DOJ's position in internet gambling

[JayC]

The US talks out of both sides of its mouth. During the WTO proceedings, they were trying to say we had no case since there was no prohibition on it.

U.S. Department of Justice
Criminal Division
Washington, D.C. 20530
March 7, 2005

Mr. Wayne Stenehjem
Attorney General
State of South Dakota
600 E. Boulevard Avenue, Dept. 125
Bismark, North Dakota

Dear Mr. Stenehjem:

In your conversation with representatives of the Department of Justice's Criminal Division and office of Intergovernmental and Public Liaison, you requested a letter regarding the application of federal law to Internet gambling.

As a general rule, the Department of Justice is limited by statute to providing legal advice within the federal government, and the Criminal Division does not issue advisory opinions with respect to the legality of specific gambling operations. This allows the department to refer the resolution of legal questions until it is confronted with a concrete situation requiring a judicial forum.

We may, however, provide general guidance to relevant statutory provisions that are applicable to Internet gambling. As set forth in prior Congressional testimony, the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling. While several federal statutes are applicable to Internet gambling, the main statutes are Sections 1084, 1952 and 1955 of Title 18, United States Code.

Section 1084 of Title 18, United States Code, prohibits one in the business of betting or wagering from knowingly using a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers.

Section 19952, Title 18, United States Code, prohibits traveling in interstate of foreign commerce, or using the mails, or using a facility in interstate or foreign commerce with intent to distribute the proceeds of an unlawful activity or otherwise promoting, managing, establishing, carrying on, or facilitating the promotion, management, establishment, or carrying on ofany unlawful activity and thereafter performing or attempting to perform such act. The term "unlawful activity" is defined in Section 1952(b) to mean "any business enterprise involving gambling . . . in violation of the laws of the sate in which they are committed or of the United States."

Section 1955 of Title 18, United States Code, prohibits illegal gambling businesses, which involve 1) a violation of state law, 2) five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business, and 3) a business that has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2000 in any single day. In additional to criminal convictions, Section 1955 can be used to seek civil forfeiture of gambling proceeds. See United States v. 5734/578.82 in United States Currency, 286 F.3d 641 (3d Cir. 2002). With respect to all of the above statutes, it is the Department's view that the gambling activity occurs both in the jurisdiction where the bettor is located and the state or foreign country where the gambling business is located.

In addition to the actual gambling business being subject to prosecution under federal law, those persons or entities which knowingly assist the Section 2 of Title 18, United States Code, imposes criminal liability on those individuals or entities that aid, abet, counsel, command, induce, or procure the commission of an offense against the United States. Moreover, the federal money laundering statutes are applicable to unlawful Internet gambling businesses.

I trust that this is responsive to your inquiry. Please do not hesitate to contact us if we can be of any further assistance in this or any other matter.

Sincerely,
Laura H. Parsky
Deputy Assistant Attorney General

 

[WildBill]

This letter scared the crap out of North Dakota senators, they voted down the internet poker bill 44-3 as a result. Back to square one, how do the states get the DOJ to stop overreaching?

 

[TheGeneral+]

It is my opinion that gambling is gambling and it is illegal via most state laws, unless noted otherwise, but there is just no serious enforcement. I do not like it and wish I could fight it. Matter fact, it aggravates me.

 

[AdamSelene]

You will notice that all the statutes above read "illegal gambling", "unlawful activity" etc.

That is, they do NOT apply to *legal* gambling, nor do they make any form of gambling illegal [exception below]. Gambling laws are left by and large to State and local jurisdictions. These federal laws only apply to gambling that is "in violation of the laws of the state in which they are committed."

Where exactly is Internet wagering committed?

The crux is that (a) regulators want to define the location as that of the bettor (e.g. New York), and that of the betting firm (e.g. Antigua); and (b) many states prohibit gambling that they do not explicitly license/regulate, or simply assume such a prohibition exists.

The sole federal law against gambling (as opposed to against "illegal gambling") is Section 1084 of Title 18 which applies to "bets or wagers on any sporting event or contest". This has been ruled not to apply casino wagering (only sports) and only applies to *interstate/foreign* transactions. i.e. you can wager on sporting events online if both you and the book are in the same State, which is how TVG Network (horse racing) operates.


Of course the more relevant issue is ... who the **** cares.

Much of the lobby money *against* the explicit legalization of Internet gambling comes from both Las Vegas and offshore sportsbooks.

 

[AdamSelene]

The DOJ sent very misleading information to South Dakota.

Should South Dakota decide to create a law allowing there residents to participate on online poker, and/or to allow an online poker room within the state of South Dakota, there is absolutely no federal law interfering.

The only provision would be a online poker room operating from South Dakota would need to only allow players from within the state and/or from states where participating in online poker is not against state/local law.

 

[AdamSelene]

That was supposed to read:

The crux is that (a) regulators want to define the location as that of the bettor (e.g. New York), and not that of the betting firm (e.g. Antigua);


In the end jurisdictions need to create and enforce laws against bettors, not againt foreign betting firms. The notion that a firm in Antigua is essentially operating within and under the jurisdiction of every country, state/province, county/city in the world where a bettor may happen to go online or place a phone call is a patently ridiculous argument.

 

[THE SHRINK]

The DOJ'S position seems unclear to me after reading this. I suppose it depends on who is greasing them the most. The hypocricy of it all...

I wonder what % of them have filled out Brackets?

Or better yet, how many might be betting with one of our sponsors??

THE SHRINK

 

[WildBill]

Some legal experts went to North Dakota and testified much of the same points, that the DOJ doesn't have a case to stand on. Didn't matter though the Senators just didn't want to go through the hassle of it. They know even if they win court fights the DOJ can still harass any party it chooses to no end knowing court fights are expensive and troubling. After all how do you think other states view the one state that gets the nerve to fight the Feds and win?

This is why I say back to square one. It was a good exercise in Bismarck, the good guys and bad guys showed a card out of their hands and that will be helpful for future battles.

 

[AdamSelene]

Actually I was wrong about TVG.

"This service has been approved by the Oregon Racing Commission. All accounts are maintained and wagering information is processed at a licensed facility located in Oregon. It is not intended to be an offer or solicitation in those states where prohibited."

I guess horse racing is not considered a sporting event -- or this is a case of selective enforcement.

"Wagering services are currently offered in California, Idaho, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, North Dakota, Ohio, Oregon, Washington and Wyoming"


Basically a online poker room could operate in South (or North) Dakota without any problem, they would just need to restrict participation to residents of states who's gaming commission has approved it. TVG is a good precedent.

The "burn" here is that if state gaming commissions made participation legal only on an approved (and taxed of course) operator basis, they hence make non-approved (offshore) illegal. Party Poker, Paradise Poker (SportingBet PLC UK) are big money who stand to lose.

A perfect example why this is an illegal constraint of free trade.

 

[WildBill]

Account wagering has to be legalized and licensed to be offered in a state. In this case you would have to get states to allow players to play poker in other states. Legally it may not be different, but in practical terms it is a huge difference. There is value to be had in having numerous simulcasted track, value states can realize in account wagering. Poker is different, the value only applies to the state offering the games. So either every state will have to have their own operations to offer poker or they will refuse to legalize it. Just my read on it if you go the route Adam suggests. Realistically best route is to have someone defeat the DOJ in court and end this harassment because they won't win a case unless they get Jay's judge and he prejudices the jury in the government's favor.

 

[AdamSelene]

Yeah, I was going to mention the strong correlation regarding the participating states and states hosting race tracks.

Hypocrisy and special interests through and through.

WSEX could not, however, offer off-track betting on those same races. Looks like protectionism to me.