As I Predicted

A number of months ago, I researched and analyzed The 1961 Wire Act and concluded that online poker playing is EXCLUDED from its reach. I came to this conclusion for the following reasons:

1) The WORDS of the statute specifically prohibit SPORTS BETTING and nothing more;

2) The LEGISLATIVE HISTORY indicates the statute was aimed at organized crime, specifically in the area of sports betting;

3) CASE LAW construes the statute as applying to sports betting;

4) The only CASE ON POINT to address the issue specifically found that the Wire Act does not apply to online gambling; and

5) Recent PROPOSED AMENDMENTS to the Wire Act demonstrate that legislators do not believe that the statute prohibits online gambling.

The case on point to which I refer in number 4 above is "In Re Mastercard International", decided February 23, 2001 , the Honorable Judge Stanwood R. Duvall, Jr. presiding. Among other issues, Judge Duval was faced with the question of whether the Wire Act applied to online gambling. The posture of the case was interesting because many deadbeat gamblers attempted to avoid online gambling debts they had incurred by alleging that the money they owed their credit card companies amounted to illegal gambling debts in violation of the Wire Act. As a matter of fact, there were so many similar suits filed by so many gamblers who did not want to pay their losses, that the lower court consolidated 33 such similar charges.

As I reported in August, Judge Duvall ruled that the Wire Act only prohibited wagering on SPORTS EVENTS and he dismissed all 33 cases, noting that "Comparing the face of the Wire Act and the history surrounding its enactment with the recently proposed legislation, it becomes more certain that the Wire Act's prohibition of gambling activities is restricted to the types of events enumerated in the statute, sporting events or contests."

Instead of simply paying the gambling debt legitimately owed, the disgruntled plaintiffs generously decided to give more money to their lawyers and brought the issue to the appellate level. On November 20 th , a three-judge panel of the 5th U.S. Circuit Court of Appeals in Louisiana affirmed Duvall's dismissal, calling his ruling "thorough and careful." The appeals court held that the gamblers failed to prove that online casinos and the credit card companies they used to process their wagers violated federal racketeering laws or the 1961 Wire Act. http://caselaw.lp.findlaw.com/data2/circs/5th/0130389p.pdf

With regard to the use of a credit card, the court held that transferring money to the player occurred PRIOR to the gambling and so could not be considered to have anything to do with "gambling" or profiting from gambling. With regard to the Wire Act's application to online gambling, the court reached the same conclusion reached by Judge Duvall and me:

"We agree with the District Court's statutory interpretation , its reading of the relevant case law , its summary of relevant legislative history , and its conclusion. The plaintiffs may NOT rely upon the Wire Act…. Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling, are not illegal."

The fact that an appellate court has now ruled that the Wire Act does not apply to online gambling is not the end of the road, but it is getting closer. It evidences clear, rational, solid, legal analysis on the issue. However, there is still the highest court of the land, the US Supreme Court, which can decide either to grant a hearing or issue a summary denial, IF and ONLY IF the plaintiffs appeal the Appellate Court's decision.

To put the ruling in perspective, let's now revisit the issues going on in Nevada . On June 14, 2001 , Nevada Governor Kenny Guinn approved Assembly Bill 466, which empowered the Nevada Gaming Commission to adopt regulations governing the licensing and operation of on-line gaming. However, Nevada Gaming Control Board Chairman Neilander did not want to make a drastic mistake by unwittingly enacting rules and regulations which violated federal law, so he first asked the Nevada Attorney General (AG) for his opinion regarding whether online gambling was legal. Almost a year after the legislation passed, Nevada's Assistant Chief Deputy Attorney General Jeff Rodefer prepared a lengthy report which concluded that federal laws on the issue are unclear!

Thereafter, Neilander asked the United States AG for an opinion. Please note that an advisory opinion from the AG is only the opinion of a government employee whose job is to enforce the law. It is not binding on a COURT, which interprets laws.

O n August 30, 2002 , Assistant Attorney General Michael Chertoff sent a letter to Neilander , reiterating the perfunctory opinion held by the Clinton administration: "As set forth in prior congressional testimony, the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling."

Well, the reason gaming attorneys and others who have analyzed the issue are disillusioned and frustrated with this ostensibly "legal" opinion is because it is devoid of any legal reasoning. It smacks of a political and not a legal opinion. A legal opinion must analyze the WORDS of a statute, the LEGISLATIVE HISTORY of a statute, relevant CASE LAW, and PROPOSED AMENDMENTS to such law.

Chertoff has HALTED commerce in Nevada by delivering such a damaging opinion to Neilander , and even though the opinion is not legally justified or binding, Nevada is now afraid to move forward in the online gambling arena. This is because IF the opinion were ultimately found to be correct, Nevada would be on NOTICE that this is the correct interpretation of the law. And when Chertoff's advisory opinion is found to be wrong, the AG will say, no harm, no foul.

Meanwhile, in the House, Representatives Leach and LaFalce were involved in their own sham, passing the unlawful Internet Gambling Funding Prohibition Act (HR 556) by a voice vote consisting of SEVEN members of the House, certainly knowing the Senate would not visit the issue this year. As I predicted, no action was taken in the Senate, enforcing the view that the rushed vote was merely political maneuvering. What all this does show is that there is a vocal number of governmental officials who are so opposed to online gambling that they will compromise honorable behavior for political expediency.

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 the 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. Ms. Jaffrey 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.