Legal Update

by Allyn Jaffrey Shulman

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After a spirited debate in the House of Representatives, where House members cited "family values," the "threat of terrorism," and the "addictive nature of gambling," yet another bill addressing Internet Gambling was recently passed in the House. Click here for the text of the bill.

On June 11, 2003, H.R. 2143, the Unlawful Internet Gambling Funding Prohibition Act, passed 319-104. (Click here for Roll Call.) The bill exempts state-sanctioned sites that endorse betting on horse and dog racing, lotteries, and so on. An amendment to remove the exemption for the state-sanctioned sites failed 237-186. The bill went through four revisions. The bill contains no criminal or civil penalties for violations of the bill, in a parliamentary effort to keep the legislation outside the jurisdiction of the House Judiciary Committee.

What does this mean in plain English? It means that this latest bill is a ridiculously watered-down version of legislators' attempts to stop Internet gambling. But the wording of the bill absolutely does not prohibit online gambling at all. It only makes it a little more difficult to get money into a gambling site. It means that the current bill does not make it illegal to play poker online. It means that our legislators are beginning to understand the difficulty they face attempting to ban Internet gambling. It just isn't going to happen. Gaming analysts estimate that on-line gambling will bring in $6 billion in revenue this year. About half of that comes from players in the US. Efforts to ban Internet gambling will always be met by creative solutions that will circumvent any small gain achieved by Internet gambling opponents.

Since 1995, our legislators have introduced a myriad of bills attempting to ban Internet gambling. The legislators just cannot seem to get their arms around a proper methodology. They first tried criminalizing online gambling, which means imprisoning the online gambler. That bill failed miserably. Remember, in 1995 when Senator Jon Kyl (R-Arizona) first proposed legislation that would imprison the online gambler? That legislation died in committee. They tried revising the Wire Act; that failed as well. Remember in October of last year when the House desperately passed The Unlawful Internet Gambling Funding Prohibition Act (HR 556) by a voice vote of seven members? The Senate never even reviewed the legislation before it recessed. They tried targeting the offshore operator, but the United States has no jurisdiction to enforce such legislation and that failed. Now, the latest attempt to stop online gambling merely prohibits credit card, wire transfer, and other payments used to gamble online. Big deal. Many experts say e-cash, a digital form of money capable of being stored on hard drives and transferred over the Internet, will eventually be utilized because it is instantaneous and inexpensive.

Let's take a look at the bill. It's fairly short but not an easy read. (Click here) The bill says it may be cited as the "Unlawful Internet Gambling Funding Prohibition Act." The bill goes on to say that six months after its passage, the federal functional regulators shall prescribe regulations identifying policies and procedures "reasonably designed to block" or to "prevent the acceptance of the products or services" where illegal Internet gambling is concerned. (Remember, the bill is not law. A similar bill must first pass the Senate and be signed by the president.) In other words, the bill speaks to "a creditor, credit card issuer, financial institution, operator of a terminal at which an electronic fund transfer may be initiated, money-transmitting business, or international, national, regional, or local network utilized to effect a credit transaction, electronic fund transfer, or money-transmitting service, or a participant in such network." In other words, the bill is aimed at the transfer of money by companies providing such a service. The bill does not speak to advertisers or gamblers and the government has no jurisdiction to enforce this legislation against companies that do not operate within the boundaries of the United States.

The bill begins by acknowledging that "The National Gambling Impact Study Commission in 1999 recommended the passage of legislation to prohibit wire transfers to Internet gambling sites or the banks which represent them." I previously reviewed this study for Card Player readers. The 104th Congress created the National Gambling Impact and Policy Commission in 1996. (Public Law 104-169) The Act recognizes that the last time the federal government did a study regarding gambling was 1976 and that in the last 20 years gambling has increased to include Internet gambling. The stated purpose of the Federal Commission was to conduct a comprehensive study of the social and economic impacts of gambling in the United States. The study was completed in June of 1999. Among other things, the Commission concluded that because Internet Gambling crosses state lines, it is difficult for states to adequately monitor and regulate on-line gambling. The Commission recommended that Congress and the President pass legislation and develop enforcement strategies regarding Internet Service Providers, credit card providers, money transfer agencies, makers of wireless communications systems, banks and, finally, "the federal government should take steps to encourage or enable foreign governments not to harbor Internet Gambling organizations that prey on US citizens." It is self-evident that our government has continued to struggle with ways to regulate or ban online gambling.

The bill defines UNLAWFUL INTERNET GAMBLING as follows: "The term `unlawful Internet gambling' means to place, receive, or otherwise 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 in which the bet or wager is initiated, received, or otherwise made."

Now this is a fascinating passage because it makes reference to both state and federal law. That is almost an acknowledgment that there is no federal law that prohibits online poker playing. If there were, it would be unnecessary to make the definition include a violation of state law, because federal law applies to all citizens. It is this writer's opinion that there is no sweeping federal law that prohibits online poker playing, notwithstanding the opinion of our Administration. Both the Clinton and Bush Administration have taken the position that gambling online violates federal law. This writer humbly disagrees. Since the first virtual casino came upon the scene in 1995, there has not been one prosecution for playing poker online. If there is such a law, what is it and why have there been no prosecutions in eight long years? There are a few scattered state laws prohibiting online gambling, but they are not being enforced for obvious reasons.

The government first asserted that the Wire Act prohibited online poker playing. However, the 1961 Federal Wire Act was judicially found not to apply to online gambling. There are laws prohibiting gambling sites to operate within the borders of the United States, but those laws do not speak to the individual gambler. This latest bill merely makes funding slightly more difficult. As I have said in many Card Player articles, the passage of legislation prohibiting credit card companies from funding online gambling will indubitably be met by either black market funding, digital e-cash, or some other method of funding online gambling. Society would be much better served by regulation.diamonds

Allyn Jaffrey received her Bachelor of Arts from the University of California at Irvine in 1977, where she graduated cum laude and became a member of Phi Beta Kappa for scholastic achievement. She is a practicing criminal defense attorney, having received a Juris Doctorate with scholastic merit from Western State University where she served as Research Editor and Executive Editor of Law Review in 1982-1983. She has lectured all over California, teaching other attorneys the fine points of criminal defense. She specializes in legal research and her areas of expertise include the filing of extraordinary writs, appeals and motions where a lower court judge commits legal error or where the police or prosecutors engage in misconduct. Allyn has been closely following the development of gaming law and the Internet ever since Jay Cohen was convicted in New York of operating a sports betting business from Antigua in violation of the Wire Act.

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