Regulation of gambling on the Internet.

1. Introduction

Coinciding with the explosive growth of the Internet, there has

been exponential growth in Internet gambling, especially sports

gambling. as with many new industries, the United States Congress is

currently trying to catch up as the Internet has allowed for illegal

gambling activities to proliferate in a medium that is much more

difficult to regulate. This contribution will focus on the regulation of

Internet gambling within the United States.

The problem of Internet gambling can perhaps best be understood by

the statement of Thomas E. McClusky Vice President, Government Affairs

Family Research Council, testifying before the House of Representatives

concerning online gambling:

When you add the anonymity of the Internet, the troubles caused by

gambling increase exponentially. The theft of credit card numbers

from customers is a very real concern and it is much easier for

gambling web sites to manipulate games than it is in the physical

world of highly regulated casinos. Additionally, gambling on the

Internet provides remote access, encrypted data and, most

importantly, anonymity. Because of this, a money launderer need only

deposit funds into an offshore account, use that money to gamble,

lose a small amount of that money, and then cash out the remaining

funds.

It is the uniqueness of the Internet when it comes to gambling that

inspired Dr. Howard Shaffer, the director of Harvard Medical School's

Division on Addiction Studies, to call Internet gambling the "crack

cocaine of the Internet" due to the ease with which online gamblers

can play from home. Online players can gamble 24 hours a day from

home with no real sense of the losses they are incurring.

Additionally, while many Internet gambling sites require gamblers to

certify that they are of legal age, most make little or no attempt to

verify the accuracy of the information. The intense use of the

Internet by those under the age of 21 has led to concerns that they

may be particularly susceptible to Internet gambling.

Problem gamblers between the ages of 18 and 25 lose an average of

$30,000 each year and rack up $20,000 to $25,000 in credit card debt,

according to the California Council on Problem Gambling. In a health

advisory issued by the American Psychiatric Association in 2001, ten

percent to 15 percent of young people reported having experienced one

or more significant problems related to gambling (McClusky, 2007).

Numerous studies have attempted to gauge the extent of gambling on

the Internet, both by the increase in gambling websites available, and

via industry revenues. Some estimates show that internet gambling is now

a $12-13 billion a year industry, with about half of that coming from

gamblers in the United States (H.R. 2046, 2007). In addition, in 2007 it

was estimated that nearly 2,300 different websites provide gamblers with

ample opportunities to place bets online.

Although these numbers are hard to verify as they are ever changing

and virtually immeasurable within the online environment, the United

States Congress has determined that internet gambling is a problem that

needs to be dealt with. Considering the fact that the United States has

regulated gambling in all of its forms since at least 1961 (as discussed

in the previous contribution), this is not surprising. This contribution

will focus on the regulation of gambling on the Internet within the

United States at both the federal and state level.

3. Federal Regulation of Internet Gambling

Although gambling is illegal in the United States, except for

specific exceptions in certain states, businesses have tried to avoid

this issue by setting up internet gambling operations overseas. Many of

these businesses have been extremely successful as gambling on the

internet has become an extremely lucrative business. However, in an

attempt to combat Internet gambling in the United States, the government

has used traditional gambling statutes to try to shut down these

operations. This section will introduce the various federal laws that

currently regulate gambling and various bills that have been recently

introduced in the legislature. First, the Wire Communications Act of

1961 ("The Wire Act") (18 U.S.C. [section]1084, 2008) and the

Transportation in Aid of Racketeering Enterprises Act of 1961 ("The

Travel Act") (18 U.S.C. [section]1952, 2008) will be discussed as

both have been used to regulate Internet gambling. Next, the Unlawful

Internet Gambling Enforcement Act of 2006 (31 U.S.C. [section]5361, et.

seq. 2008) will be discussed. It is currently the only Internet-specific

gambling statute in the United States. Finally, recent legislation that

could affect Internet gambling will be discussed.

3.1. Regulations That Are Not Specific to the Internet

In 1961, the government passed a variety of antiracketeering

statutes. Because racketeering activities often included gambling, many

of these statutes focused on regulating gambling as well. Although

internet gambling was not an issue in 1961, the Wire Act and Travel Act

have been used to regulate Internet gambling because the Wire Act deals

with wire communications facilities, which includes the Internet, and

the Travel Act deals with facilities in general.

3.1.1. The Wire Act

One of the most useful statutes used in trying to combat illegal

Internet gambling operations is the Wire Act. The Wire Act prevents a

person engaging in interstate or foreign commerce from using a wire

communication facility to assist in placing a bet on a sporting event.

The first part of the Act criminalizes certain types of gambling

behavior as it provides that

a 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

(18. U.S.C. [section]1084(a), 2008).

Both the telephone and the Internet are considered wire

communications facilities; and therefore, the government has used the

Wire Act to prosecute individuals running Internet gambling operations

overseas.
3.1.2. The Travel Act

Another important federal statute used to combat gambling is the

Travel Act. Similar to the Wire Act, the Travel Act may also be used to

prosecute people in the business of Internet gambling. This Act prevents

anyone from using any facility in interstate or foreign commerce to

distribute the proceeds of any unlawful activity, including gambling.

The Travel Act specifically provides that

a Whoever travels in interstate or foreign commerce or uses the

mail or any facility in interstate or foreign commerce, with intent to-

1 distribute the proceeds of any unlawful activity; or

2 commit any crime of violence to further any unlawful activity; or

3 otherwise promote, manage, establish, carry on, or facilitate the

promotion, management, establishment, or carrying on, of any unlawful

activity,

and thereafter performs or attempts to perform-

A an act described in paragraph (1) or (3) shall be fined under

this title, imprisoned not more than 5 years, or both; or

B an act described in paragraph (2) shall be fined under this

title, imprisoned for not more than 20 years, or both, and if death

results shall be imprisoned for any term of years or for life (18 U.S.C.

[section]1952).

For purposes of the Travel Act, an "unlawful activity"

includes illegal gambling, which can include sports betting. The courts

have determined that the use of the mail, telephone or telegraph,

newspapers, credit cards and tickertapes is sufficient to establish that

a defendant "used a facility of interstate commerce" to

further an unlawful activity in violation of the Travel Act. Obviously,

as Internet gambling transactions involve the use of a credit card,

these transactions can also come under the regulation of the Act.

3.1.3. Case Law Involving the Wire and Travel Acts

Because most cases contesting illegal gambling activities are

brought under both the Wire and Travel Acts, the following cases will be

used to illustrate how these laws have been applied to Internet

gambling. United States v. Cohen (2001) illustrates how the government

has used the Wire Act to prosecute those involved in Internet gambling

operations. Jay Cohen ran one of the most lucrative online sports

book-making sites in the late 1990s before he was convicted of violating

the Wire Act. In 1996, Cohen, along with several business partners,

started a business called World Sports Entertainment (WSE). WSE accepted

bets on American sporting events through both the Internet and over the

phone. WSE successfully targeted American customers through several

media such as radio, television, and newspaper. Clearly these attempts

at targeting were successful as WSE was able to attract 1,600 American

customers within the first year. Prior to allowing customers to place

bets, WSE required them to open an account with WSE and wire at least
$300 to a bank in Antigua to open that account. After opening the

account, customers contacted WSE via the Internet or phone to place

bets.

The FBI began investigating Cohen and WSE during late 1997 and

early 1998. FBI agents contacted WSE by both phone and Internet to place

bets after they had opened accounts. In March 1998, Cohen was arrested

and charged with conspiracy to violate and actually violating the Wire

Act. After a jury trial found him guilty of violating the Wire Act, he

was sentenced to twenty-one months in prison (United States v. Cohen,

2001, p. 70).

During sabung ayam the late 1990s as Internet gambling became more popular,

states began to notice that their residents were engaging in this

behavior and wanted to prevent this from occurring. In 1998, the state

of New York sued World Interactive Gaming Corporation (WIGC) and Golden

Chips Casino, Inc. (GCC) to enjoin them from operating within New York

or offering New York residents the opportunity to gamble over the

Internet while located in New York (Vacco v. World Interactive Gaming

Corp., 1999).

In Vacco, the main issue the court needed to determine was whether

a state could enjoin a foreign corporation that was "legally

licensed to operate a casino offshore from offering gambling to Internet

users in New York" (Vacco v. World Interactive Gaming Corp., 1999,

p. 846). WIGC operated its offices in New York and was incorporated in

Delaware. WIGC owned GCC, which was an Antiguan subsidiary corporation

licensed to operate a land-based casino in Antigua. GCC then purchased

computer servers and developed software that allowed users to gamble

over the Internet from computers located all over the world. GCC

promoted its Internet casino over the Internet and through a gambling

magazine that was targeted to people in the United States.

In order to gamble with WIGC, customers were required to register

for an account. When registering for an account, a customer was required

to submit a permanent address in a state that allowed land-based

gambling. Anyone who entered a state that did not allow land-based

gambling was prohibited from creating an account. However, users could

get around the system by going back to the registration page and

entering an address in a state such as Nevada, which allows land-based

gambling. The plaintiffs claimed that because it was so easy to

circumvent the system, the defendants did not make a good faith effort

at preventing New York residents from engaging in online gambling. The

defendants claimed that the transactions occurred off shore and that

there were no state or federal laws that regulated internet gambling and

applied to their conduct (Vacco, 1999, p. 848).

The court disagreed with the defendants' argument and found

that its activity not only violated New York state statutes, but also

the Wire and Travel Acts (Vacco, 1999, p. 851). as the court explained,

the Wire Act prohibits people from using a "telephone

facility" to receive bets or send gambling information while

engaged in interstate or foreign commerce (Vacco, p. 852). The Internet

is accessed through a telephone wire, which implicated the Wire Act in

this case. The Travel Act then prevents anyone from using any facility

to promote or manage any illegal activity or distribute the proceeds of

any illegal activity (p. 846). The defendants here used a facility in
Antigua and New York to both promote and manage the illegal activity of

gambling as well as distributing the proceeds from the illegal gambling

operation. Therefore, their conduct violated both federal laws.

As these cases demonstrate, state and federal authorities have been

able to sue individuals who engage in internet gambling claiming that

their behavior is illegal gambling under both the Wire and Travel Acts.

In 2006, the federal government went further enacting specific

legislation meant to deal with internet gambling.

3.2. Federal Regulation of Internet Gambling

Although the United States Congress has repeatedly expressed

concern over the negative impact that gambling can have on American

society, it is clear that this impact could be much worse if Internet

gambling is not strictly regulated. Internet gambling can exacerbate

some of the problems associated with gambling, especially underage

gambling and gambling addictions. Because of the anonymity that the

Internet provides, it is often difficult for owners of internet gambling

sites to determine whether players are of legal gambling age. In

addition, as the internet has grown in popularity, it has become more

and more accessible and therefore, it is easier and easier to engage in

internet gambling activities. Therefore, the United States Congress has

determined that it has a strong interest in regulating internet gambling

in order to ensure that that all users are of legal age, to prevent

illegal gambling, and to prevent excessive gambling that may lead to

addictive behavior (GAO, 2002, 2-11). Congress' first step in

regulating Internet gambling was taken when it enacted the Unlawful

Internet Gambling Enforcement Act of 2006.

3.2.1. Unlawful Internet Gambling Enforcement Act of 2006

In general, the Unlawful Internet Gambling Enforcement Act of 2006

prohibits the transfer of funds from a financial institution, such as a

bank or credit card company, to an internet gambling website (31 U.S.C.

[section]5361, et. seq. 2008). However, the provisions of the law are

extensive.

According to Congress, the Unlawful Internet Gambling Enforce ment

Act was enacted for several reasons. Initially, Congress recognized the

difficulty in regulating Internet gamblers because this form of gambling

is funded through the "personal use of payment system instruments,

credit cards, and wire transfers" (31 U.S.C. [section]5361(1),

2008). In addition, in 1999 the National Gambling Impact Study

Commission recommended that Congress pass some legislation that would

"prohibit wire transfers to Internet gambling sites or the banks

which represent such sites" (31 U.S.C. [section]5361(2)). Moreover,

Congress recognized that "Internet gambling is a growing cause of

debt collection problems for insured depository institutions and the

consumer credit industry" and that "[n]ew mechanisms for

enforcing gambling laws on the Internet are necessary because

traditional law enforcement mechanisms are often inadequate for

enforcing gambling prohibitions or regulations on the Internet" 31

U.S.C. [section]5361 (3-4)).

Of particular importance to Internet gamblers, the Act defines a

bet or wager as

A the staking or risking by any person of something of value upon

the outcome of a contest of others, a sporting event, or a game subject

to chance, upon an agreement or understanding that the person or another

person will receive something of value in the event of a certain

outcome;

B the purchase of a chance or opportunity to win a lottery or other

prize (which opportunity to win is predominantly subject to chance);

C any scheme of a type described in [The Professional and Amateur

Sports Protection Act of 1992);

D any instructions or information pertaining to the establishment

or movement of funds by the bettor or customer in, to, or from an

account with the business of betting or wagering; (31. U.S.C.

[section]5362(1), 2008).

The term "unlawful internet gambling" then means 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 (31. U.S.C. [section]5362(10)(A), 2008).

As an exercise of the congressional power under the Commerce

Clause, Article 1, Section 8, Clause 3 of the United States

Constitution, the Unlawful Internet Gambling Enforcement Act regulates

only activities that take place as part of interstate commerce, or

commercial activity between different states. In this way, states are

left to create their own independent regulations.

The law does not make it illegal for a person to participate in

Internet gambling. Instead, in order to regulate Internet gambling

activities, the law focuses on financial institutions and Internet

service providers and prohibits the acceptance of funds from bettors by

operators of most online gambling websites as it provides

No person engaged in the business of betting or wagering may

knowingly accept, in connection with the participation of another person

in unlawful Internet gambling

1 credit, or the proceeds of credit, extended to or on behalf of

such other person (including credit extended through the use of a credit

card);

2 an electronic fund transfer, or funds transmitted by or through a

money transmitting business, or the proceeds of an electronic fund

transfer or money transmitting service, from or on behalf of such other

person;

3 any check, draft, or similar instrument which is drawn by or on

behalf of such other person and is drawn on or payable at or through any

financial institution; or

4 the proceeds of any other form of financial transaction, as the

Secretary and the Board of Governors of the Federal Reserve System may

jointly prescribe by regulation, which involves a financial institution

as a payor or financial intermediary on behalf of or for the benefit of

such other person (31 U.S.C. [section]5363, 2008).

The Act then calls for financial institutions to adopt procedures

and policies designed to block the flow of prohibited funding to the

operators of the affected online gambling websites (31 U.S.C.

[section]5364, 2008), and gives federal and state attorneys general the

power to seek civil remedies to help enforce the other provisions of the

Act (31 U.S.C. [section]5365, 2008). In addition, anyone who violates

the Act can be subject to criminal penalties including fines and

imprisonment up to 5 years (31 U.S.C. [section]5366, 2008).

Interestingly, the law exempts participation in fantasy sports

online. Such activity, defined as

ix participation in any fantasy or simulation sports game or

educational game or contest in which (if the game or contest involves a

team or teams) no fantasy or simulation sports team is based on the

current membership of an actual team that is a member of an amateur or

professional sports organization (as those terms are defined in [the

Professional and Amateur Sports Protection Act of 1992] and that meets

the following conditions:

I all prizes and awards offered to winning participants are

established and made known to the participants in advance of the game or

contest and their value is not determined by the number of participants

or the amount of any fees paid by those participants.

II all winning outcomes reflect the relative knowledge and skill of

the participants and are determined predominantly by accumulated

statistical results of the performance of individuals (athletes in the

case of sports events) in multiple real-world sporting or other events.

III No winning outcome is based-

aa on the score, point-spread, or any performance or performances

of any single real-world team or any combination of such teams; or

bb solely on any single performance of an individual athlete in any

single real-world sporting or other event (31 U.S.C.

[section]5362(I)(E)(ix), 2008).

is specifically excluded from the Act's definition of a

covered bet or wager.

The provisions of the Act are then enforced by certain provisions

of the Code of Federal Regulations. These Code provisions focus on

setting forth ways to monitor financial institutions and other

organizations who come under the Act (12 C.F.R. 233 (2008). as part of

the Code related to banks and banking, the provisions set forth

regulations for financial institutions and ways to monitor the payment

systems prohibited by the Act.

Overall the impact of this Act is still to be seen. Immediately

after its passage, many Internet gambling sites stopped taking bets from

United States gamblers using American financial institutions. However,

the application of the law to gambling and gamblers is less clear as

there has been little litigation involving the Act.

3.2.2. Case Law Involving the Unlawful Internet Gambling

Enforcement Act

Although there have not been many cases brought under this new law,

a few cases have tested the waters to determine how the law will be

enforced.

In 2008, Interactive Media Entertainment & Gaming (Interactive

Media), a non-profit group that collects and disseminates information on

internet gambling, claimed that the Unlawful Internet Gambling

Enforcement Act was unconstitutional and moved to enjoin the Act from

being enforced (Interactive Media Entm't & Gaming Ass'n v.

Gonzales, 2008). Interactive Media claimed that the Act violated the

First Amendment by burdening its freedom to express itself about

internet gambling in certain ways. The New Jersey District Court held
that the Act does not burden any group's expressive association

freedoms because it does not prevent the group from expressing its views

on Internet gambling (Interactive Media Entm't & Gaming

Ass'n, p. *22). In fact, nothing in the Act prevents the plaintiffs

from continuing to promote internet gambling. as the court explained,

"the plaintiff and its members remain free to promote Internet

gambling; nothing in the challenged statute implicates the

plaintiff's expressive activities in this regard (p. *22).

Interactive Media also claimed that the Act also violated its

rights to be free from regulations impacting commercial speech because

it criminalizes the transfer of funds. The court did not agree as it

found that the Act criminalizes only the acceptance of money in

connection with illegal internet gambling, and the acceptance of money

is not speech (Interactive Media Entm't & Gaming Ass'n, p.

*27).

Interactive Media also claimed that the Act is both "overbroad

[and] void for vagueness" (Interactive Media Entm't &

Gaming Ass'n, 2008, p. *27). The overbroad claim failed because the

overbreadth doctrine is relevant only to constitutionally protected

conduct and the financial transactions included in the Act are not

protected speech; and therefore, are not considered protected conduct.

The Act does not deal with constitutionally protected conduct, and

therefore, the Act is not covered by the overbreadth doctrine and cannot

be considered overbroad. Similarly, the Act is not void on vagueness

grounds. Although the Act may cause operators of an internet gambling

business to incur additional costs because they have to ensure that the
wagers made are not illegal, it is not vague. as the court explained,

the Act clearly outlines what conduct is considered illegal and what

actions businesses need to take to ensure they are not violating the Act

(p. *28)

Finally, Interactive Media claimed the Act violated the Tenth

Amendment by taking away the rights of the states to regulate gambling.

The court dismissed the Tenth Amendment claim for lack of standing

because private individuals lack standing to bring Tenth Amendment

claims (Interactive Media Entm't & Gaming Ass'n, p. *35).

However, because the statute regulates interstate commerce, even if

Interactive Media did have standing, it would be considered a proper

exercise of Congress's interstate commerce powers.

Another recent case focused on whether online fantasy sports

leagues do not violate the Unlawful Internet Gambling Act (Humphrey v.

viacom, 2007). In Humphrey, the plaintiff tried to sue to recover under

a Qui Tam statute, claiming that the people involved in fantasy sports

leagues were making bets. Qui Tam statutes are derived from an old

English statute that allows gamblers to recover their losses. The Qui

Tam statute permits gamblers to recover the losses incurred while

playing "cards, dice, billiards ... or by betting on [a] sport or

pastime" (Humphrey, pp. *7). The defendant ran a fantasy sports

league where participants paid a fee to join the league and use services

that came along with it, such as real-time data. The entrance fee also

included services to manage the fantasy league, such as the ability to

draft players as well as trade. at the end of the fantasy league season,

winners were awarded prizes that had been announced in advance and did
not have any correlation to the amount of people that registered.

The court rejected the plaintiff's claim and went on to

explain that when there is a specific entry fee, prizes are announced in

advance, and these prizes have no correlation to the entry fees, the

entry fee to the fantasy league will not be considered a bet (Humphrey,

2007, pp. *18-20). The court also pointed to the Unlawful Internet

Gambling Act, which specifically excludes these types of fantasy sports

leagues from its definition of bets or wagers.

So far these are the only United States court decisions that have

discussed the application of the Unlawful Internet Gambling Act.

Presumably as the provisions of the Act are given fuller affect more

litigation will follow in the future.

3.3. Recent Internet Gambling Initiatives

Although Congress passed the Unlawful Internet Gambling Enforce

ment Act in 2006, the House of Representatives has introduced several

additional bills related to internet gambling since that time. These

bills have focused on further analysis of the problem of Internet

gambling, finding ways to tax the proceeds of Internet gambling

activities, licensing operators of Internet gambling websites, and

* The Internet Gambling Regulation and Enforcement Act of 2007

(H.R. 2046, 2007), would require those involved in running an Internet

gambling operation to file an application with the Direc tor of the

Financial Crimes Enforcement Network to be licensed to operate an

Internet gambling facility. The gambling operators must provide their

financial statements, a detailed explanation of the corporate structure

of the Internet gambling business, and agree to abide by all of the laws
of the United States related to Internet gambling. The Director would

determine whether to grant a license based on the financial information

provided, business experience, and background checks on any directors

and executives of the company. Once licensed, the operators must agree

to put into place safeguards to ensure that responsible gambling takes

place. The House and Energy Commerce referred this proposed bill to the

Subcommittee on Commerce, Trade, and Consumer Protection on April 30,

2007.

* The Internet Gambling Study Act (H.R. 2140, 2007), would re quire

the National Research Council of the National Academy of Sciences to

conduct a comprehensive study of Internet gambling. This study would

include an analysis of the existing legal framework that governs such

activities and transactions and the impact of the Unlawful Internet

Gambling Enforcement Act on Internet gambling in the United States.

* The Internet Gambling Regulation and Tax Enforcement Act of 2007

(H.R. 2607, 2007), would amend the Internal Revenue Code in an attempt

to help regulate Internet gambling. The bill would require Internet

gambling operators to become licensed and pay a fee that is equal to 2%

of all funds deposited with the operator for purposes of placing bets.

The fee would have to be paid within thirty days of the deposit, and all

fees would be deposited into the general fund of the Treasury. The bill

was referred to the House Committee on Ways and Means on June 7, 2007.

* The Internet Gambling Regulation and Tax Enforcement of 2008

(H.R.5523, 2008), would amends the Internal Revenue Code to impose an

Internet gambling license fee on online operators, require them to file

returns identifying themselves and the individuals placing wagers with

them, withhold a tax on annual Internet gambling winnings of more than

$5,000, impose a 30% tax on the Internet gambling winnings of

nonresident aliens, and impose an excise tax on wagers on any individual

who places a wager with an unlicensed Internet gambling operator. The

Bill was referred to the House Committee on Ways and Means in March of

2008.

* The Investing in our Human Resources Act of 2008 (H.R.6501,

2008), includes a provision requiring the Secretary of Health and Human

Services to establish a national Safe Internet Gambling Practices

Program focusing on the promotion of responsible Internet gambling

behavior and the awareness of unsafe Internet gambling practices. On

July 15, 2008, the bill was referred to the Committee on Ways and Means

and the Committee on Education and Labor.

* The Unlawful Internet Gambling Enforcement Clarification and

Implementation Act of 2008 (H.R. 6663, 2008), would further clarify the

implementation of the Unlawful Internet Gambling Enforcement Act of

2006. Specifically, this bill would force the United States Attorney

General's office to focus prosecutorial efforts on persons who

offer Internet sports betting in the United States, or those who process

payments for illegal Internet sports betting in the United States. On

July agen sabung ayam 30, 2008, the bill was referred to the Committee on Financial

Services and the Committee on the Judiciary.

Although to date none of these bills has passed, they demonstrate

the continuing focus that federal legislators have on the problem of

Internet gambling.

3.4. Summary of Federal Legislation

Overall, through the Wire, Travel and Unlawful Internet Gambling

Enforcement Acts, the United States Congress has set up a scheme that

makes it very difficult for any private individual to participate in

gambling on the Internet, including sports gambling. Even though the

actual practice of online gambling is perhaps not illegal (at least

under the Unlawful Internet Gambling Enforcement Act), the regulations

imposed on gambling in general, and the regulations imposed on financial

institutions and Internet service providers, make it difficult to see

how a United States citizen can engage in any legal form of online

gambling. and the latest federal law in 2006 has not ended the

discussion as Congress has continued to review and debate further

federal regulations in the intervening years.

Of course, as with all legislative regulation of gambling within

the United States the analysis must now shift to an analysis of these

regulations by individual states.

4. State Specific Regulation of Internet Gambling

Prior to the passing of the Unlawful Internet Gambling Enforcement

Act, several states passed laws specific to internet gambling.

Currently, Illinois, Indiana, Louisiana, Montana, Nevada, Oregon, South

Dakota, Washington, and Wisconsin have passed laws related specifically

to Internet gambling. These states have used a variety of measures to

prohibit internet gambling.

For instance, Louisiana, Oregon, and South Dakota have all enacted

specific statutory provisions that deal with "Internet

gambling" or "Gambling by computer." For example, in its

general statute that criminalizes gambling, Louisiana defines prohibited

"Gambling by computer" as

the intentional conducting, or directly assisting in the conducting

as a business of any game, contest, lottery, or contrivance whereby

a person risks the loss of anything of value in order to realize a

profit when accessing the Internet, World Wide Web, or any part

thereof by way of any computer, computer system, computer network,

computer software, or any server (La. Rev. Stat. Ann.

[section]14:90.3, 2008)

Similar statutes can be found in Oregon and South Dakota (Or. Rev.

Stat. [section]167.109, 2007; S.D. Codified Laws [section]22-25A, et

seq., 2008). In fact, chapter 22-25A of the South Dakota statutes

focuses exclusively on "Internet gambling" and provides that

no one in the state can engage in or establish a website that conducts

Internet gambling activities (S.D. Codified Laws [section]22-25A-7-8,

2008).

Other states have created specific provisions that legalize some

forms of licensed gambling activities. The Montana legislature has found

that

The legislature finds that for the purpose of ensuring the proper

gambling environment in this state it is necessary and desirable to

adopt a public policy regarding public gambling activities in Montana.

The legislature therefore declares it is necessary to:

a create and maintain a uniform regulatory climate that assures

players, owners, tourists, citizens, and others that the gambling

industry in this state is fair and is not influenced by corrupt persons,

organizations, or practices;

b protect legal public gambling activities from unscrupulous

players and vendors and detrimental influences;

c protect the public from unscrupulous proprietors and operators of

gambling establishments, games, and devices;

d protect the state and local governments from those who would

conduct illegal gambling activities that deprive those governments of

their tax revenues;

e protect the health, safety, and welfare of all citizens of this

state, including those who do not gamble, by regulating gambling

activities; and

f promote programs necessary to provide assistance to those who are

adversely affected by legalized gambling, including compulsive gamblers

and their families (Mont. Code judi sabung ayam Ann., [section]23-5-110, 2007).

Within its definition of regulated gambling it then defines

Internet gambling as

"Internet gambling", by whatever name known, includes but is not

limited to the conduct of any legal or illegal gambling enterprise

through the use of communications technology that allows a person

using money, paper checks, electronic checks, electronic transfers of

money, credit cards, debit cards, or any other instrumentality to

transmit to a computer information to assist in the placing of a bet

or wager and corresponding information related to the display of the

game, game outcomes, or other similar information (Mont. Code Ann.

[section]23-5-112, 2007)
Interestingly, the state of Nevada, one of the few states where

gambling is legal within the United States, has made Internet gambling

illegal. However, it has left itself room to allow Internet gambling in

the future (Nev. Rev. Stat. [section]463.750, 2007). This statute states

that the Nevada Gaming Commission will not allow the licensing of an

Internet gambling operation until the Commission until the Commission

has determined that Internet gambling operations can be operated in

compliance with applicable laws and they are secure and reliable.

However, if the Commission comes to that conclusion it is possible for

Internet gambling to be legal in the state of Nevada in the future.

Overall, the regulation of Internet gambling at the state level is

a relatively new phenomenon with states now including specific

definitions of this type of gambling activity within their legislation.

Unlike federal legislation, most of the state laws specifically target

and criminalize the actual activity of Internet gambling. Therefore,

because few states allow for any form of legalized gambling, coupling

these laws with the federal laws already discussed, leads to an overall

scheme that prohibits virtually any form of Internet gambling within the

United States.

5. Conclusion

The participation of American citizens in Internet gambling

continues to grow. While Congress and the states have put forth

extensive regulations attempting to regulate this activity, the nature

of the Internet leads to problems with enforcement. as a result while

most states have outlawed Internet gambling by individuals, Congress has

instead focused on financial institutions and service providers. as with

any new legislation focused on the Internet, the impact of this

legislation at both the federal and state level is still too difficult

to assess. Instead, gambling activities on the Internet continue to

proliferate. and with much illegal gambling focused on sports, the

problem of sports gambling on the Internet will continue into the

foreseeable future.

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by Paul Anderson *

* Prof. Paul Anderson is Associate Director, National Sports Law

Institute, Marquette University Law School, Wisconsin, Milwaukee, United

States of America.