Online gambling has expanded exponentially in the past five years. This has fueled concerns by state officials and law enforcement that the Internet will be used to bring illegal gambling activities into their jurisdictions. However, there are several factors that may hinder the success of state-level enforcement policies.
First, it is important to understand that state laws govern gambling. Gambling includes sports betting, casinos, lotteries, and pool-selling. It also includes games of chance, such as roulette and video poker. While gambling is primarily a matter of state law, federal law is also a relevant consideration.
The federal criminal statutes that are implicated in illegal Internet gambling include the Wire Act, the Illegal Gambling Business Act, the Racketeer Influenced and Corrupt Organizations Act, the Unlawful Internet Gambling Enforcement Act, and the Money Laundering Control Act. These laws have been challenged on both constitutional and legislative grounds.
One court decision that has garnered attention is United States v. Nicolaou. In that case, a defendant was accused of laundering money for international purposes and concealing it from law enforcement. Specifically, the prosecution argued that the defendant laundered $2,000 for five people.
The case also included employees at a bar and a restaurant. The prosecutors alleged that the establishments had video poker machines. They also cited waitresses who served drinks to customers who made bets. Lastly, they cited a number of layoff bettors who participated in the activity.
The Congressional Research Service (CRS) recently published an abridged version of its report, “Internet Gambling: Overview of Issues.” The CRS Report, which can be viewed in its entirety online, provides information about the various laws that govern Internet gambling and highlights how the UIGEA is applicable to these types of activities.
In addition to these aforementioned statutory provisions, there are several additional federal statutes that can be used to prosecute illegal Internet gambling. For example, the Travel Act applies to players who use interstate facilities to engage in unlawful activities.
There are also certain elements in the Lopez Amendment to the Federal Crimes Code that can be used to target low-level gambling cases. In particular, the amendment includes provisions to prohibit gambling that involves certain individuals, commercial activity, and a finding of the impact of the activities on interstate commerce.
A third element is that the activities are conducted on a computer. Several states have passed laws that make it a crime to place bets on the Internet. This is primarily an issue of state law, but federal law will reinforce those state laws in the event of a prosecution.
Finally, the Commerce Clause has been raised in a number of cases. Questions have been raised about the government’s ability to regulate activities that are conducted overseas, as well as the government’s power to regulate gambling businesses. Nonetheless, the commercial nature of the business seems to satisfy many of the Commerce Clause concerns.
Since the passage of the UIGEA, many companies have warned of the risk of facing criminal prosecution for making bets on the Internet. Some financial institutions, such as PayPal, have been warned that they could face prosecution if they accepted financial instruments for illegal Internet bets.