Is Internet Gambling Legal?

This article has been prepared to discuss the legality of online gambling and the relevant rules and regulations. These laws affect individuals, businesses, startups, and entrepreneurs as they’ve recently expressed their interests in this topic. Therefore, we will discuss the relevant state and federal laws.

It’s important to note that in Murphy v. NCAA, the Supreme Court struck down the Professional and Amateur Sports Protection Act (“PASPA”) and granted the states the right to regulate sports gambling within their own jurisdictions. In general, placing an online wager is legal but it should not be placed on a website that is located in the United States. In other words, the gambling website and its owner must not reside or do business within the United States and its territories. So, for this reason, individuals may run into contradictory state laws which will be referenced here.

What are the state laws?

There are states that have legalized internet gambling in their jurisdictions. For example, New Jersey and Pennsylvania have taken affirmative action on legalizing online casinos, online poker, and online sports betting. New Jersey has listed several authorized websites which include well-known hotels and casinos. So, the individual must be located in New Jersey to play for real money on those authorized websites. There are other states – e.g., Nevada, Delaware – that have legalized some types of online gambling activities but not all.

California, along with other states, has introduced bills to legalize internet gambling. The California State Legislature has introduced several laws for this reason. For example, it introduced Assembly Bills 1677 and 1294 and a couple of Senate Bills. Assembly Bill 1677 was known as the Internet Poker Consumer Protection Act (“IPCPA”) and attempted to establish a framework to authorize intrastate internet poker. It sought to authorize eligible entities to apply for a 7-year license to operate an authorized poker website offering online poker games to registered players in the state.

In California, the Gambling Control Act – codified under Business & Professions Code Sections 19800, et seq. – mandates the owner of a gambling organization to submit and receive a state gambling license. This is a complicated process because the government will conduct background investigations. In California, land-based gambling, sweepstakes gambling, charitable/house-based gambling, and lotteries are legal at this time.

What are the federal laws?

The following federal laws are applicable to internet gambling:

The Unlawful Internet Gambling Enforcement Act prohibits individuals engaged in the business of betting from knowingly accepting payments to settle unlawful internet gambling debts pursuant to 31 U.S.C. Sections 5361-5367.

The Federal Wire Act prohibits individuals from using the telephone or telecommunications for illegal gambling business on sporting events or contests pursuant to 18 U.S.C. Section 1084. The Travel Act prohibits individuals from using interstate commerce facilities to conduct an illegal gambling business pursuant to 18 U.S.C. Section 1952. RICO prohibits individuals from conducting an illegal gambling business for collecting unlawful debts or engaging in a pattern of gambling offenses pursuant to 18 U.S.C. Sections 1961, et seq.

The Illegal Gambling Business Act prohibits individuals from operating an illegal gambling business pursuant to 18 U.S.C. Section 1955. Anti-money-laundering statutes prohibit individuals from laundering proceeds from an illegal gambling business or to retransfer them into the business pursuant to 18 U.S.C. Section 1956. The same laws prohibit individuals from spending $10,000 or more of the illegal gambling business at any one time and location pursuant to 18 U.S.C. Section 1957.

The enforcement of these laws has been challenged by using the First Amendment, Commerce Clause, or Due Process Clause. First Amendment has been used to make such challenges because gambling has an advertising and auxiliary communication component. The Commerce Clause grants Congress the power and authority to regulate commerce with foreign nations, states, and Indian Tribes and to make the necessary and proper laws for carrying those powers. Hence, a gambling business constitutes a “commercial activity” and is subject to the Commerce Clause. The Due Process Clause was designed to protect an individual’s liberty interest in not being subject to a forum’s binding judgment with which he has not established meaningful contacts. It is meant to provide a fair warning and certain degree of predictability in the judicial system. Stated otherwise, it allows a defendant to reasonably anticipate being dragged into court based on his/her conduct and connection with the forum.

It’s important to know your legal rights and responsibilities when it comes to internet gambling. Please contact our law firm to speak with a knowledgeable internet and technology attorney at your convenience.