Online
Gambling - Legal Issues and Updates
In most
jurisdictions around the world, the law is still a long way
behind the technology and issues applying to online gambling.
As a result, the question of whether or not it is legal to
gambling online can rarely be answered definitively. It is
probably fair to say also, that government attitudes to online
gambling vary significantly, from whole hearted support, to
strong opposition, to indifference. What is clear though,
is that there is very little by way of legislation drafted
specifically to deal with online gambling, whether positive
or negative, and the application of existing laws is proving
problematic.
US
State Gambling Laws
Up until
reasonably recently, regulation of gambling in the United
States was left exclusively to the State Legislatures, who
determined the legality or otherwise of gambling activities
within their jurisdiction. Some states have legalized many
forms of gambling, while others have legislated to make
it illegal to participate in any form of gambling other
then the stats lottery. Nevada is the obvious example of
a State which has embraced gambling as a legal form of commerce,
while Utah is a noted for its strong anti-gambling stance,
and laws deeming all forms of gambling within its jurisdiction
illegal.
US State
gambling laws were all drafted long before the advent of
the Internet, and they do not have provisions dealing specifically
with online gambling.
US
Federal Gambling Laws
So far,
US Government attempts to pass legislation dealing specifically
with online gambling have been unsuccessful. Separate Bills
sponsored by Sen. Kyle and Rep. Goodlatte, which both attempted
to ban online gambling both failed to attract the required
2/3 majority Senate vote required to become law. And while
it is likely that there will be more attempts to pass legislation
dealing specifically with online gambling (to regulate or
ban), until such legislation is passed existing federal
legislation serves as the only guide on this issue.
Federal
laws relating to gambling were passed by Congress more recently
(than State laws) to deal with inconsistencies in State
based gambling laws, especially as they applied to interstate
commerce. Although passed recently, US federal laws applying
gambling activities were all drafted before the advent of
Internet gambling. There are a number of current federal
laws that have indirect application to online gambling.
These are discussed below.
1.
The Wire Wager Act
The
Wire Wager Act is the statute that may be applied most
directly to restrict the use of the Internet as to gamble.
It 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."
Exactly
how this Act applies to Internet wagering is hotly debated.
One school of thought in legal circles is that the Wire
Act broadly covers any interstate use of the Internet
that is related to placing or receiving bets. A second
school of thought is that the Wire Wager Act cannot be
applied to online gambling generally for two reasons.
First, the words "wire communication facility"
only apply to transmissions that use wires and the proliferation
of wireless Internet access would therefore fall outside
the scope of the Act. Second, reference to "bets
or wagers on any sporting event or contest" implies
the Act might only apply to wagering upon sporting events
(not card games or other games based upon chance).
The
above issues aside, it is clear that whether or not the
Wire Wager Act can be applied to Internet gambling, it
can only be applied to those "being engaged in the
business of betting or wagering." It cannot apply
against the online gambler or Internet service providers.
2.
The Travel Act, The Interstate Transportation of Wagering
Paraphernalia Act, The Professional and Amateur Sports Protection
Act, The Federal Aiding and Abetting Statute
The
above 4 Statutes all contain provisions that could be
construed to apply to internet gambling. However, as for
the Wire Wager Act, the appropriateness of their application
is strongly argued, and even if they could be adjudged
to apply to Internet gambling, their application would
be restricted to operators only, and not players or peripheries
(ISP's etc).
Given
these Statutes questionable validity with regard to their
application to online gambling, and also the fact that
US prosecutors will always have a difficult time coercing
defendants to appear in the United States to stand trial,
actual prosecutions in the US in this area are extremely
rare.
Be aware
that all of the sportsbooks on our recommended
list are fully licensed by, and completely legal in, the
countries where they reside.
More
Thoughts
Since
1996, several Members of Congress have sought to ban bets
or wagers online. This year, Representative Jim Leach, a Republican
from Iowa, and Senator Jon Kyl, a Republican from Arizona,
have introduced H.R. 21 and S. 627 respectively, unjustly
titled the "Unlawful Internet Gambling Funding Prohibition
Act."
We would
like your help to ensure you keep your right to place bets
and wagers on the Internet. Many of us believe that instead
of an outright ban on Internet gambling, why not simply regulate
online play?
Late last
year, Time Magazine published its list of the 100 Dumbest
Ideas of the 20th Century - unsurprisingly, alcohol prohibition
was selected as the single dumbest idea. George Santayana
warned us that those who do not learn from history are doomed
to repeat it. We can only hope that the prohibitionists in
Congress find themselves reading about the 1920's sometime
soon.
Why We Should Regulate
NOT Prohibit Internet Gaming
Attempts
to prohibit Internet gaming are unlikely to succeed; they
will have substantial unintended consequences, and they may
have adverse implications for other forms of e-commerce.
Because
of the inter-state and international nature of the Internet,
it is nearly impossible to establish a prohibition and enforcement
regime which does not compromise individual privacy and/or
deputize private sector entities to enforce social policy.
Most Internet gaming prohibitions, if enacted, would only
succeed in driving Internet gaming underground and keeping
it offshore. H.R. 21 and S. 627, currently under consideration
in Congress, would drive payment processing from the most
transparent forms (credit card transactions) toward the least
transparent (blind e-cash). Finally, if the U.S. sets the
precedent of using settlement (meaning payment processing)
as the regulatory choke-point for e-commerce, it is reasonable
to conclude that governments at every level in every country
will do the same – that could make e-commerce unworkable.
Licensing
and regulation of Internet gaming will extend appropriate
protection against minor gambling, problem gambling, and money
laundering.
Many
jurisdictions, from the United Kingdom and Australia to
Curacao and Antigua have commenced the process of regulating
Internet gaming. They have found that appropriate regulations
can ensure that Internet gaming operators know their customers,
watch for signs of problem gaming, and follow established
money-laundering criteria applicable to other industries.
Licensing
and regulating Internet gaming could be a substantial revenue
source for U.S. jurisdictions.
Today,
in the absence of U.S. licensing, the U.S. Internet gaming
market is estimated to be $2 billion, and that is expected
to grow. If the operators processing those wagers were U.S.
based, that growth will yield many millions of dollars to
state governments and the federal government as well. However,
because the U.S. chooses not to license, those wagers are
placed offshore. If Internet gaming is going to exist, and
it is clear that it will, then U.S. jurisdictions should
take appropriate steps to ensure that their revenue interests
are protected.
A
U.S.-based licensed and regulated Internet gaming industry
would "suck all of the oxygen" out of an off-shore
industry without U.S. licenses.
Rep. Bobby
Scott (D-VA) put this well in hearing when he said, "If
people in the U.S. have a choice between betting at Offhshore.com
or Caesar'sPalace.com, they are going to go to Caesar's every
time. The marketing potential of U.S. branding, combined with
the confidence that players would feel with a U.S. licensed
entity would allow U.S.-licensed operators a substantial advantage.
In sum,
licensing and regulation of Internet gaming is the best way
to ensure appropriate consumer protections, appropriate protections
against money-laundering, and an appropriate revenue stream
to U.S. jurisdictions. Efforts at prohibition are unlikely
to achieve any of these.
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