on this type is the ''numbers guy,'' a bookie who, if some twist of fate or antisocial behavioral tic hadn't landed him in the gambling trade, might be doing risk arbitrage on Wall Street. The skill sets are fairly similar.
Another type of bookie is ''the agnostic entrepreneur,'' for whom bookmaking is merely another business opportunity. He regards the core of the industry -- the sports-obsessed bookies and gamblers that make it run -- with scorn. The entrepreneur typically arrives in Costa Rica with an elaborate five-year plan, in which he envisions setting up a business, promoting it like mad and finally selling it off to a large company, preferably a large casino conglomerate in the United States that has suddenly decided to get into the offshore sports-betting market.
That dream, however, was dependent on the United States government's giving at least tacit approval to the offshore business, and that has not happened. In fact, the opposite has occurred.

The first hard evidence that offshore betting would not be tolerated by the feds came in 1997, when Jay Cohen, the outspoken founder of World Sports Exchange, one of the first offshore books, was charged along with 19 other bookmakers for violating the Wire Act. Cohen decided to return to the United States and fight the charges. He argued that he and his colleagues were innocent of any crime and challenged the United States government to prove in a court of law that what he was doing was illegal. Which, subsequently, they did; Cohen is now serving the tail end of a 21-month sentence in a Las Vegas prison.

The whole episode shocked the bookmaking community. After the verdict was announced, bookmakers throughout the offshore world changed their names and began placing their sports books in the names of local citizens. Some packed up and left the business.

The assault by the United States government has continued. Last year Eliot Spitzer, the attorney general of New York, persuaded most of the major New York-based banks that issue credit cards to stop accepting sports-betting transactions, forcing sports books to find less convenient means of extracting money from their gamblers. A bill by Representative Jim Leach, a Republican from Iowa, proposes to further hobble Internet gambling by making it illegal for American banks to transfer money to offshore betting accounts. And that's why those guys in Costa Rica with their five-year plans are now working on 10-year plans.

In San Jose, the bookmakers' closest relationships outside the business tend to be with their lawyers in the United States. Within the business, there is considerable distrust. Bookmakers reveal their names to almost nobody, and many have completely severed ties to their families and friends back home.

Because of all this, the bookmaker's life in Costa Rica is severely circumscribed. Bookies hang out in small groups in strip clubs and anonymous chain restaurants. They drink and smoke excessively. A few marry local women, but these marriages typically don't last. The richer bookies live in compounds in the hills around San Jose, while the struggling ones rent apartments closer to downtown. Although some of the bookmakers I met had been in the country for most of the last decade, not one had learned Spanish.

 
Wherever bookies go, and no matter his disposition, the games, and the stress that they provoke, are never far away. Whether they are in the office or out at a bar, they talk about one thing and one thing only -- gambling. Who got burned on that day's games? Who beat a sharp out for $5,000? Who got beaten by a sharp for $10,000? Mostly, though, bookies scrutinize the minutiae of the previous night's games -- a blown call by a referee that made all the difference, a dropped pass, a muffed extra point.

Bookmakers are constantly assaulted from all sides -- by the prospect of the American government really going after them; by the sharps with inside information; by gamblers whom they allow to bet on credit but then don't pay; by the threat of local crime; and by rival bookmakers stealing their client lists. But mostly they suffer because their peace of mind is dependent on the essential unpredictability of sports. The multitude of goofs, lucky shots and officiating quirks that perplex, agitate and annoy regular fans can be, to the bookmaker, life-altering events.

The lure of major money is always a temptation, and the Internet, with its worldwide web of gamblers, makes it all the more possible to get in big and deep. Betting lore is rife with stories of bookies who tempted fate and lost. A spectacular recent example is of the former owner of Aces Gold Casino, which until last year was a well-regarded offshore sports book in Curacao. The bookie's money troubles became apparent in late 2001 during the N.F.L. playoffs, when he failed to pay a few high-stakes players on time. His problems were the subject of forums on TheRx.com, an offshore-sports-industry information and gossip site. Kenneth Weitzner is the owner of TheRX.com and serves as a a kind of watchdog for the offshore gambling world. Weitzner followed the Aces Gold incident from the beginning. ''When people said he was going bad, no one believed it,'' he said. ''He had a good reputation.''

The bookie had found himself in a position a lot of gamblers recognize. He lost some money, and then, instead of trying to catch up gradually, he started putting out risky lines, abandoning the bookmaker's conservative credo of 50/50. He tilted his lines heavily to one team or another, hoping that the game would be decided in his favor so he could make up his mounting losses in one go.

 
But through the N.F.L. playoffs, he kept losing, arriving at the Super Bowl -- the most heavily wagered American event -- owing his clients more than a million dollars. So he went for the Hail Mary. Before the 2002 Super Bowl, the standard line offered by nearly every bookie favored the St. Louis Rams over the New England Patriots by 14 points. Aces Gold offered those betting on the Patriots 14.5 points. Predictably, the book received huge action on the Patriots but made no effort to cover the other side of the line by moving down to 14.

 
The bookie was probably packing his bags at halftime. Not only did the Rams not cover the spread, they lost the game in a stunning upset. Aces Gold owed gamblers more than $3 million, money that they would never see. The bookie is now rumored to be living somewhere in Texas. There are a number of very irate bettors who would pay good money to know exactly where.

 
The internet made earning real money on bookmaking possible by sharply increasing the volume of gamblers a bookie could handle, but it also made the average gambler, ''the square,'' somewhat smarter too. Web sites like TheRx and ESPN have educated the amateur bettor. Valuable information now appears instantaneously on the Internet, and it takes only a tiny bit of it to start a bookmaker on his downward spiral. They just can't keep up with it. ''The biggest change in this industry is that the average bettor has gotten smarter,'' K.C. said. ''It's tougher to be a bookie than it was when I started.''

Strangely, the Internet, which seemed like such a boon for K.C. in the beginning, had come to make his life worse than it ever was before he moved offshore. And the legitimacy that K.C. and many of his colleagues sought offshore never materialized.

So after thousands of nail-biting games, countless headaches, delirious highs and nauseating lows, missed free throws and botched extra points, K.C. decided to get out of the bookmaking business for good. ''You get so stressed out from being in that cage all day and only dealing with gamblers trying to take your eyeballs out all day and being in a country where it rains all day,'' he says. ''There's a lot of drinking. The lifestyle is completely unhealthy. I don't know any guys who take care of themselves physically. They're eating fast food all day. No movies. No music. No culture. You're always having to worry about your family being kidnapped.''

In the world of Costa Rican bookies, K.C. is an exception. For a certain strain of bookmakers, the low-grade manic lifestyle is part of the allure. They revel in the very things that began to drive K.C. nuts. The godlike ability to control betting lines can be a terrific high, and the fugitive nature of the life only makes that feeling more intense. A lot of the guys could never imagine doing anything else. L.R. would probably book bets from a Siberian gulag as long as he had a server and DirecTV.

 
K.C. is different. He was the only bookmaker I met who had kids of his own and who was trying to hold together a family. Ultimately, K.C. probably lacked that extra notch of hardness that insulates other bookmakers from offshore life.
''I never thought of myself like Henry Hill,'' K.C. says, referring to the mobster on whom the film ''Goodfellas'' is based and who now finds life in the witness-protection program unbearable. ''I never looked at regular guys as schleps. Actually, I was always a little jealous of them.''