dice INTERNET GAMBLING dice
Home
Background
Legal
Policy
Links


 I.   Federal
       Attempts to
       Regulate

 II.  Current Fed.
       Law

 III. Current
       State Law

 IV.  Cases

 

Current Federal Law

Due to the absence of federal legislation specifically aimed at internet gambling federal prosecutors wishing to pursue prosecutions are forced to rely on outdated laws, most notably the Interstate Wire Wager Act (“Wire Act”).  The Wire Act was passed in 1961 to assist prosecutors in taking down gambling rings, and provides in pertinent part:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission…of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest…shall be fined under this title or imprisoned not more than two years, or both.”

18 U.S.C. § 1084, U.S. Code Collection, Cornell Law School , at http://www.law.cornell.edu/uscode/html/
uscode18/usc_sec_18_00001084----000-.html (emphasis added).

In a letter to the Nevada Gaming Control Board in 2002, the Department of Justice (DOJ) famously contended that the Wire Act in its current form bans all internet gambling.  However, many legal experts, courts, and perhaps even the DOJ itself are not so sure.  The Wire Act language in italics above suggests that the Wire Act may have very limited applicability when it comes to online gambling.  This language will be examined in further detail below.

References:

Criticisms of the Wire Act’s Applicability to Online Gambling

  • In the Business of Betting or Wagering

Even if the Wire Act is shown to apply to internet gambling it would only apply to gambling operators, since it expressly states that it applies only to those “engaged in the business of betting or wagering.”  18 U.S.C. 1084, U.S. Code Collection, Cornell Law School , at http://www.law.cornell.edu/uscode/html/uscode18/
usc_sec_18_00001084----000-.html .  Obviously, this would exclude individual bettors from any liability under the Act.  This point is fairly uncontroversial, and is supported by the language of Congressman Emanuel Celler, then Chairman of the House Judiciary Committee, who stated during debate on the Act that “[t]his bill only gets after the bookmaker, the gambler who makes it his business to take bets or to lay off bets. . . It does not go after the causal gambler.”  Jeffrey R. Rodefer, Internet Gambling in Nevada : Overview of Federal Law Affecting Assembly Bill 466, 8-13, athttp://web.archive.org/web/20040303190351/http:/ ag.state.nv.us/hottopics/int_gamb_nv.pdf (quoting United States v. Baborian, 528 F. Supp. 324, 328 (D.R.I. 1981) (quoting 107 Cong.Rec. 16,534 (1961))). 

  • Wire Communication Facility

There is no question that when the Wire Act was passed legislators did not have the internet in mind.  Many critics of the Act’s applicability to the internet argue that because of this the language of the Act no longer encompasses internet technology.  The internet today incorporates wireless technology such as satellite and microwave transmissions that arguably do not make use of wires, thus excluding the internet from the scope of the Wire Act.  While the DOJ argues for the Act’s continued applicability to internet technologies despite the advent of wireless internet, this argument is tenuous at best.  However, even the Act’s dependence on wires is not cited by critics as much as the language regarding sports betting.

References:

  • Any Sporting Event or Contest

There is a very valid argument that the Wire Act’s reference to sporting activities limits its applicability to only gambling that involves sports, thus removing all other forms of gambling, such as lotteries and poker, from the scope of the Act.  Though it could be contended that by stating “sporting event or contest” the Act was meant to apply to both sporting events and other contests that did not have to do with sporting, such an argument is difficult to make in light of the fact that Congress expressly defined other forms of gambling in other statutes, yet did not include such definitions in the Wire Act.  18 U.S.C. 1084, U.S. Code Collection, Cornell Law School , at http://www.law.cornell.edu/uscode/html/uscode18/usc_sec_18_00001084----000-.html (emphasis added).  Nevertheless, the DOJ attempted to make this argument in their 2002 letter to the Nevada Gaming Control Board by saying that the Wire Act covered all forms of internet gambling.  However, even the DOJ has recognized that the Act may be limited to sports betting only, as shown in a 1999 letter to Senator Patrick Leahy that stated, “[w]e do recognize, however, that the Internet has allowed for new types of electronic gambling, including interactive games such as poker and blackjack, that may not clearly be included within the types of gambling currently made illegal by [the Wire Act].”  Letter from the Department of Justice to Senator Patrick Leahy Regarding the Internet Gambling Prohibition Act of 1999, at http://www.cybercrime.gov/s692ltr.htm.  Further buttressing critics’ argument that the Act doesn’t apply to non-sports of online gambling is a recent decision by the Fifth Circuit Court of Appeals in In re: Mastercard Int’l, where the court ruled that the Wire Act did not prohibit internet gambling that was not based on sports. 

 

        References:

o       Allyn Jaffrey Shulman, The 1961 Federal Interstate Wire Act Does Not Prohibit Online Poker, Card Player, at
http://www.cardplayer.com/poker_magazine/archives/ showarticle.php?a_id=13599&m_id=74

o       In re: Mastercard Int’l, No. 01-30389 (5th Cir. 2002), at http://caselaw.lp.findlaw.com/data2/circs/5th/0130389p.pdf

o       Jeffrey Rodefer, Federal Wire Wager Act, at
http://www.gambling-law-us.com/Federal-Laws/wire-act.htm

o       See Tony Batt, Ruling Muddles Internet Gaming Legality Concerns, Reviewjournal.com, at
http://www.reviewjournal.com/lvrj_home/2002/Dec-19-Thu-2002/
business/20305742.html

In light of the Wire Act’s language regarding wires and sports betting, and particularly in light of the Mastercard decision, it is becoming increasingly clear that the Wire Act does not prohibit online non-sports gambling, and may not prohibit any form of online gambling.  Though prosecutors may attempt to stop online gambling using the Wire Act they will probably meet with very limited success until a more clearly applicable law is passed.

Other Federal Statutes

There are several other federal statutes that the DOJ contends prohibit online gambling, including the Interstate and Foreign Travel Act (“Travel Act”), the Interstate Transportation of Wagering Paraphernalia Act (“Paraphernalia Act”), and the Illegal Gambling Business Act.  However, because the Wire Act is the most applicable and the Act under which prosecutions are sought most frequently, these other statutes will only be discussed briefly.

  • Travel Act, 18 U.S.C. § 1952: this statute, which was passed to prohibit syndicated crime groups from traveling across state lines, makes it a federal crime to use “any facility in interstate or foreign commerce…to further any unlawful activity.”  18 U.S.C. § 1952, U.S. Code Collection, Cornell Law School , at http://www4.law.cornell.edu/uscode/html/uscode18/usc_sec_18_00001952----000-.html.  Unlawful activity is defined to include “any business enterprise involving gambling.”  Id.   Thus, if the internet is considered a facility in interstate commerce then this law could prohibit internet gambling.  While courts have broadly interpreted the term facility to include telephone lines through which the internet is accessed, the definition has yet to be stretched to cover satellite and microwave transmissions, so it is unclear whether this Act would prevent gambling using wireless internet. 

References:

  • Paraphernalia Act, 18 U.S.C. § 1953: this statute prevents someone from sending a physical item in interstate commerce that can be used in a gambling operation.  The language of this act is more explicit than the Travel Act in limiting its scope to physical items, so this is unlikely to be used to prosecute internet gambling.  In fact, one commentator has suggested that the only way this may apply is if gambling software is shipped to or from the gambling operation.

References:

  • Illegal Gambling Business Act: under this statute, a gambling operation that violates a state law can be prosecuted for violation of a federal crime.  To be prosecuted under the act, a business must involve five people, be in operation for thirty days or have profits of over $2,000 in a single day, and must violate a state law.  Note that this statute does not target individual gamblers.  Because there must be a violation of state law before federal prosecution can occur, the effectiveness of this statute in combating internet gambling is largely dependant on state law regarding internet gambling.  However, because many state laws regarding internet gambling are not directed towards out-of-state operations this law is only of minimal efficacy in targeting most gambling operations.

References: