subscribe to this pageAmerican Gaming Association, Fact Sheet on Internet Gambling, accessed 7/20/2009: http://www.americangaming.org/Industry/factsheets/issues_detail.cfv?id=17
The American Gaming Association (AGA) presents a succinct review of the current disagreement between the U.S. Department of Justice and U.S. courts that have decided online gambling cases. They address most of the historic and current legal issues surrounding U.S. law in regards to online gambling. “Due to the divergent views of its members, the AGA is neutral on the issue of Internet gambling.” The following cases were described: Wire Act of 1961, Professional and Amateur Sports Protection Act of 1992, The WTO ruling of the U.S. violation of the General Agreement on Tariffs and Trade, the Unlawful Internet Gambling Enforcement Act of 2006, as well as the 2009 Internet Gambling Regulation Consumer Protection and Enforcement Act, Reasonable Prudence in Regulation Act, and the Internet Gambling Regulation and Tax Enforcement Act.
This factsheet is a good primer on the relevant background and current legal issues facing online gambling. It was a good place to start in order to be more informed when locating more substantive sources.
Sporting Events – Transmission of Bets, Wagers, and Related Information Act,Pub. L. No. 87-216, § 2, 75 Stat. 491, 552-553 (1961) http://uscode.house.gov/download/pls/18C50.txt
Adopted in 1961, the intent of this law was to help law enforcement agencies, especially at the state level, fight organized crime. The Federal Wire Act, in companionship with other federal bookmaking statutes – Travel Act, Interstate Transportation of Wagering Paraphernalia Act, and the Illegal Gambling Business Act – established how organized gambling activities would be deemed illegal and punishable.
Subsection (a) of the Wire Act, a criminal provision, provides:
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 [18 U.S.C. § 1084(a).]
Two provisions standout from the above clause. Namely, “engaged in the business of betting or wagering” and “wire communication facility.” The first quote is most often interpreted to exclude casual bettors. It has been argued, even by congressmen during the debate on this bill, 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 who bets $2 on a race. That type of transaction is not within the purvue of the statute” [United States v. Baborian, 528 F. Supp. 324, 328 (D.R.I. 1981) (quoting 107 Cong.Rec. 16,534 (1961)).]
Regarding the definition of a “wire communication facility,” the following wording applies, “[A]ny and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission.” It remains unclear if the Internet falls in this category. It may be true that certain cables and wires facilitate the Internet, but information also can be transmitted wirelessly between destinations. Wireless transmissions would fall outside the scope of a “wire communication facility.” Since the authoring of this bill preceded the Internet, no consensus has been made on whether it should be applied to online gambling.
One thing is for sure, the Wire Act clearly separates sports betting from nonsports betting, and has been used to define the legality of nonsports betting online. That is to say, the Wire Act fails to prohibit using the Internet to bet on games of chance, such as poker.
Call#: Van Pelt Library KF3992 .N375 1999
In 1996 the National Gambling Impact Study Commission Act was signed into law which established the National Gambling Impact Study Commission, “charged by Congress with a ‘very broad and very difficult task – to conduct a comprehensive legal and factual study of the social and economic implications of gambling in the United States.’” The Commission efforts included “holding a series of hearings around the country…received testimony from hundreds of experts…making several site visits, commissioning original research, conducting surveys of the existing, wide-ranging literature, and soliciting and receiving input from a broad array of individuals and organizations.” This process took two years, and the final report was published in 1999. During the report’s introduction, the Commission addresses Internet gambling specifically, “Thus, with only a few exceptions in areas such as the Internet, we agree that gambling is not a subject to be settled at the national level, but is more appropriately addressed at the state, tribal and local levels.”
It seems that the authors’ limited understanding of cyberspace permitted them to treat the Internet as a unified jurisdiction capable to being encompassed by a national law, since any state would be hard pressed to enforce a law governing the de-centralized Internet’s transmissions across state lines. They did include a specific section devoted to Internet gambling in which they came to no clear conclusion, but rather harped on the uncertainty that the technology has brought to the legal field. Mainly they assert that the most likely law to invoke is the Wire Act, but simultaneously admit that “wire communications” may not apply to the World Wide Web that can employ satellite technology and other wireless technology. They also raise the issue that the statute does not clearly define gambling “contests” and if it should apply to nonsports betting such as Internet bingo, lotteries, or casino-style games. More poignantly, the Commission asks relevant but unanswered questions such as “What are the legal jurisdictions when it comes to Internet gambling? Where are the bets and wagers actually taking place?” Such questions were already covered for brick-and-morter establishments and accompanying telephone communications as a result of the RICO laws and the like.
In conclusion, the Commission made four recommendations regarding Internet gambling: 1) the federal government should prohibit…Internet gambling not already authorized, 2) prohibit wire transfers to known Internet gambling sites or the banks who represent them, 3) prohibit states from permitting the expansion of gambling into homes…, 4) the federal government should take steps to encourage foreign government not to harbor Internet gambling organizations that prey on US citizens.
While the report focused on addressing both the social and economic situation regarding gambling, the only technological solutions in regards to Internet gambling they came up with were recommending enforcement strategies that targeted ISPs, credit card providers, money transfer agencies, and makers of wireless communication systems. In order to police the nebulous Internet, they planned on holding the financial facilitators responsible.
Susan Schmidt; James V. Grimaldi (October 16 2005). "How a Lobbyist Stacked the Deck—Abramoff Used DeLay Aide, Attacks On Allies to Defeat Anti-Gambling Bill". Washington Post. p. A01. http://www.washingtonpost.com/wp-dyn/content/article/2005/10/15/AR2005101501539_3.html.
Although this Washington Post article was written in 2005, the subject of the story centers on the 1999 Internet Gambling Prohibition Act (IGPA) that never came to be. IGPA was bill that cleared the Senate and "appeared on its way to passage by an overwhelming margin in the House of Representatives." Although a strong lobbying effort from the moral right and anti-gambling groups such as the Christian conservatives thought they had sealed the passage of this bill, political payoffs behind the scene derailed the process.
Even though the National Gambling Impact Study Commission’s Final Report gave fresh life to an anti-gambling bill, powerful lobbying efforts orchestrated by Jack Abramoff eventually scuttled the passage. These efforts employed a “win-at-any-cost strategy that went so far as to launch direct-mail attacks on vulnerable House conservatives” and included at one point, “circulat[ing] a forged letter of support from Florida Gov. Jeb Bush.” After the $2 million pro-gambling campaign defeated the bill, several charities tied to Abramoff and his accomplices helped launder the money.
This story serves as an example of how powerful lobbyists and corruption is capable of manipulating Capitol Hill and eventually national law. Although for the average gambler, they were never the wiser. Conservatives swore that they would one day resurrect the bill and that day eventually came also surrounded in controversy. [See UIGEA 2006]
In re MasterCard Int'l, et al., 132 F. Supp. 2d 468, 472 (E.D. La. 2001). http://www.ca5.uscourts.gov:8081/isysquery/irlc1e/1/doc
This 2001 class action case targeted several banks and credit card companies (such as Mastercard and Visa International) for alleged unlawful interaction with Internet casinos per the Racketeer Influenced and Corrupt Organizations Act (RICO). However, the defendants were able to successfully move to dismiss the case. During the appeal hearing in 2002, the judge affirmed the previous decision.
In short: “In this lawsuit, Larry Thompson and Lawrence Bradley (“Thompson,” “Bradley,” or collectively “Plaintiffs”) attempt to use the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, to avoid debts they incurred when they used their credit cards to purchase “chips” with which they gambled at on-line casinos and to recover for injuries they allegedly sustained by reason of the RICO violations of MasterCard International, Visa International, and banks that issue MasterCard and Visa credit cards (collectively “Defendants”). The district court granted the Defendants’ motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. We AFFIRM”
The judge wrote the following in his decision, “Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling are not illegal.” Trumpeted by poker players unanimously, this case law set a precedent that although sports betting conducted over the Internet may be illegal, casino games are legal according to the Wire Act. The judge’s opinion was indeed influenced by previous attempts to expand the ambiguous Wire Act, as seen by his comments, “[T]he recent legislative history of internet gambling legislation reinforces the Court's determination that internet gambling on a game of chance is not prohibited conduct under 18 U.S.C. § 1084. Recent legislative attempts have sought to amend the Wire Act to encompass ‘contest[s] of chance…’ the ‘Internet Gambling Prohibition Act of 1999’ …sought to amend Title 18 to prohibit the use of the internet to place a bet or wager upon a ‘contest of others, a sporting event, or a game of chance…’”
Public Law 109 - 347 - Security and Accountability For Every Port Act of 2006 or the SAFE Port Act: H.R. 4954 (S. 2008) (S. 2459) http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h4954enr.txt.pdf
Although the SAFE Port Act was mainly an anti-terrorism bill, the Unlawful Internet Gambling Enforcement Act (UIGEA) was tacked on at the last moment. The entire package was passed at midnight on the day Congress adjourned for the 2006 elections. Very few of the representatives had a chance to review the full bill and the UIGEA portion was not even included in the original SAFE Port Act passed by the Senate. The UIGEA was indeed a resurrection of the HR4411 IGPEA that failed in 1999 but several portions had been scrapped, namely any text relating to the Wire Act. Even though the UIGEA was signed into law in 2006, its provisions were marked for “notice of proposed rulemaking” that delayed any real legitimacy to the act until final regulations were released November 12, 2008 to become effective January 19, 2009. Additionally, due to the complicated enforcement issue the UIGEA placed on payment processors, compliance was not required until December 1, 2009. So even though the Bush administration had successfully passed an anti-gambling via the Internet bill, it took over three years to become effective, under a new administration that could possibly overturn the law.
While this bill does not expand the Wire Act provisions, it does add language to cover “interactive computer services” which obviously refers to the Internet. The real problem with the UIGEA is that it declares “unlawful Internet gambling” is illegal, but never defines Internet gambling. In an attempt to target poker and casino-style games specifically, the language expands on what is considered a bet or wager to include “games subject to chance.” However, poker enthusiasts and advocates claim that poker is a game of skill and not chance.
UIGEA does affirm that one should ignore intermediary computers and look to the place where the bet is made or received. However, the main purpose of the bill is to force the financial institution to become watchdogs over transactions. This reason alone is why banks heavily lobbied against the bill. While the long-term consequences are yet to be seen, the immediate effects resulted in Neteller and several other prominent payment processors to unilaterally stop serving the gambling community. Of course, other processors gladly stepped up in this vacuum alongside poker sites utilizing workarounds through phone cards and other innovative approaches.
Haley Hintze, "Payment Processor Files Against U.S. for Return of Seized Online Poker Funds" PokerNews.com, 7-13-09. http://www.pokernews.com/news/2009/07/payment-processor-files-return-seized-online-poker-funds-6939.htm
On June 10, 2009, authorities from the U.S. Department of Justice’s Southern District of New York froze more than $30 million in the accounts of payment processors that handle the winnings of thousands of online poker players. This unprecedented action marked the first attempt by DoJ to enact the 2006 UIGEA. According to the news reporting that day, “In a letter dated Friday and faxed to Alliance Bank, the prosecutor said accounts held by payment processor Allied Systems Inc. are subject to seizure and forfeiture ‘because they constitute property involved in money laundering transactions and illegal gambling offenses.’” Although the money belonged to individual players, poker sites decided to step in and cover all the losses suffered by the payment processing companies in order to ensure a smooth experience by their clients, i.e. the players. These poker sites were going out on a limb to keep credibility established in their business but eventually someone was going to have to reimburse them, right?
One month after the seizure, some payment processors filed a suit against the DoJ that claimed the legal action was unwarranted. One company is asking a federal judge “to order the return of approximately $14 million it believes was improperly seized by authorities.” Interestingly, “The majority of the funds seized belonged to individual poker players themselves, who could not, according the statute involved, have violated the law.” They also declare that online poker is not illegal gambling, as outlined in their 40-page motion that argues “why poker should be treated legally as a game of skill.”
This trial is currently under way.
European Commission, Directorate-General for Trade, "Report to the Trade Barriers Regulation Committee," Brussels, 6-10-2009. http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143405.pdf
The 2006 UIGEA not only scared American companies from facilitating gambling online by US citizens, but it also sent international shockwaves in the gambling industry. Specifically, European companies were forced out of the US market but “still suffer legal proceedings by US authorities based on their past activities on the US market.”
The report published June 10, 2009 by the European Commission is the result of a formal examination procedure filed in 2008 following the complaint lodged by the Remote Gambling Association. The report “concludes that US laws deny access and discriminate against foreign suppliers of gambling and betting services inconsistently with US WTO obligations.” In response, the US is trying to withdraw from the trade obligations, but has been unable to formally do so. However, as the report notes, “a withdrawal only affects future access to the market, but does not allow the US to disregard its obligations in respect of past activities.” These past activities affect “revenue and stock market value lost by affected companies.” One of the fundamental reasons why this dispute is taking place, is indeed the fault of the US government for not clearly defining their laws, namely in the ambiguous Wire Act. As outlined by the Commission, “EU companies thought that it was legally possible to supply Internet gambling services in the US, given the lack of clarity of the domestic legal framework.” As a result, even though the European companies began withdrawing in 2006 as a response to UIGEA, the US pursued these companies for their pre-2006 activities in a discriminatory fashion.
“Internet gambling is a complex and delicate area, and we do not want to dictate how the US should regulate its market,” said EU Trade Commissioner Catherine Ashton. “However, the US must respect its WTO obligations. I hope that we will be able to reach an amicable solution to this issue.”
H.R. 2267: Internet Gambling Regulation, Consumer Protection, and Enforcement Act, 2009. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2267ih.txt.pdf
In May 2009, Rep. Barney Frank (D-Mass) resurrected a bill similar to one he was unable to pass in the previous congress. HR 2267, or the Internet Gambling Regulation Consumer Protection and Enforcement Act, “would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States.” Currently slated for the September session, many poker players are betting that this bill will finally legalize their Internet gambling. One of the other two bills that join HR2267 is HR2266 (Internet Gambling Regulation and Tax Enforcement Act) with the purpose of framing the regulation and taxation of this new enterprise; namely, “a 2 percent fee (i.e. federal tax) on all deposits.” The third counterpart, the Reasonable Prudence in Regulation Act, is the last ditch effort to stall the UIGEA, which calls for a one-year delay in date for compliance.
In Frank’s own words, “The government should not interfere with people's liberty unless there is a good reason. This is, I believe, the single biggest example of an intrusion into the principle that people should be free to do things on the Internet. It's clearly the case that gambling is an activity that can be done offline but not online.” Most advocates point to the revenue stream this bill would create, while opponents argue “legalized online gambling is a ‘clear danger to our youth’ and encourages gambling addiction at a young age.” However, Frank’s response to this claim is “The notion that a society should prohibit something entirely because of the possibility that children will abuse it is a terrible blow to liberty.” The authors have stressed that the bill includes safeguards to prevent underage or compulsive gambling and protect consumers who gamble online.
Until the bill comes to session, lobbying efforts have been promised by the Poker Players Alliance that include a $3 million campaign. HR2267 moves contrary to the traditional prohibitive stance the government has taken to online gambling. In an economic downturn, it’s no surprise that novel revenue streams become more appealing, which makes passing the Internet Gambling Regulation Consumer Protection and Enforcement Act a no-brainer. According to Harrah's Entertainment's senior vice president of communications and government relations Jan Jones, "We really believe this industry already exists. It just exists in a wild west setting. If you say you care about protecting children and fraud and money laundering, then the only way you can put those protections in place is to put in a strong regulatory frame."
2001