Online Gambling: A Lost Cause? (2 of 8)

After years of states passing various forms of legislation on the issue of gambling, the federal government eventually passed the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006[1]. It was enacted as Title VIII of the Security and Accountability For Every Port Act of 2006(SAFE Port Act). The UIGEA was added at the last minute and The Economist noted this was “hastily tacked onto the end of unrelated legislation.”[2] This act prohibits a gambling business from knowing accepting payments in connection the participation of another person in unlawful internet gambling.[3] Under the UIGEA, unlawful internet gambling is defined as “to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.”[4] However, it then goes on to exclude the definition to intrastate transactions. Not considering Congress’ limitations under the interstate commerce clause, this means gambling over the internet within a state is not illegal. In my previous blog I mentioned Washington, D.C. has made a move to legalize online gambling. Since the system would restrict users to people within the district and the gambling business would be located in the same place, this would fall outside the UIGEA.

What I find interesting about the enactment of this legislation is Congress’ finding that “Internet gambling is a growing cause of debt collection problems for insured depository institutions and the consumer credit industry”.[5] Again, I argue that gambling is merely a symbolic illegality which is premised in biblical morality. Let’s face it, society’s morals have become extremely liberalized. If there was a national poll on gambling beliefs I’m sure there would be stronger support for the legalization than people expect; whether or not it forms a majority, I’m not sure. Is credit debt a legitimate excuse for illegalizing online gambling? The U.S. has claimed statutes which prohibit international gambling, the Wire Act, etc are “measures…necessary to protect public morals or to maintain public order.” The laws were passed because of the government’s concerns “pertaining to money laundering, organized crime, fraud, underage gambling and pathological gambling.”[6]

In the absence of state legislation making online gambling illegal, the UIGEA does not make it illegal to gamble over the internet. It makes it illegal to ACCEPT the bets not to place them. Below you will a chart which rates the risk associated with different activities. What has happened recently in a war against gambling sites is the domain seizures and closing of websites like FullTilt Poker, PokerStars,  Absolute Poker and more. There are still sites like Bodog, which are fully operational. I’m not sure how they’ve successfully eluded authorities but they changed from www.bodog.COM to www.bodog.EU. Anyone in the U.S. can go online and play poker or place bets on a sport. In my later blogs I will discuss the attack on these sites and whether they are properly being prosecuted. For the time being, I will just say I think stakeholders in these companies are simply finding an easy way out and moving on with their life even though they have a chance at winning in the courts.

The Federal Department of Justice has taken the position that the Federal Wire Act covers all forms of gambling. However, in In Re MasterCard Intern. Inc.[7], the 5th Circuit ruled that the Federal Wire Act  prohibits electronic transmission of information for sports betting across telecommunications lines but affirmed a lower court ruling that the Wire Act “‘in plain language’ does not prohibit Internet gambling on a game of chance.”

Should online gambling be legalized? Is current legislation clear enough on what is legal and what is not? How do we fix this issue? Are these statutes “necessary to protect public morals or to maintain public order”?

Risk Activity Examples of fed action

10

Taking bets on a server located in the U.S. Taking sports bets on a U.S. server is the most clearly illegal activity, and as a result, probably no one has ever risked trying it.
Taking sports bets over U.S. phone lines. BetOnSports (2006, sports; prison)

9

Taking sports or poker bets on a foreign server. FullTilt Poker, PokerStars, Absolute Poker (2011, poker)
Party Gaming (2008, poker)
Sportingbet (2006, sports)
World Sports Exchange (2000, sports; prison)
(details on above cases)
Facilitating the transfer of funds to online casinos (payment processors), and then visiting the U.S. Processors serving FullTilt, PokerStars, Absolute Poker, & UltimateBet (2011)
eWalletXpress (2010)
Douglas Rennick of Canada (2010)
Ahmad Khawaja and Allied Wallet (2009)
Neteller (2007)
(details on above cases)
Accepting advertising for Internet gambling, in the major media Google, Yahoo, Microsoft, The Sporting News (2003)
Esquire (2005) (more on these cases)

7

Taking casino bets from U.S. customers on a website outside the U.S. No online casino has faced fed action yet that we know of (only sports & poker so far), but it’s probably just a matter of time before the feds crack down on online casinos, too — even though it’s not against the law.  (The feds have been playing a war of intimidation with websites.)

6

Helping people make bets on a website InternationalNetCasino (2004 (action by the State of New Jersey, not the feds; more)

3

Accepting advertising for Internet gambling, smaller media IntegrityCasinoGuide.com (2006)  (state of WA shut it down, not the feds; more)

2

Buying advertising in a U.S. publication as a casino, poker room, or affiliate No legal troubles that we know of for this activity.

1

Placing bets yourself on the Internet No trouble with the feds that we know of. A handful of states have anti-online-gambling raws, but even there prosecution is rare.  (See the intro to this article.)

 

 


[1] 31 U.S.C. 5361-5367

[2] See  Poker face off, The Economist, April 23, 2011, p. 68

[3] 31 U.S.C. 5363

[4] 31 U.S.C. 5362 (10)(A)

[5] 31 U.S.C. 5361(3)

[7] 313 F.3d 257 (5th Cir.2002 )

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~ by davidghassan on October 27, 2011.

4 Responses to “Online Gambling: A Lost Cause? (2 of 8)”

  1. One of the things I have found interesting in the state prohibition aspect is that Nevada prohibits online gambling. Clearly, they don’t want people staying at home instead of coming to their hotels and spending even more money. But that seems to fly in the face of any kind of public policy argument about the evil dangers of gambling.

    I don’t understand the credit card debt argument by the government. You are not allowed to buy lottery tickets with your credit card. Moreover, whenever I played poker online, you were not allowed to transfer money with your credit card. I guess you can take out a cash advance on your credit card, deposit that into your bank account and gamble online that way, but that seems like it would take time and effort and thus limit the problem. Through my research for the serial blogs, I have also found that many advocates for online gambling point to how credit cards transactions could aide in limiting money laundering as it adds some form of paper trial.

    I have no desire to turn this into a religious argument, but I have to disagree with your personal aside that anti-gambling sentiment is rooted in biblical morality. As someone who goes to church three times a week and reads his Bible everyday, I am not sure where you are getting that statement from. In fact, throughout the Old and New Testament God followers relied upon luck and the casting of lots to determine the will of God. As a Christian, I am not to be a slave to worldly desires or be ruled by money, but I see nothing in the Bible that directs whether I can spend money to play a game. I can tell you, no elder at my church ever complained when I tithed my poker winnings. Finally, I just did a quick google search and have no idea of their methodology, reliability, or how they phrased their questions, but this poker site claims that last year 2/3 of Americans are against online gambling, which surprised me as I would have thought this number would be much lower. http://www.parttimepoker.com/two-out-of-three-americans-oppose-online-gambling-poll-says

  2. I agree with the previous comment that the prohibition on gambling is not necessarily based on “Biblical morality,” but our society’s morality. True, the US has become more liberal in recent years, but we are still more conservative than a lot of other nations. It has always been interesting to me that the government has chosen not to allow gambling because it would make millions of dollars by taxing it. I am sure that if the government increased taxes on our society’s “vices,” our national debt problem would soon be resolved. It seems like the only industries that haven’t suffered during this recession are such industries. It seems that one explanation is that the voters and, in turn, Congress have decided that permitting gambling on a national basis would seriously deteriorate our country’s moral character. Surely, those who wish to gamble can go to their local Indian reservation, Sun Cruz casino, Hard Rock in Tampa, Atlantic City, or Vegas. However, it certainly takes some effort and planning, unless you live nearby. Permitting gambling in such limited forms is more palpable because it tends to curtail the perceived moral harms that might be present in the gambling industry.

    Frankly, I have never been interested in gambling. I have also never really understood others’ strong moral stances against it. Thus, I do not have a problem with the government permitting online gambling. The government could certainly regulate it under the commerce clause. Seriously, with this current recession and the lack of jobs in our country, the government should open up online gambling, which would create new jobs in the private sector and new revenue for the government in the form of taxes. If it doesn’t work out and the voters aren’t happy, the federal government could simply tax the online gambling industry into submission.

  3. I agree with the two previous blogs that I cannot recall any language in the Bible which prohibits gambling. However, if there is language in the text that supports that conclusion, I would love to see it. I am skeptical and I apologize, but the Bible can be used to justify almost any point of view, e.g. justification for slavery was once found in the Bible.
    Further, I can see both sides to the online gambling problem. Note that I am not a gambler (a few slots on vacation is the most I will do), but I can understand the draw for some people. Online gambling is a whole other beast. One can gamble from the comforts of there home without having to deal with other people taking their machine, smoking or getting thrown out of the casino for counting cards or any other casino prohibited activity. As with any online activity, it takes place in your own bubble. You can control how long, when and where you choose to participate. The gambler feels even more control online than in a casino run by someone else with someone else’s rules. However, this type of gambling can have serious consequences. The online gambler can lose track of time, spend more money than anticipated over a shorter period of time and the possibility of addiction is greater since it is available to you 24-7 no matter where you are in the world as long as there is an internet connection. Maybe as stated in the blog, debt could be one of the reasons for regulation, but is it necessary? I am not sure. Maybe regulation is necessary to protect gamblers from falling into tremendous debt or to preserve society’s values. Gambling is taboo in our society, if not, there would be slot machines in churches and in schools. Allowing online gambling to take place without regulation would appear that the elected officials are condoning the behavior. Further, most states limit the number of physical casinos. It is not surprising that some states would also attempt to limit online gambling as well. But the biggest problem with state regulation of online gambling is how does the state know that the gambling is happening within its boundaries or somewhere else? If the gambling company is in one location, the server in another and the gambler in yet another, who would have jurisdiction and how would they decide? The last blog entry cited a case which dealt with this complex issue. I find it hard to understand how a state would enforce a law on online gambling.

  4. Its rarely the language of the bible specifically that calls for prohibition of activities that people find objectionable. It is correct, however, to say that much of the prohibition-type legislation is influenced by religious morality (read Christian) of American legislators. PBS did a great series recently on the Prohibition Era. Another very flawed example of when law tried to legislate morality. The motivation for that legislation was completely based on religious morality. And it does appear that the UIGEA had similar motivations. You might want to check out a case going on in North Carolina now regarding limitations of contests using online video: http://www.businessweek.com/ap/financialnews/D9QK18I03.htm

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