Federal law, with its prohibitions against gambling across state lines, may provide the most effective means of combating cyber-gambling under current law. As early as the 1960s, it was evident that the States could not stop gambling without federal help. During the next decade, Congress passed three separate acts, discussed below, to stop criminal gambling activity across state lines. These laws, though passed under earlier times and different circumstances, appear on first inspection to be fully applicable today to Internet gambling. However, a closer analysis reveals several shortcomings, shortcomings which will be tested as the United States prosecutes operators of online gambling operations in the months to come. To empower future law enforcement efforts, Congress is considering passing a measure targeting Internet gambling specifically.
The first and possibly most applicable law currently on the books that may be used against cyber-gamblers is the Federal Interstate Wire Act, passed by Congress in 1961. See Pub. L. 87-216, § 2, Sept. 13, 1961, 75 Stat. 491 (codified as amended at 18 U.S.C. § 1084 (1994)). The purpose of the Wire Act, as stated by Congress, was to assist the various States and the District of Columbia in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses and to aid in the suppression of organized gambling activities by prohibiting the use of wire communication facilities which are or will be used for the transmission of bets or wagers and gambling information interstate and foreign commerce.
H.R. Rep. No. 967, 87th Cong., 1st Sess. (1961), reprinted in 1961 U.S.C.C.A.N. 2631. In pertinent part, the Act makes it unlawful for anyone engaged in the business of betting or wagering knowingly [to use] a wire communication facility for the transmission in interstate and foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers . . . .
18 U.S.C. § 1084(a) (emphasis added).
The emphasis added to the language above highlights the Wire Act's limitations. By its language, the Wire Act applies to persons "in the business of betting" and therefore does not apply to the individual gambler. The courts have agreed with this interpretation, finding that the Wire Act does not apply to mere players, no matter how substantial or how frequent their bets. See United States v. Baborian, 528 F. Supp. 324, 328 (D.R.I. 1981). The Act may apply to a player who performs an integral function of the gambling business, such as being an agent or employee of the business, or sharing in the profits or losses of the casino.
The Act would seem to apply to operators of Internet casinos, because they certainly are "engaged in the business of betting." However, law enforcement must clear three hurdles before it can prosecute them under the law. First, is the Internet a "wire communication facility" within the meaning of the Act? On first impression, most people familiar with the Internet would agree that the Internet is exactly that, a "wire communication facility." After all, the Internet is nothing more than a huge network of computers that communicate over wires, whether those wires be phone lines, ethernet networks, T1 links, etc. And the Internet seems to fall within the definition of "wire communication facility" set forth in the Act:
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.
18 U.S.C. § 1081. However, some would argue that the Internet is not a wire communication facility within the meaning of the Act, which was targeted at telephone lines. They point out that the Internet was not even conceived until the late 1960s, and in its present form as the World Wide Web, is absolutely nothing like the point to point telephonic communications that Congress had in mind in 1961.
Second, is the Wire Act limited to sports betting? The first part of the Act prohibits "assisting in the placing of bets or wagers on any sporting event or contest," which seems limited to sporting events; but the next clause of the Act prohibits "the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers," which does not seem limited to sports betting. The U.S. Attorney who indicted 21 online gambling operators under the Wire Act recognized this limitation a public statement:
We will vigorously prosecute any use of the Internet to conduct criminal
activity. Federal law clearly prohibits anyone engaged in the business of betting or wagering from using interstate and international wire communications, including the Internet and telephones, in connection with betting on sports events.
Statement of Mary Jo White, U.S. Attorney for the Southern District of New York, quoted in Bill Pietrucha, Feds Expand Internet Gambling Case, Newsbytes News Network, Mar. 27, 1998. So to the extent that an online gambling operation offers only traditional casino-style games, is it outside the scope of the Wire Act? Only time will tell. However, it is worth noting that the Act alternatively prohibits the transmission of "information assisting in the placing of bets," so it would apply to a sports-betting operation that does not take bets itself, but rather matches individual players to bet against each other (e.g., Wagernet operates this way).
Third, violation of the Wire Act requires specific intent ("Whoever . . . knowingly uses. . ." 18 U.S.C. § 1084(a)). Gambling may be perfectly legal at the physical location of an online gambling operation located offshore, for example, in Antigua. And many of the business's customers may be logging in from countries where online gambling is legal as well. Hence, the government must prove that the gambling operator knew that a particular user or player was logging in from the United States. The anonymous nature of the Internet may make this specific intent more difficult to prove, though not impossible: the user's identity and location probably could be determined by the operator from credit card or billing information. Nevertheless, this requirement provides an evidentiary hurdle for the government. See Kenneth A. Freeling and Ronald E. Wiggins, Despite Tough Talk from Prosecutors, and Despite Indictments of Those Charged with Internet Gambling, No Court Has Held That U.S. Law Prohibits Such Betting, Nat. Law J., Mar. 30, 1998.
A separate section of the Act may apply to access providers. Under § 1084(d), if a common carrier subject to the jurisdiction of the Federal Communications Commission receives notice from a local, state, or federal law enforcement agency that the carrier's facilities are being used to transmit "gambling information," the carrier must stop furnishing the facility to the subscriber. Companies like AT&T and Sprint, which provide the phone lines on which much Internet traffic flows, clearly are within this section. That means that law enforcement could demand telephone companies to disconnect individuals engaged in Internet gambling. If the company refused, law enforcement could bring charges against the company under the Wire Act. However, current laws are in the works to limit ISP liability; these proposals reflect a general policy recognition that ISPs and common carriers should not be held liable for all the activity that goes on their systems.
On the same day Congress passed the Wire Act, it also passed the Travel Act. See Pub. L. 87-228, § 1(a), Sept. 13, 1961, 75 Stat. 498 (codified as amended at 18 U.S.C. § 1952 (1994)). The Travel Act prohibits travel or using "any facility in interstate or foreign commerce, with the intent . . . to promote, manage, establish or carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity." Unlawful activity is defined to include "any business enterprise involving gambling . . . in violation of the laws of the State in which they are committed or of the United States." Unlike the Wire Act, the Travel Act is not limited to sports betting, and therefore it would seem to have a broader applicability to Internet gambling. However, there has been no mention of criminal liability under the Travel Act in the recent indictments of cyber-gamblers.
The key to applying the Travel Act to Internet gambling is the meaning of "facility" as used in the Act. In United States v. Smith, 209 F. Supp. 907 (E.D. Ill. 1962), the court stated that Congress did not intend to limit the application of the Travel Act "to cases in which there was an actual physical transportation of substantive materials in interstate commerce." Id. at 916. The court went on to explain that "by the use of a telephone a voice or message is actually transported by wires across state lines to the same extent as materials are transported over state lines in moving vehicles." Id. at 916. This same reasoning should apply to data transmitted state-to-state via the Internet. However, for the reasons expressed above, whether a court will actually apply the Travel Act to Internet communications is
unclear.
In addition, the Travel Act has been construed to apply only to those engaged in criminal enterprises, not individuals. See United States v. Roberson, 6 F.3d 1088, 1093 (5th Cir. 1993) ("The purpose of the Act is clear: It aims to deny those engaged in criminal business enterprise access to channels of interstate commerce. It is not aimed a individual substantive offenses." (citing McIntosh v. United States, 385 F.2d 274 (8th Cir. 1967)). Accordingly, the Travel Act is not likely to be applied to individual cyber-gamblers.
The third current federal law that can be used to combat Internet gambling is the Organized Crime Control Act of 1970, Pub. L. 91-452, title VIII, § 803(a), Oct. 15, 1970, 84 Stat. 937 (codified as amended at 18 U.S.C. 1955 (1994)). This law prohibits conducting, managing, financing, etc., a gambling business involving five or more persons, which has been in business for more than 30 days or has gross revenue of more than $2000 on a single day, and is in violation of the law of the state in which it operates. See 18 U.S.C. § 1955(a), (b).
By its language (and as indicated by its title), the Organized Crime Control Act does not apply to the individual gambler; in fact, Congress intended it to apply to large-scale illegal gambling activities. See I. Nelson Rose, Gambling & the Law 49 (1986). The Supreme Court has confirmed that the Act does not apply to individuals. See Sanabria v. United States, 437 U.S. 54, 70-71 n.26 (1978) (defining "conduct" to be "any degree of participation in an illegal gambling business, except participation as a mere bettor").
The Act would seem to apply to an Internet casino, as long as it takes five or more people to operate. This requirement would seem avoidable by at least some online gambling operations. After all, isn't it possible that two, three, or four people could set up and maintain the gambling operation Call of the gambling activity happens inside a computer. Assuming the five-person requirement is met, an Internet casino otherwise satisfies the requirements of the Act. Interestingly, to satisfy the requirement that the gambling business is in violation of the law of the state in which it operates, the gambling business need not be found guilty in state court, but rather there need only exist a state law that it is violating. See United States v. Murray, 928 F.2d 1242, 1245 (1st Cir. 1991); 18 U.S.C. § 1955(b)(i). Certainly, this requirement is met for Internet gambling operations under any of the state law analyzed here.
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