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Online Gambling

Gambling has been an entertaining pastime in casinos for several years. The expansion of the Internet now makes it possible to play casino games online. However, this raises the question of whether online gambling is a legal activity. While federal law criminalizes “betting or wagering” over “a wire communication,” courts have interpreted this differently than the Department of Justice.

What Laws Apply To Online Gambling?

The federal government regulates online gambling activity.  There are several laws that apply to betting and gambling over the Internet. Most importantly, the Federal Wire Act of 1961, does not allow businesses to engage in certain online betting activity in the United States. It is important to note that federal laws can only regulate online gambling activity that takes place in the United States. They do not have the authority to regulate online gambling that takes place entirely in other jurisdictions. Among other laws, Congress also enacted the Illegal Gambling Business Act of 1970, as part of the Organized Crime Control Act of 1970. This Act was meant to target large-scale illegal gambling operations that funded organized crime.

Is Online Gambling Illegal?

In a 2002 case, In re MasterCard International, Inc., the United States Court of Appeals for the Fifth Circuit held that the Federal Wire Act only applies to Internet sports gambling. The Fifth Circuit affirmed the United States District Court for Eastern District of Louisiana’s finding that the “plain language” of the Wire Act does not prohibit “Internet gambling on a game of chance.” Federal courts have continued to interpret the Wire Act as limited to only “sporting events or contents” and not all online gambling. Accordingly, these holdings establish that federal law does not make Internet lotteries and casinos illegal. However, the Department of Justice continues to maintain that the Wire Act prohibits all forms of online gambling, not just sports gambling.  Therefore, there is not enough clarity in the interpretation of federal laws to establish whether online gambling is entirely illegal.

What Are The Legal Consequences for Participating in Illegal Online Gambling?

Most often, illegal online gambling is a criminal, and not a civil, offense. While this ensures stricter court proceedings for criminal defendants, it may also lead to consequences that are more serious. Since online gambling may involve parties from different jurisdictions, governments may only impose penalties for online gambling that occurs within their own borders. However, legislators have enacted statutes to stop American residents from participating in online gambling. For example, federal law makes it illegal to place bets over the Internet from within U.S. jurisdictions. Additionally, the Unlawful Internet Gambling Enforcement Act of 2006, makes it illegal to accept funds for online gambling in violation of federal or state laws. This federal statute also requires financial institutions to identify and deny transfers for unlawful online gambling. The aim of this federal law is to identify and stop the institutions that run online gambling, not simply to find and penalize those who participate on these sites.

At our law firm, we help inform businesses and individuals about the various federal laws that apply to online activities and transactions. You may contact us to discuss with an attorney how the online gambling guidelines apply to you.