Internet Gambling
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By Tim Ito and Sharisa Staples
Washingtonpost.com Staff
Updated: June 1999

At least 140 Web sites now offer some form of wagering to online users – an expansion in recent years that has alarmed opponents and put increased focus on the laws that govern Internet gambling.

Internet gambling is primarily regulated by the 1961 Interstate Wireline Act (18 U.S.C. section 1084). The Wire Act makes it illegal for providers to offer or take bets from gamblers over phone lines or through other wired devices unless otherwise authorized by a particular state.

In March 1998, the U.S. Department of Justice made an unprecedented move against 14 owners and managers of offshore sports gambling sites, charging them in violation of the Wire Act. Two of those charged pleaded guilty in May to conspiracy to transmit bets and wagers on sporting events.

Online gambling took another hit in June 1999, when the National Gambling Impact Study Commission released its recommendations on Internet wagering to Congress. The committee, staffed by anti-gambling proponents and members of the traditional gambling industry, recommended that gambling via the Internet be prohibited in the U.S.

Questions About the Law
Despite the Justice Department action, many legal scholars question how well existing laws can be applied to new technologies. The Wire Act, for example, does not explicitly mention the Internet. It is also unclear how well the law would apply to satellite-based transmissions, which are not considered wired devices.

"Changes in [gambling] law follow changes in society," says I. Nelson Rose, professor of law at Whittier Law School. "But our society has been changing so rapidly . . . sometimes the law cannot keep up."

"As history has demonstrated, prohibitions do not work."
— Sue Schneider, chairman of the Interactive Gaming Council, in testimony to Congress in Feb.

Sen. Jon Kyl (R-Ariz.), introduced a bill known as the Internet Gambling Prohibition Act of 1997. Kyl's bill aims to amend the Wire Act and more clearly ban online gambling. Penalties would be imposed on bettors and operators. In July 1998, the Senate voted overwhelmingly, 90-10, to back the act – a major blow to proponents of the industry.

The bill got held up in the House for a variety of reasons. There was more pressure from special interest groups to have their exemptions added to the bill. There were calls to let the National Gambling Impact Study Commission make recommendations before voting on the bill. Also, the House Judiciary Committee was in charge of reviewing the bill, but was tied up with the Starr report. The bill is expected to be back on the table next year.

Critics of the bill find its amending language too broad, potentially affecting Internet commerce on the whole. In a letter to Senate Judiciary Chairman Orrin Hatch (R-Utah), the ACLU stated, "The Kyl bill sets a precedent that the mere transmission or receipt of a message on the Internet may be sufficient to confer jurisdiction on state or local authorities at either end of the transmission. This legislation would subject a national – even a global – network to a patchwork of state and local laws, which would increasingly pose a substantial barrier to future Internet commerce."

Betting Without Borders
Gambling is also governed by state laws, making for more legal confusion over Internet regulation, as betting often crosses borders and jurisdictions. "Technology has made long-distance communication so easy," notes Rose, "that state boundaries seem like nothing more than lines on a map."

Moreover, most companies that operate gambling sites are located offshore. The betting services contend that their practices are legal in the countries where they operate and that U.S. laws cannot determine their ability to establish these entities.

The states contend meanwhile, that if they can prove that a site was targeting their residents, their courts may have jurisdiction over the matter. In the March case against the offshore sports gambling sites, undercover FBI agents said the sites could be accessed from Manhattan. The indictment stated the agents opened accounts and placed wagers on the outcomes of games from computers and telephones in New York.

"When a tribe offers or promotes gambling over the Internet to Missouri citizens located in our state, then Missouri laws apply."
Missouri Attorney General
Jay Nixon

Indian Casinos Online
The legality of Internet gambling gets even murkier when it involves Indian online services crossing state lines. Tribes contend that they are sovereign entities, thus generally independent of laws made by a particular state.

Missouri Attorney General Jay Nixon sued the Couer d'Alene tribe of Idaho in 1997, claiming the tribe's online lottery violated Missouri laws that prohibit offering betting services to state citizens. The tribe countered that its operations were legal under the Indian Gaming Regulatory Act (IGRA) of 1988 – a law that made at least Class II gaming (sports betting, bingo and lotteries) exempt from all federal gambling statutes. The matter is still tied up in courts.


© Copyright 1998 The Washington Post Company

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