gambling law: an overview

Gambling, though widespread in the United States, is subject to legislation at both the state and federal level that bans it from certain areas, limits the means and types of gambling, and regulates the activity in countless other ways.

A standard strategy for avoiding laws that prohibit, constrain, or aggressively tax gambling is to locate the activity just outside the jurisdiction that enforces them in a more "gambling friendly" legal environment. Gambling establishments are often found near state borders and on ships that cruise outside territorial waters. They have exploded, in recent years, in Indian territory. Internet-based gambling takes this strategy and extends it to a totally new level of penetration, for it threatens to bring gambling directly into homes and businesses in localities where the same activity could not be conducted by a physical gambling establishment.

15 U.S.C. §3001(1), states that "the states should have the primary responsibility for determining what forms of gambling may legally take place within their borders." 15 U.S.C. §3001(2), adds that "the Federal Government should prevent interference by one State with the gambling policies of another, and should act to protect identifiable national interests."

Congress has used the Commerce Clause in order to regulate interstate gambling, international gambling and relations between the United States and Native American territories. They have passed amendments to federal law making it illegal to sell one state's lottery tickets in another state, outlawing sports betting with only certain exceptions (Las Vegas being one) and have regulated the extent to which casinos may exist on Native American land.

The federal government has given each state the ability to decide what kind of gambling it allows within its borders, where the gambling can be located and who may gamble. Each state has created different laws pertaining to these topics. The laws have been compiled here.

Each state has defined the legal gambling age differently, with some states giving the same age to all types of gambling, while others have different age limits on different activities. For example: in New Jersey, an 18-year-old can buy a lottery ticket or bet on a horse race, but cannot enter a casino until age 21.

Internet Gambling

The popularity explosion and information revolution fueling the Internet and World Wide Web in the mid-1990's created both brand-new industries and reinvented old ones. Secure transmission technologies and the credit card combined to fashion a powerful lure for the online consumer. Internet transactions for goods and services, once considered risky propositions, are now commonplace, as seen in the success of Amazon.com and eBay. The very same factors that have led to growth in online consumer transactions, combined with the unregulated nature of the Internet, have attracted commercial online gambling.

Online gambling appears to represent a complete end-run around both government control and prohibition. A site operator need only establish itself in a friendly offshore jurisdiction, such as the Bahamas, and begin taking bets. Anyone with access to a web browser can find the site and place wagers by credit card. Confronted with this blatant challenge to local policies, regulators and lawmakers have explored the applicability of current law and the desirability of new regulation to online gambling. The issues include whether a person, located in a state that prohibits commercial gambling and accessing an offshore Internet site from a home-computer, violates either state or Federal law and further whether the site operator is as well.

Since current Federal gambling law (18 U.S.C. §1084) focuses on wire transmissions, its application to the Internet is far from explicit. Legislation has been proposed to address the problem, but it hasn't yet passed. Until it does, an uncertain mix of Federal and state law must cope with these issues' complexities.

According to §1084(a), anyone in the "business of betting or wagering" is at risk of fine and imprisonment under this statute. Enacted under Congress's power to regulate interstate commerce, the statute prohibits knowingly using a wire communications facility to transmit interstate or foreign bets and wagers. Transmitting information assisting in betting and wagering as well as transmitting the proceeds of bets and wagers to the winners also falls within the statute's ban.

The key term "wire communications facility" is cross-referenced in §1081. "The term 'wire communication facility' means any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission." This definition appears to embrace the nation's entire telecommunication's infrastructure, and therefore, render online gambling illegal so long as the transmission travels interstate. §1084(a) requires proof of the content of the transmission which may present problems in the case of transactions conducted using encrypted transmissions.

In any case, legislation has been offered to correct any deficiencies in the Federal law. The Internet Gambling Prohibition Act of 1997 would have added a "§1085 Internet Gambling" to Title 18, and criminalize any betting or wagering in any State via the Internet. The Act failed in Congress, due to lawmakers' fears of the law being extremely difficult to enforce, like Prohibition was in the 1920s.

§1084(b) states that "Nothing in this section shall be construed to prevent the . . . transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal."

As stated earlier, Congress has given the individual States the power to regulate gambling within their own borders. Since the Federal statute focuses on interstate commerce, gambling is permitted as long as the activity remains within the state. Congress emphasizes the State's power in §1084(c)--"Nothing contained in this section shall create immunity from criminal prosecution under any laws of any State." Since States are free to regulate within their borders, they are free to regulate online gambling.

For instance, the State of New York investigates and prosecutes online gambling companies for promotion of gambling activities under Article 225. Currently, such prosecutions are limited to companies physically located within the state's borders. State prosecution of online gambling providers located out of the state, but accessed by state residents may be possible, given Missouri's efforts to prosecute the Coeur D'Alene Tribe of Idaho. The Coeur D'Alene operated an Internet lottery service accessible from Missouri residents' home computers. The Indian Gaming Regulatory Act governs gambling activity on Indian reservations, but the extent to which it preempts state action in the Internet arena is uncertain.

The House of Representatives recently passed HR 2143, the Unlawful Internet Gambling Funding Prohibition Act, which would make it illegal to use any kind of bank instrument (credit cards, wire transfers, etc.) to fund internet gambling activities. Sen. Jon Kyl of Arizona has pushed a similar bill in the Senate, S 627, which has yet to come to a vote. The U.S. Chamber of Commerce has sent a letter to members of the Senate urging them to oppose the bill in the wake of a ruling by the World Trade Organization that a restriction on internet gambling would be an illegal trade barrier. Another bill is circulating in the House that would create a gambling licensing and regulation commission.

At this point, no new restrictions have been placed on internet gambling, but they may be on the horizon. Until then, the internet gambling industry will continue to grow, as it has for the past decade. For immediate updates on internet gambling regulation bills, click here.

menu of sources

Federal Material

Federal Statutes

• U.S. Code: Title 15, Chapter 24 (http://www.law.cornell.edu/uscode/15/ch24.html): Transportation of Gambling Devices
• U.S. Code: Title 15, Chapter 57 (http://www.law.cornell.edu/uscode/15/ch57.html), Interstate Horseracing
• U.S. Code: Title 18, Chapter 50 (http://www.law.cornell.edu/uscode/18/pIch50.html): Gambling
• U.S. Code: Title 18, Chapter 61 (http://www.law.cornell.edu/uscode/18/pIch61.html): Lotteries
• 18 U.S.C. §1953 (http://www.law.cornell.edu/uscode/18/1953.html) (Interstate Transportation of Wagering Paraphernalia Act)
• 18 U.S.C. §1955 (http://www.law.cornell.edu/uscode/18/1955.html) (Illegal Gambling Business Act of 1970)
• 25 U.S.C. §§2701-2721 (http://www.law.cornell.edu/uscode/25/ch29.html) (Indian Gaming Regulatory Act)
• U.S. Code: Title 28, Chapter 178 (http://www.law.cornell.edu/uscode/28/pVIch178.html): Professional and Amateur Sports Protection
• Code of Federal Regulations: Title 25, Chapter 3 (http://cfr.law.cornell.edu/cfr/cfr.php?title=25&type=chapter&value=3): National Indian Gaming Commission, Department of the Interior
• Proposed Internet Gambling Prohibition Act of 1997 (http://thomas.loc.gov/cgi-bin/query/z?c105:S.474.RS:) (not passed)

Federal Judicial Decisions

• Greater New Orleans Broadcasting Association, Inc. v. United States, 527 U.S. 173 (1999)
• Ratzlaf v. United States, 510 U.S. 135 (1994)
• Chickasaw Nation v. United States, 534 U.S. 84 (1999)
• AT&T Corporation v. Coeur d'Alene Tribe, 295 F.3d 899 (9th Cir. 2002) (http://www.ca9.uscourts.gov/ca9/newopinions.nsf/417DF987C40DCF6888256B810000BC8A/$file/9935088.pdf?openelement)

State Material

• New York State Consolidated Law Article 225 (http://assembly.state.ny.us/leg/?cl=82&a=55)
• State of Missouri v. Coeur D'Alene Tribe (8th Cir 1999) (http://lw.bna.com/lw/19990119/981520.htm)
• State Gambling Laws (http://www.gambling-law-us.com/State-Law-Summary/)
• State Gambling Agencies (http://www.gambling-law-us.com/Useful-Sites/State-Gambling-Agencies.htm)

Other References

• Gaming on the Internet (http://lviplaw.com/gaming2.html), Mark G. Tratos, Managing Partner, Quirk & Tratos
• "14 Charged in Internet Betting (http://www.washingtonpost.com/wp-srv/national/longterm/intgambling/stories/charged.htm)" (Washington Post, March 5, 1998)
• Gambling Law US (http://www.gambling-law-us.com/)
• Status of Gambling Laws (http://www.gamblingandthelaw.com/status.html)
• Minimum Legal Age to Place a Bet (http://www.gamblingandthelaw.com/agechart.html)
• General Accounting Office's Overview of Internet Gambling Issues  (http://www.gao.gov/new.items/d0389.pdf)
• United States National News Update from GamblingLicenses.com (http://www.gamblinglicenses.com/LicencesDatabaseDetail.cfm?Licenses_ID=103&Region=North%2BAmerica)