Is Online Gambling Legal?
This is an extremely important question so we dedicate a lot of research to it. Here
are some excerpts of recent legislative action as reported by Mike Brunker of MSNBC.
- A bill to ban Internet gambling resurfaced Tuesday in the Senate after
undergoing a major change between legislative sessions: It no longer threatens casual bettors with fines and
THE SO-CALLED casual bettor provision - which for the first time would have
criminalized the act of placing a bet - was deleted from recent drafts of Sen. Jon Kyl's Internet Gambling
Prohibition Act obtained by MSNBC.
Kyl's office did not return repeated phone calls seeking confirmation or comment on
its removal, but a political ally said the provision was excised because of concerns about
"I'm not sure that law enforcement would have spent the time prosecuting them," said
Bill Saum, a NCAA official who is scheduled to testify on behalf of the Kyl bill Tuesday at a Senate Judiciary
subcommittee hearing. "We need to create bills that are enforceable."
Another Kyl supporter, Bernie Horn, of the National Coalition Against Legalized
Gambling, described the penalty as "an unnecessary irritant."
"The penalty against individual bettors was not something that anyone was going to
enforce," he said. "It was just there on the theory that most people obey the law."
The provision would have subjected Internet gamblers with up to three months in prison
and fines of $500. Instead, the bill now concentrates its prosecutorial firepower on operators of online casinos
and sports books, who would face up to four years in prison and fines of up to $20,000 or the amount wagered,
whichever is greater.
The removal of the casual bettor provision caught many observers by surprise, since
the Senate approved Kyl's bill by a 90-10 vote in July with the penalty intact. The Kyl bill was later stripped
from an appropriations bill, forcing the Arizona Republican to begin his drive anew in the current legislative
"I'd love to know the rationale myself," Sue Schneider, co-chair of the Interactive
Gaming Council, said of the decision to drop the penalty. "I guess that's a pretty unpleasant idea, putting people
in jail for placing a bet on their computer."
The premise that operators of gambling Web sites, which operate out of foreign
territories, can be prosecuted also has been questioned.
"An attempt to ban Internet gambling is really doomed to futility," said Tom W. Bell,
a professor at Chapman School of Law who analyzed the issue for the Cato Institute. "That's one reason we're going
to see legality because you just can't stop it effectively. Gambling is very popular in the U.S. and there's every
reason to believe its popularity will carry over onto the Internet."
And now, some observations on existing laws…
According to the Federal Interstate Wireline Act, it is currently illegal to offer
online wagering via the Internet within the United States of America. The Interstate Wireline Act bans gambling
operations from remote locations unless states specifically permit it. The Interstate Wireline Act forbids
interstate gambling over the telephone or other wired devices but not the Internet by name.
In layman's terms, this means you can't legally run a web server that resides in the
USA and offer gambling from that server over the Internet. To this date No U.S. court has ruled that the Wireline
Act includes the Internet when the server resides outside the United States. Also, excerpts from Sportsform, the
Weekly Encyclopedia of Football & Basketball, Vol. 22, Issue 4 - September 12 to September 18, 1996 provides an
interesting glimpse into offshore bookmakers and how they have circumvented the legality issues:
(Quote) Kenneth F. Hense, the country's foremost lawyer in the world of gambling, says
offshore bookmaking is legal and beyond the jurisdiction of the United States government. Hense said John Russell
of the United States Department of Justice said in April and again in July that the justice department has no
jurisdiction over offshore bookmakers. According to Hense, here is what both bettor and bookmaker must do to avoid
breaking the law:
There first must be a transfer of money from the bettor to a bank account in a foreign
country. The money can not be transferred from bettor to bookmaker. The bank, working with the bettor and
bookmaker, then becomes the third party to betting, paying the bookmaker when the bettor loses and accepting
transfers from the bookmaker when the bettor wins. Both bookmaker and bettor do their business via a legitimate
banking facility and not between each other.
The player can then have the foreign bank transfer his money, in dollars, back to his
American bank account any time he wishes. The key is the money transfer, Hense said. "If the money is transferred
directly from a bettor in the United States to a bookmaker in a foreign country, or vice versa, that could permit
the U.S. government to claim jurisdiction under the Travel Act and everybody could be in trouble."
By using the third-party foreign bank as an intermediary, there is no violation of the
Travel Act, and the money and what it is to be used for moves beyond the jurisdiction of the United States
government, Hense said.
Hense said the first question any court asks is "who has jurisdiction?" and the
government has already said it has no claim on this under interstate gambling laws.
He said bettors should know with whom they are doing business and whether a legitimate
government licenses the gaming operations. (End Quote)
Most casinos are required to use a bank as an intermediary in the country where they
are licensed. And all funds are collected by that bank are not distributed until the player loses or requests the
money be returned.