Is Online Gambling Legal ?
The debate on online gambling is always changing from state to state and the online gambler should protect himself by reading the laws in their state or country. The discussion on online gambling is by no means over and the validity and applicability of these laws has just begun.
A. STATE LAWS
Up until the last few years, the regulation of gambling had been relegated to state legislatures. Predictably, states have varied in their degree of regulation. Utah, a universally renowned conservative state, does not permit its citizens to participate in any form of gambling. On the other hand, Nevada openly declares in their statutory law that gambling is "vitally important to the economy of the state and the general welfare of the inhabitants." All states have legalized at least one form of gambling (usually a lottery).
B. FEDERAL LAWS
Congress decided to institute their own regulations upon gambling because of the inconsistencies in states legislation and enforcement. To prevent a wide variation between neighboring states, Congress resolved to exercise their power to control interstate commerce. The majority of federal statutes were passed before the introduction of online wagering, however.
1. The Wire Wager Act
The statute that most directly restricts the use of the Internet to place bets is the Wire Wager Act. This Act directly prohibits the use of a wire transmission facility to foster a gambling pursuit. It provides, in part:
Whoever being engaged in the business of betting or wagering knowingly uses 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 on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
Two different views of this statute can be taken. Some regulatory advocates feel that this statute broadly covers any interstate use of the Internet that is related to placing or receiving bets. Support for this assertion is found in the emphasis placed upon the following phrase: "use" of a wire facility. For example, if this law does indeed apply to online wagering, a bookmaker would violate the act simply by emailing a point spread
Challengers to the applicability of this Act point to two issues. First, the words "wire communication facility" only apply to transmissions that use wires. Currently, wireless Internet access is already being provided by cellular phone companies and with handheld computers. The proliferation of such services is inevitable. The Wire Wager Act would not apply to companies that allow wagering or provide information to assist in a wager through a wireless service. Second, the Act might only apply to wagering upon sporting events (not card games or other games based upon chance). The first portion of the Act refers to "bets or wagers on any sporting event or contest." However, only a few phrases later the Act becomes more expansive by referring generally to "bets or wagers." The legislative history on the Act suggests that the purpose of the Act was to regulate sports betting and activities, like numbers games, that were related to organized crime. Nevertheless, the challenge is a valid one.
Another relevant shortcoming in the Wire Wager Act is its significance only to those "being engaged in the business of betting or wagering." This phrase limits the act to professional bookmakers who set up online facilities. Excluded would be online gamblers, Internet service providers, and those arranging for wagering without making a profit (office pools, for example). Despite these limitations, the Wire Wager Act contains language that is broad enough to allow the law to serve as the primary basis in the attempt to hold operators of online gambling operations criminally liable.
2. The Travel Act
The second federal statute relevant to the regulation of Internet gambling is the Travel Act. This statute penalizes any person who "travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to . . . further any unlawful activity." An unlawful activity is defined as including "any business enterprise involving gambling." "Although the purpose of the Act was to prohibit illegal syndicated gambling, the scope of the Act may reach on-line gamblers who use interstate facilities, such as telephone lines, to access the
Internet in furtherance of illegal activities."
The plain language of the statute indicates that it could apply to both online casino operators or individual bettors. However, the intention of the statute, undoubtedly, was not to reach online gamblers. A good indication of this purpose is the definition of an unlawful activity. The law only focuses upon those who are involved in a "business enterprise involving gambling."
3. The Interstate Transportation of Wagering Paraphernalia Act
The Interstate Transportation of Wagering Paraphernalia Act also applies to Internet gambling. This Act prohibits individuals or entities from "knowingly carrying or sending in interstate or foreign commerce any ‘paraphernalia’ or ‘other device’ to be ‘used . . . or designed for use’ in illegal gambling." Clearly, the primary interpretation required with this law is the definition of "other device". A broad interpretation could include the web site or software necessary to place wagers online that is shipped by companies to potential customers.
Another phrase in the Act could extend liability to Internet service providers. The law punishes anyone who "knowingly carries or sends" devices used for illegal gambling. "For example, an Internet service provider could be found criminally liable if it comes to their attention that their facilities are being used to expedite online wagering and they do nothing to prevent such acts. Such a broad interpretation would require that the
web site itself be considered a "device" .
Like the other federal statutes that have been analyzed above, the Interstate Transportation of Wagering Paraphernalia Act would not apply to individual gamblers. The statute only applies to those who "send" the paraphernalia or device.
4. The Professional and Amateur Sports Protection Act
This federal statute makes it illegal for any person to sponsor,
operate, advertise or promote, pursuant to the law or compact of a governmental entity, a . . . betting, gambling, or wagering scheme based, directly or indirectly . . . , on one or more competitive games in which amateur or professional athletes participate, or are
intended to participate, or on one or more performances of such athletes in such games.
At first glance, this statute seems very inclusive. However, there are some exceptions. Nevada, Oregon, and Delaware are not subject to the restrictions "with respect to state authorized sports betting in existence prior to enactment of the statute." This federal statute would make it illegal for anyone to operate a gambling business (whether online or not) in which the results of amateur or professional sports form the basis for
winning bets.
There are limitations with this law. First, the statute only applies to bookmakers who take bets on sporting events. Thus, this law is inapplicable to all of the cybercasinos who do not provide sports betting. Second, the law does not apply to the individual bettor. Instead, it only applies to those who "operate" the gambling scheme. Finally, as mentioned above, the statute contains exceptions for specific states.
5. The Federal Aiding and Abetting Statute
Although this statute does not specifically mention gambling, it applies to online gambling, nevertheless. The statute provides that "[w]hoever commits an offense against the United States or aids, abets . . . or procures its commission, is punishable as a principal." In order to be punished under this Act, the perpetrator must assist in the commission of the offense with the intent to assist and have "guilty knowledge" of the
offense. Further, the illegal act must actually be performed by the principal lawbreaker.
Plainly, this statute would apply to anyone who assists someone in operating an illegal online gambling business. "Thus, those involved in the operation and maintenance of cybercasinos, those who assist users in accessing gambling [w]eb sites, and possibly those who provide access to cybercasinos would all face potential penalties under the aiding and abetting statute." The typical Internet service provider would not face
criminal liability, however, under normal circumstances because their actions do not normally satisfy either of the "guilty knowledge" or participation requirements.
All of these federal statutes appear to pertain, to some degree, to online gambling. Nevertheless, the actual prosecution of these types of companies or their officers is uncommon. One reason for this scarcity in prosecutions is the inability of enforcement officials to coerce the defendants to appear in the United States to stand trial. The actual validity of these statutes as they pertain to online gambling has also been
questioned.
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