Gambling Law: An Overview

1. Us Sports Gambling

Gambling, though widespread in the United States, is subject to legislation at both the state and federal level that bans it from certain areas, limits the means and types of gambling, and otherwise regulates the activity.

Dec 27, 2016  Congress is considering changes to its prohibition against sports betting and a court case challenges an appeals court's ruling that New Jersey is not allowed to repeal its law against. May 15, 2018  A federal law against sports betting has been removed—what does it mean for esports? Who instigated the lawsuit that subsequently overturned the federal ban on gambling, claimed that New.

Congress has used its power under the Commerce Clause to regulate interstate gambling, international gambling, and relations between the United States and Native American territories. For example, it has passed laws prohibiting the unauthorized transportation of lottery tickets between states, outlawing sports betting with certain exceptions, and regulating the extent to which gambling may exist on Native American land.

Each state determines what kind of gambling it allows within its borders, where the gambling can be located, and who may gamble. Each state has enacted different laws pertaining to these topics. The states also have differing legal gambling ages, with some states requiring the same minimum age for all types of gambling, while for others, it depends on the activity. For example, in New Jersey, an 18-year-old can buy a lottery ticket or bet on a horse race, but cannot enter a casino until age 21. Presumably, the age 21 restriction is due to the sale of alcohol in that location.

A standard strategy for avoiding laws that prohibit, constrain, or aggressively tax gambling is to locate the activity just outside the jurisdiction that enforces them, in a more 'gambling friendly' legal environment. Gambling establishments often exist near state borders and on ships that cruise outside territorial waters. Gambling activity has also exploded in recent years in Native American territory. Internet-based gambling takes this strategy and extends it to a new level of penetration, for it threatens to bring gambling directly into homes and businesses in localities where a physical gambling establishment could not conduct the same activity.

Internet Gambling

Federal Regulation

In the 1990s, when the World Wide Web was growing rapidly in popularity, online gambling appeared to represent an end-run around government control and prohibition. A site operator needed only to establish the business in a friendly offshore jurisdiction such as the Bahamas and begin taking bets. Anyone with access to a web browser could find the site and place wagers by credit card. Confronted with this blatant challenge to American policies, the Department of Justice and Congress explored the applicability of current law and the desirability of new regulation for online gambling.

In exploring whether an offshore Internet gambling business taking bets from Americans violated federal law, attention was focused on the Wire Act, 18 U.S.C. § 1084 (2000). The operator of a wagering business is at risk of being fined and imprisoned under the Wire Act if the operator knowingly uses a 'wire communication facility' to transmit information related to wagering on 'any sporting event or contest.' 18 U.S.C. § 1084(a). An exception exists if that act is legal in both the source and destination locations of the transmission. § 1084(b). The Wire Act’s definition of “wire communication facility” appears to embrace the nation's entire telecommunications infrastructure, and therefore probably applies to online gambling. See § 1081.

The Department of Justice maintains that, under the Wire Act, all Internet gambling by bettors in the United States is illegal. U.S. House of Representatives Committee on the Judiciary Hearing on Establishing Consistent Enforcement Policies in the Context of Online Wagers, 110th Cong., Nov. 14, 2007 (testimony of Catherine Hanaway, U.S. Attorney (E.D. Mo.), Dept. of Justice). The Fifth Circuit disagreed, ruling that the Wire Act applies only to sports betting, not other types of gambling. In re MasterCard Int’l Inc., 313 F.3d 257 (5th Cir. 2002).

In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act, which made it illegal for wagering businesses to knowingly accept payment in connection with unlawful Internet gambling (though it does not itself make Internet gambling illegal). 109 Pub. L. 109-347, Title VIII (Oct. 13, 2006) (codified at 31 U.S.C. §§ 5301, 5361–67). It also authorizes the Federal Reserve System to create regulations that prohibit financial transaction providers (banks, credit card companies, etc.) from accepting those payments. See 31 U.S.C. § 5363(4). This Act, along with threats of prosecution under the Wire Act from the Department of Justice, has caused several Internet gambling businesses to withdraw from the U.S. market.

In response, House Representatives introduced multiple bills in 2007 to soften federal Internet gambling law. If passed, the Internet Gambling Regulation and Enforcement Act and the Internet Gambling Regulation and Tax Enforcement Act would license, regulate, and tax Internet gambling businesses rather than prohibit them from taking bets from the United States. Alternatively, the Skill Game Protection Act would clarify the Wire Act to exempt certain games such as poker and chess.

State Regulation

In addition to federal measures, some states have enacted legislation to prohibit some types of Internet gambling. In 2006, Washington State amended its Code to make knowingly transmitting or receiving gambling information over the Internet a felony. See Wash. Rev. Code § 9.46.240 (2006). Other states with similar prohibitions have made it a misdemeanor instead. See e.g., 720 ILCS 5/28-1 (2007).

States have not been particularly active in enforcing these laws, possibly due to a conflict with the dormant Commerce Clause doctrine. That doctrine theorizes that state law applying to commerce outside the state’s borders is unconstitutional because that power lies with federal, not state, government. In particular, federal preemption has obstructed states’ attempts to regulate gambling activity on Indian reservations within state borders. See Missouri ex rel. Nixon v. Coeur D’Alene Tribe, 164 F.3d 1102 (8th Cir. 1999). The federal Indian Gaming Regulatory Act, 25 U.S.C. § 29 (2000), governs gambling activity on Indian reservations, but the extent to which it and other federal gambling laws preempt state action in the Internet arena is uncertain.

menu of sources

Federal Material

U.S. Constitution and Federal Statutes

• U.S. Code: Title 15, Chapter 24: Transportation of Gambling Devices
• U.S. Code: Title 15, Chapter 57, Interstate Horseracing
• U.S. Code: Title 18, Chapter 50: Gambling
• U.S. Code: Title 18, Chapter 61: Lotteries
• 18 U.S.C. §1953 (Interstate Transportation of Wagering Paraphernalia Act)
• 18 U.S.C. §1955 (Illegal Gambling Business Act of 1970)
• 25 U.S.C. §§2701-2721 (Indian Gaming Regulatory Act)
• U.S. Code: Title 28, Chapter 178: Professional and Amateur Sports Protection
• Code of Federal Regulations: Title 25, Chapter 3: National Indian Gaming Commission, Department of the Interior
• Proposed Internet Gambling Prohibition Act of 1997 (not passed)

Federal Judicial Decisions

• Greater New Orleans Broadcasting Association, Inc. v. United States, 527 U.S. 173 (1999)
• Ratzlaf v. United States, 510 U.S. 135 (1994)
• Chickasaw Nation v. United States, 534 U.S. 84 (1999)

State Material

Other References

• '14 Charged in Internet Betting' (Washington Post, March 5, 1998)

• wex

The Interstate Wire Act of 1961, often called the Federal Wire Act, is a United States federal law prohibiting the operation of certain types of betting businesses in the United States. It begins with the text:

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.^[1]

In September 2011, the US Department of Justice released to the public a formal legal opinion on the scope of the Act concluding, 'interstate transmissions of wire communications that do not relate to a 'sporting event or contest' fall outside the reach of the Wire Act.'^[2]

A new Department of Justice opinion dated November 2, 2018 reversed the 2011 opinion, declaring that the Wire Act’s prohibitions are “not uniformly limited to gambling on sporting events or contests.”^[3]

The U.S. Fifth Circuit Court of Appeals has ruled that the Wire Act prohibition on the transmission of wagers applies only to sports betting and not other types of online gambling.^[4] The Supreme Court has not ruled on the meaning of the Federal Wire Act as it pertains to online gambling. In an opinion issued November 2018 and published January 2019, the Department of Justice stated that the Federal Wire Act applies to all gambling and not just sports betting.^[5]

On January 15, 2019, Deputy Attorney General Rod Rosenstein announced that the Department of Justice would delay enforcement of the 2018 OLC opinion for 90 days to “give businesses that relied on the 2011 OLC opinion time to bring their operations into compliance with federal law.'^[6]

On February 15, 2019, the New Hampshire Lottery Commission filed a complaint in the US District Court for New Hampshire, naming the Department of Justice and Attorney General William Barr as defendants.^[7] The suit asks the Court to vacate and set aside the OLC’s new opinion, which the Commission claims will reduce its annual profits by millions of dollars.^[8] New Hampshire Gov. Chris Sununu said the state wasn’t interested in negotiating an out-of-court settlement, “we’re looking to win.”^[9]

On June 3, 2019, U.S. District Court Judge Paul Barbadoro issued a summary judgment that the Wire Act “is limited to sports gambling” and set aside the 2018 OLC opinion.^[10] A Department of Justice spokesperson said the government was reviewing the decision.^[11] On August 16, 2019, the Department of Justice filed notice of its intention to appeal Barbadoro’s ruling to the U.S. First Circuit Court of Appeals.^[12]

Background[edit]

—Robert F. Kennedy discussing how the Wire Act would affect organized crime^[13]

After being selected to become US Attorney General, Robert F. Kennedy suggested to the 87th United States Congress to pass legislation which would make interstate gambling illegal. Kennedy's goal of the legislation was to help the United States Justice Department stop organized crime from trafficking.^[14] One of the eight bills given to Congress was Senate Bill 1656—The Wire Act.

Signing[edit]

The Interstate Anti-Crime Acts were signed by the 35th President of the United StatesJohn F. Kennedy on September 13, 1961.^{[15][16][17][18]}

See Also[edit]

Notes[edit]

1. ^18 U.S.C.§ 1084
2. ^'Whether Proposals by Illinois and New York State to Use the Internet and Out-of-State Transaction Processors to Sell Lottery Tickets to In-State Adults Violate the Wire Act'(PDF). United States Department of Justice. September 20, 2011. p. 1. Retrieved June 29, 2012.
3. ^Sykes, Michael. 'New DOJ opinion expands Wire Act outside of sports betting'. Axios. Retrieved 15 January 2019.
4. ^'In RE: Mastercard International Inc. Internet Gambling Litigation'. FindLaw. November 20, 2002. Retrieved June 29, 2012.
5. ^Bach, Natasha. 'Justice Department Says All Online Gambling Is Illegal'. Fortune. Retrieved 2019-01-15.
6. ^Rosenstein, Rod. 'Applicability of the Wire Act'. Justice.gov. Retrieved 21 January 2019.
7. ^Huffman, Zack (15 February 2019). 'Justice Department Sued for Targeting Online Lotto Sales'. Courthouse News Service. Retrieved 26 February 2019.
8. ^Landrigan, Kevin. 'NH will sue to keep $5M/year in lottery profits at stake in Trump online gambling crackdown'. UnionLeader.com. Retrieved 26 February 2019.
9. ^Batt, Tony. 'New Hampshire Governor Not Interested In Settling Lottery Lawsuit | GamblingCompliance'. gamblingcompliance.com. Retrieved 26 February 2019.
10. ^Cousineau, Michael. 'NH Lottery Commission wins its case over online lottery sales'. UnionLeader.com. Retrieved 7 June 2019.
11. ^Salant, Jonathan D. (3 June 2019). 'Court decision supports N.J. online gambling over Trump administration opposition'. nj.com. Retrieved 7 June 2019.
12. ^Brooks, David. 'Feds continue fight against online betting, threatening lottery sales'. Concord Monitor. Retrieved 20 August 2019.
13. ^Schwartz (2010), p. 535
14. ^Schwartz (2010), p. 553
15. ^Schwartz (2010), p. 537
16. ^'Bill signings – S. 1653, S. 1656, S. 1657, Interstate Anti-Crime Acts, 11:00AM'. John F. Kennedy Presidential Library and Museum.
17. ^'Interstate and Foreign Travel or Transportation in Aid of Racketeering Enterprises Act - P.L. 87-228'(PDF). 75 Stat. 498-2 ~ Senate Bill 1653. U.S. Government Printing Office.
18. ^'Interstate Transportation of Wagering Paraphernalia Act - P.L. 87-218'(PDF). 75 Stat. 492-2 ~ Senate Bill 1657. U.S. Government Printing Office.

References[edit]

• Schwartz, David (September 2010). 'Not Undertaking the Almost-Impossible Task: The 1961 Wire Act's Development, Initial Applications, and Ultimate Purpose'. Gaming Law Review and Economics. 14 (7): 533–540. doi:10.1089/glre.2010.14708.

External links[edit]

• Wire Act at Gambling-law-us.com

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