The United States Court of Appeals for the Fifth Circuit
ruled in November 2002 that the Federal Wire Act prohibits electronic transmission of information for sports betting across
state lines but affirmed a lower court ruling that the Wire Act "'in plain language' does not
prohibit Internet gambling on a game of chance."
Some
states have specific laws against online gambling of any kind. Also, owning an online gaming operation without proper licensing
would be illegal, and no states are currently granting online gaming licenses.
In March 2003, Deputy Assistant Attorney General John G. Malcolm testified before the Senate Banking Committee regarding
the special problems presented by online gambling. A major concern of the United States Department of Justice is online money laundering. The anonymous nature of the Internet and the use of encryption make it especially difficult to trace online money
laundering transactions.
In April 2004 Google
and Yahoo, the two largest internet search engines, announced that they were removing online gambling advertising from their
sites. The move followed a United States Department of Justice announcement that, in what some say is a contradiction of the Appeals
Court ruling, the Wire Act relating to telephone betting applies to all forms of Internet gambling, and that any advertising
of such gambling "may" be deemed as aiding and abetting. Critics of the Justice Department's move say that it
has no legal basis for pressuring companies to remove advertisements and that the advertisements are protected by the First Amendment.
As of April 2005, Yahoo
has provided advertising for "play money" online gaming.
In February 2005 the North Dakota House of Representatives passed a bill
to legalize and regulate online poker and online poker cardroom operators in the State. Testifying before the State Senate, Nigel Payne, CEO of Paradise Poker, pledged to relocate to the state
if the bill became law. However, the measure was defeated by the State Senate in March 2005. Rep. Jim Kasper, who sponsored
the 2005 legislation, plans to introduce similar bills in the 2007 North Dakota legislative session.
In July
2006, David Carruthers, the CEO of BetonSports, a company publicly traded on the London Stock Exchange was detained in Texas while changing planes on his way from London to Costa Rica. He and ten other individuals had
been previously charged in a sealed indictment with violations of US Federal laws relating to illegal gambling. While as noted
above, a United States Appeals court has stated that the Wire Act does not apply to non-sports betting, the Supreme Court of the United States previously refused
to hear an appeal of the conviction of Jay Cohen, where lower courts held that the Wire Act does make it illegal
to own a sports betting operation that offers such betting to United States citizens.
The BetOnSports indictment alleged violations of at least 9 different Federal statutes,
including 18 USC Sec. 1953 (Operation of an Illegal Gambling Business). Carruthers is currently under house arrest on a one
million dollar bail bond.
In September 2006,
SportingbetPLC reported that its chairman, Peter Dicks, was detained in New York City on a Louisiana warrant while traveling
in the United States on business unrelated to online gaming. Louisiana is one of the few states that has a specific law prohibiting
gambling online. At the end of the month, New York dismissed the Louisiana warrant.
Also in September 2006, just before adjourning for the midterm elections, both the House of Representatives and Senate passed legislation
(as an amendment to the unrelated Safe Port Act) that would make transactions from banks or similar institutions to online
gambling sites illegal. This differs from a previous bill passed only by the House that expanded the scope of the Wire Act.
The passed bill only addresses banking issues. The act was signed into law on October 13, 2006 by President George W. Bush, and there is a provision for a 270-day
period to develop enforcement measures. At the bill-signing ceremony, Bush never mentioned the Internet gambling measure,
which was supported by the National Football League and opposed by banking groups.
In response to this new legislation, a number of online gambling operators including PartyGaming, The bwin Group, Cassava Enterprises, and Sportingbet announced that real-money gambling operations
would be suspended for U.S. customers. PartyGaming's stock dropped by 60% following its announcement. Other operators
such as Absolute Poker, Bodog, and Ultimate Bet announced their intention to continue serving customers
in the U.S.
On April 26, 2007, Rep. Barney Frank (D-MA) introduced HR 2046, the Internet
Gambling Regulation and Enforcement Act (IGREA). The IGREA would modify the UIGEA by providing a provision for licensing of
Internet gambling facilities by the Director of the Financial Crimes Enforcement Network. On June 8, 2007, the House Financial Services Committee, chaired by Rep. Barney Frank, held a hearing entitled, "Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments
System?". Expert witnesses at the hearing testified that Internet gambling can be effectively regulated for age verification,
money laundering issues, facilitation of state and federal tax collection, and for issues relating to compulsive gambling.
On June
7, 2007, Rep. Robert Wexler (D-FL) introduced HR 2610, the Skill
Game Protection Act. This act would legalize Internet poker, bridge, chess, and other games of skill. Also on June 7,
Rep. Jim McDermott [D-WA] introduced H.R. 2607, the Internet Gambling Tax Act. The IGTA would legislate Internet gambling tax collection
requirements.
Australia Legality
On the 28th of June 2001 the Australian Government passed the
Interactive Gambling Act 2001 (IGA). The government said that the IGA was important to protect Australians from the harmful
effects of gambling.
The IGA targets the providers
of interactive gambling services, not their potential or actual customers. The IGA makes it an offence to provide an interactive
gambling service to a customer physically present in Australia, but it is not an offence for Australian residents to play
poker or casino games online. In stark contrast to the USA, sports betting online is also completely legal in Australia, with
many state government licensed sportsbooks in operation.
The
offence applies to all interactive gambling service providers, whether based in Australia or offshore, whether Australian
or foreign owned. The offence carries a maximum penalty of $220,000 per day for individuals and $1.1 million per day for bodies
corporate.
Other Countries Legality
Various forms of online gambling are legal and regulated in many
countries, including most members of the European Union and several nations in and around the Caribbean Sea.
In India it is neither legal nor illegal the Law is silent on the issue, but in the state of Maharashtra it is a
banned offence under the "Bombay Wager Act".
The
government of the island nation of Antigua and Barbuda, which licenses Internet gambling entities, made a complaint to the World Trade Organization about the U.S. government's actions to impede online gaming. The Caribbean country won the preliminary ruling
but WTO's appeals body somewhat narrowed that favorable ruling in April 2005. The appeals decision held that various state
laws argued by Antigua and Barbuda to be contrary to WTO agreements were not sufficiently discussed during the course of the
proceedings to be properly assessed by the panel. However, the appeals panel also ruled that the Wire Act and two other federal
statutes prohibiting the provision of gambling services from Antigua to the United States violated the WTO's General Agreement on Trade in Services, or "GATS". Although the United States convinced the appeals panel that these laws were "necessary"
to protect public health and morals, the asserted United States defense on these grounds was ultimately rejected because its
laws relating to remote gambling on horse-racing were not applied equally to foreign and domestic online betting companies,
and thus the United States could not establish that its laws were non-discriminatory.
On March 30, 2007 the WTO confirmed the U.S. "had done nothing to abide by an earlier verdict that labeled some U.S. Internet
gambling restrictions as illegal."
On June
19, 2007, Antigua filed a claim with the WTO for USD $3.4 billion in trade sanctions against the United States, along with a request
for authorization to ignore U.S. patent and copyright laws. This followed by a day similar demands for compensation made by
the European Union.
