Using the Internet to place bets or take bets, transmitting bets over the Internet, or receiving bets over the Internet, all fall into the category of “illegal Internet gambling.” Some states have enacted laws that specifically address illegal Internet gambling, but others have merely expressed their concern that such activity may occur within their jurisdiction. Other federal laws, such as the Illegal Gambling Business Act (IGBA), prohibit gambling on contests and sporting events. The Federal Wire Act, which prohibits interstate transmission of wagers, also applies to Internet gambling.
The law has been challenged on many grounds. The most common are the Commerce Clause, the First Amendment, and the Due Process Clause. While many of these arguments have been ruled out, the commercial nature of gambling is a plausible defense. The Federal Communications Commission (FCC) is charged with regulating common carriers, and the FCC can suspend or even terminate leasing and maintaining such facilities. In fact, in the past year, the FCC has made several moves to crack down on Internet gambling. In one case, federal marshals seized $3.2 million from Discovery Communications after accepting ads from a Costa Rican casino operation. In another case, the FCC found that a New York state banker was reporting illegal online gambling activity. In yet another case, federal prosecutors warned PayPal that it could be prosecuted for accepting financial instruments from illegal Internet bettors.
The FCC’s actions have triggered state and local governments to enact their own laws. For example, in the state of Pennsylvania, state lawmakers passed the first legal gambling statute in the state, making illegal Internet gambling a felony. Another law in that state, the Illegal Gambling Business Act, is similar in nature to the IGBA. It focuses on gambling on contests and sporting events, and prohibits financial transaction providers from participating in illegal Internet gambling. The most significant problem with these laws is that they are not uniform across the board. In fact, in the state of Missouri, an indictment was handed down against a sports bookmaker, who had been operating an offshore online gambling operation. This case prompted the state of Missouri to pass the state’s own gambling statute.
The FCC has also been a strong defender of state laws. In the past year, the agency has ruled on several cases where state officials have questioned the legality of Internet gambling in their state. In a recent hearing, the FCC found that state law was not enough to prevent the illegal online gambling in its jurisdiction. In other cases, the FCC has simply ruled that the state did not have the authority to impose such a ban. Nevertheless, enforcing state laws has been a challenging task. Fortunately, federal law reinforces state law in cases where it matters. In fact, the FCC has recently ruled that it has jurisdiction over all common carriers, not just Internet service providers.
The best way to acquaint yourself with the legal and ethical implications of gambling is to study your state’s laws, but to be safe, it would be prudent to study federal law as well.