Criminalizing Internet Gambling: Should TheFederal Government Keep Bluffing Or Fold?

American University Criminal Law Brief Volume 2 Issue 1 Article 2 2006 Criminalizing Internet Gambling: Should TheFederal Government Keep Bluffing Or Fold? Wesley Scott Ashton American University Washington College of Law Follow this and additional works at: https://digitalcommons.wcl.american.edu/clb Part of the Criminal Law Commons Recommended Citation Ashton, Wesley Scott. "Criminalizing Internet Gambling: Should The Federal Government Keep Bluffing Or Fold?" Criminal Law Brief 2, no. 1 (2006): 3-12. This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University Criminal Law Brief by an authorized editor of Digital Commons @ American University Washington College of Law. For more information, please contact . CRIMINALIZING INTERNET GAMBLING: SHOULD THE FEDERAL GOVERNMENT KEEP BLUFFING OR FOLD? Wesley Scott Ashton* bet. Similar to the online casino, the winnings are credited to, and losses and fees are debited against, the gambler’s account. Worldwide, millions of people gamble on Internet A recent addition to Internet gambling is the formation gambling sites, generating billions of dollars of online revenue. of online poker sites where players log-on to play against other Many of these online gambling operations presently accept bets players.6 Under this business model, the website operator does from United States citizens in violation of U.S. federal laws. not directly participate in the gambling; instead, the web operaMost of these Internet gambling operations are based in foreign tor manages the poker pot while the players gamble between jurisdictions where Internet gambling is legal. Consequently, it themselves. The website’s random number generator deteris rare for the U.S. Government to prosecute these crimes. In mines what cards the players get and the web operator takes a addition, other changes to the gambling landscape in the U.S. cut, called a “rake,” of each pot, which is the total amount of and the world, such as the rise in state-sponsored lotteries, the money bet in a single game. Typically, the rake is 2 to 5 % of growth of gambling operations on Native American reservathe pot. Under this model, the operator of the online poker site tions, and the increase in mainstream foreign does not gamble against the poker players. Only investment in online gambling, beg the question: the poker players are gambling, and they gamble Should the Federal should the Federal Government continue to bluff against one another. Government continue to on the issue of outlawed Internet gambling, or is bluff on the issue of out- Federal Laws Applicable to Internet Gambling it time to fold and encourage the creation of state and federal mechanisms for constructively regulawed Internet gambling, There are many federal laws applicable to lating this industry? or is it time to fold and Internet gambling activities, including (1) 18 This paper first describes the various encourage the creation of U.S.C. § 1084, known as the “Wire Act,” which aspects of Internet gambling, and then reviews state and federal mechacriminalizes the use of interstate telephone facilthe U.S. criminal laws that apply to gambling nisms for constructively ities by those in a gambling enterprise to transconducted online. As part of this review, severmit gambling-related information, (2) 18 U.S.C. al criminal and civil cases involving Internet regulating this industry? § 1952, known as the “Travel Act,” which crimgambling activities are discussed. Finally, how inalizes the use of any interstate facility with the rapidly changing gambling landscape in the intent to promote an unlawful activity such as illegal gambling, United States and the world may affect future federal lawmak(3) 18 U.S.C. § 1955, known as the “Illegal Gambling Business ing efforts for controlling Internet gambling is considered. Act,” which prohibits illegal gambling businesses involving five or more persons, (4) 18 U.S.C. §§ 1956 and 1957, which crimiThe Evolution of Internet Gambling nalize money laundering, and (5) 18 U.S.C. §§ 1961 and 1962, which outlaw racketeer influenced and corrupt organizations.7 In 1999, there were 700 Internet gambling sites.1 While other federal gambling statutes may conceivably apply to However, by 2004 more than 1,800 offshore gambling Internet Internet gambling activities, the present article is limited to dissites received about seven billion dollars in bets, with the online gambling industry projected to be an 18.4 billion dollar per year cussing the seven statutes listed above.8 2 industry by 2010. Internet gambling sites offer a variety of The Wire Act gambling venues, such as casino-style gambling, off-shore sports booking operations for betting on sporting events and horse races, etc., and, recently, increasingly popular interactive The Wire Act9 pertains to (1) persons engaged in the Internet party poker games. A brief explanation of how these business of betting or wagering, who (2) knowingly use a wire various Internet gambling sites operate follows. communication facility (i) for the transmission of bets or An Internet gambling casino is designed to mimic a wagers, or information assisting the placement of bets or real casino, and the gambler is typically invited to download wagers, in interstate commerce or foreign commerce on any gambling software, open an account, wire money to the account sporting event or contest, or (ii) for the transmission of a wire to purchase virtual “chips,” before the gambler may proceed to communication which entitles the recipient to receive money or play various online games of chance such as slots, blackjack or credit as a result of bets or wagers, or (iii) for information assistroulette.3 The outcomes of play are determined by a random ing in the placing of bets or wages.10 However, the Wire Act includes a “safe harbor” provision which exempts from criminal number generator.4 The winnings are credited to, and the losses liability the transmission, in interstate or foreign commerce, of are debited from, the user’s account. information for use in news reporting of sporting events or conAnother Internet gambling business model is patterned tests, or for the transmission of information assisting in the placoff of bookmaking on sporting events, where the gambler opens ing of bets or wagers on a sporting event or contest from which an account and then can place bets on various sporting events.5 a state or foreign country, where betting on that sporting event Internet bookmaking activities may charge a commission, called or contest is legal, into a state or foreign country in which such a ”vig,” on each bet. The vig can be as high as 10% of the total Introduction 3 Criminal Law Brief betting is legal.11 In other words, the Wire Act prohibits persons engaged in the business of betting o (...truncated)