All Bets Are Off (Online Gambling 2 of 8)

In my first blog, I discussed the passage of the Unlawful Internet Gambling Enforcement Act, UIGEA, in 2006. This was not the first time though that the United States government has tried to regulate electronic gambling. Whether through direct or indirect methods, the United States government through multiple branches has tried to regulate electronic gambling for close to 20 years.

Online gambling began to initially take off in mid-1990s. The first official gambling website opened its virtual doors in 1995. [FN 1] After the initial website, an explosion in the increase of websites occurred. [FN 2] Seeing potential problems, the United State House of Representatives passed the Internet Gambling Prohibition Act in 1999. However, this bill received no support in the United States Senate where it did not even get a floor vote after it failed to get the initial votes needed to get off a suspension calendar. [FN 3]

Many social conservatives like James Dobson and Focus on the Family who feared the dangers of online gambling on society supported the bill. To counter this lobbying effort, an online corporation named eLottery turned to Jack Abramoff of all people to help defeat the bill in the United States Senate. ELottery feared the Internet Gambling Prohibition Act because they were in the business of selling state lottery tickets online. Abramoff has been accused of using confusion, fraud, and targeting republicans in vulnerable political districts to ensure that the opposition of this bill succeeded. Although the bill would never see a vote again, some of its principles, ideas and language were used in the UIGEA. [FN 4]

In 2002, the United States Fifth Circuit Court of Appeals took a swing at regulating online gambling when they interpreted the Interstate Wire act of 1961, also known as the Federal Wire Act, to rule that several types of online gambling are explicitly illegal. Specifically, the Court of Appeals ruled that using the Internet to make sports bets is illegal. Although the Internet is not mentioned in the language of the Federal Wire Act, it did deal with telecommunication lines and at that time was targeted to stop organized crime. [FN 5] The text of the Federal Wire Act goes as follows:

(a) 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. [FN 6]

Gambling enthusiast, point to the plain meaning of the Federal Wire Act and cite that it should only be applied to businesses that engage in gambling. This was the “intent” of the Act as it allowed single bettors to be excluded.  Moreover, looking at the language of the Act, courts have split on whether “sporting” is an adjective to describe both event and contest or just the word event. If sporting describes both event and contest, then the Federal Wire Act can only apply to bets and wagers on sporting activities. [FN 7]

A second point of contention centers on the word “transmission”. If “transmission” means both sending and receiving information than someone taking a bet is not in violation, as they never engage in sending information. This was a finding in the 1980 case United States v. Stonehouse.  [FN 8] Other courts have disagreed with this reasoning saying a violation of the federal Wire would then rarely occur. [FN 9]

Like the later UIGEA, dispute has arisen as to what “bets or wager” in the Federal Wire Act should apply to in addition to sports betting. Differentiating between a game of chance versus a game of skill is something the Fifth Circuit specifically commented on and as discussed in my previous blog, they have ruled that games of chance, specifically poker and blackjack, are legal. [FN 10]  The Supreme Court has yet to comment on this ruling or online gambling and its relation to the Federal Wire Act. As technology improves this issue may become moot, as we begin to access the Internet without wires as can be done with satellite Internet.

Well those are the highlights of American regulation on online gambling before the passage of the UIGEA. There were other gambling legislation such as the Travel Act, the Interstate Transportation of Wagering Paraphernalia Act and the Illegal Gambling Business Act, but these were/are rarely used in regards to online gambling. In my next blog, we will look at what has happened in America since its passage.

[FN 1] See Michael Schmitt, Prohibition Reincarnated? The Uncertain Future of online Gambling Following the Unlawful Internet Gambling Enforcement Act of 2006, 17 S. Cal Interdisc.. L.J. 381 (2007-2008).

[FN 2] See Schmitt at 383.

[FN 3] See Susan Schmidt and James V. Grimaldi “How a Lobbyist Stacked the Deck”, Washington Post, October 16, 2005.

{FN 4] See id.

[FN 5] See Schmitt at 384.

[FN 6] See http://uscode.house.gov/download/pls/18C50.txt

[FN 7] See Schmitt at 385.

[FN 8] See United States v. Stonehouse, 452 F. 2d 455, 457 (7th Cir. 1971).

[FN 9] See United States v. Reeder, 614 F. 2d 1179, 1184 (8th Cir. 1980).

[FN 10] See In re MasterCard Int’l Inc., Internet Gambling Litig., 132 F. Supp. 2d 468, 480  (E.D. La 2001).

~ by jramsey5213 on October 13, 2011.