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The Growing, Yet Illegal Market of Online Gambling

Since the Internet allows companies to conduct gambling online, albeit illegally, the legal implications of the sport have come into consideration. Federal and State level gambling laws strictly restrict and regulate gambling throughout the country. The opportunity to conduct gambling online allowed site operators to register sites offline, in districts that allowed online gambling, and begin taking bets while circumventing United States law.

However, according to the Wire Act, under 18 U.S.C. § 1084, an operator that utilizes the American telecommunication network to transmit information to place and manage wagers online is subject to prosecution, fines, and possibly imprisonment. In a 2003 civil case involving an Internet financial services company, the United States government prosecuted and settled with the company for $10 million regarding the company’s involvement in online gambling related transactions. Transmitting information in relation to wagers may be exempt from the Wire Act, under 18 U.S.C. § 1084(b), if the information is transmitted from and to a state or country that permits such betting.

The U.S. Department of Justice maintained that all gambling within America was illegal under the Wire Act. However, in a 2002 case, the Fifth Circuit held in In re Mastercard International, Inc. that Congress intended the Wire Act to apply exclusively to sport-related online wagers. In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act, which made it illegal to accept payments in relation to online gambling. Interestingly, this Act does not make it illegal to conduct online gambling.

Perhaps recognizing the potential profit in the Internet gambling market, both federal and state governments have taken steps to soften related legislation. Online gambling acts have since turned away from strict restriction and moved towards regulation. States, including California, have moved to legalize, license and tax Internet gambling in order to draw profits from this industry. Supporters of legalization estimate that Internet gambling could generate profits of $100-$250 million a year. Legalizing online gambling would also give states the opportunity to sell lottery tickets online. The Internet gambling companies that stand to benefit from legalization are taking aggressive steps to influence legislation to legalize online gambling.

At the Law Offices of Salar Atrizadeh, we guide California consumers and businesses in matters related to the Internet and Cyberspace by using legal knowledge and skills to create solutions for our clients. Please contact us today online or at (310) 694-3034 to set up a confidential consultation.