As the legalization of Internet gambling spreads, how far behind is the United States?
When the U.K. joined the competition for legalized Internet gambling, the tally reached 54 jurisdictions worldwide with legal online gambling. As countries continue to legalize these activities the issue has received more attention here in the United States.
No recent legislation regarding Internet gambling has been passed in the United States, but in theory, under decades old 18 U.S.C. § 1084 transmitting a bet or wager (or information assisting in the placement of a bet or wager) on any sporting event or contest in interstate or foreign commerce using a "wire communications facility" is illegal. 18 U.S.C. § 1081 defines "wire communications facility" as any instrumentality used or useful in transmitting data "between the points of origin and reception of such transmission." These laws were originally enacted to prevent bookmakers from using phone lines to place sports bets. In 1998, however, 21 American citizens where charged in the Southern District of New York under § 1084 with "owning and/or operating sports betting businesses that illegally accept wagers on sporting events over the Internet and telephones." Twenty of the defendants were dropped from the case, plead guilty, or remain fugitives. Jay Cohen, however, stood trial and was the first person to be found guilty for Internet gambling under federal law. Cohen's guilty verdict was recently upheld in appellate court. In general, enforcement is problematic due to the anonymity of the Internet, and because operators are established overseas. The logical next step would be for enforcement agencies to go after individuals and Internet Service Providers (ISPs).
Additional legislation on Internet gambling has been attempted by Congress. In October, 1999 the Internet Gambling Prohibition Act (H.R.3125) was introduced, but in July, 2000 this resolution failed to pass in the House. A related bill, S.692 is also aimed at the prohibition of Internet gambling, and in 2000 was referred to the House Subcommittee on Crime where it stands. In addition, the Unlawful Internet Gambling Funding Prohibition Act (H.R.21) was proposed in January, 2003 and would prohibit use of "bank instruments" (including credit cards and wire transfers) for unlawful Internet gambling and other purposes. This bill has been referred to the House Committee on Financial Services where it now stands. It is important to note that none of the pending legislation should have any impact on the gaming rights or privileges of Indian tribes (under the Indian Gaming Regulatory Act).
While current laws and proposed bills are all aimed at Internet gambling prohibition, some argue that legalization would be preferred as it would allow for strict regulation. Regulation, it has been argued, would be beneficial as it could better prevent access to Internet gambling from children and gambling addicts. In addition, regulations could prevent fraud (for example, some Internet gambling companies based in Antigua have accepted customers' money and simply run off with it). Finally, regulation proponents recommend legalization as a means to get back lost revenue from taxes. Not only are legalized institutions losing taxable revenues to their Internet gambling competitors, but the Internet gambling could also be taxed.
While the United States seems to remain focused on the prohibition of Internet gambling, as more countries continue to legalize these activities it will be interesting to see how the United States proceeds.
