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MasterCard Wins Hollow Victory

19 September 2004

MasterCard and Visa recently won a major victory in the Court just below the U.S. Supreme Court, declaring that they could not be sued for being involved with Internet gambling. Yet these and other credit card companies, and the banks that issue the cards, have announced that they are abandoning this extremely lucrative market.

No one likes to be sued. But the suits brought against MasterCard have not been for innocuous breach of contract. Instead, the complaints allege RICO, Racketeer Influenced and Corrupt Organizations.

Imagine having to explain to your children that, "No, my company does not collect credit card debts like the Sopranos."

The RICO Act adds injury to the insult of being declared a racketeer in the form of triple damages. More scary are RICO's criminal penalties. The government can throw you in prison and take everything you purchased with tainted money.

Although the credit card companies have been winning most of their lawsuits, the wins are not clean.

In the latest decision, the U.S. Fifth Circuit Court of Appeals agreed with the trial judge that, given the facts alleged, MasterCard and Visa could not be sued for allowing their cards to be accepted by Internet casinos.

But the plaintiffs' lawyers made mistakes that could be fixed.

The case involved numerous class action lawsuits from around the country. The trial judge ordered the plaintiffs to choose two test cases, to see whether the RICO claim was any good. This meant that potentially millions of players were represented by two typical individuals.

For some reason, the lawyers chose Larry Thompson of Kansas and Lawrence Bradley of New Hampshire.

RICO requires proof that the defendants violated certain federal laws or any state felony anti-gambling law.

Illegal gambling in Kansas and New Hampshire is almost always a misdemeanor, not a felony.

Kansas does make it a felony to set up or collect an illegal bet. But the involvement of the credit card companies ended before the first bet was made.

New Hampshire was an even worse choice. The lawyers alleged violations of civil statutes, which were not even misdemeanors, let alone felonies.

The plaintiffs' lawyers could have still won, if they proved a violation of federal anti-gambling laws. The Wire Act, for example, prohibits gambling businesses from knowingly using an interstate wire to transmit "bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest." The statute also uses the phrase "bets or wagers" without adding "sporting event."

The MasterCard decision is important because the Court held that the Wire Act is limited to sports bets. Thus, under federal law, as it is now written, Internet casinos and lotteries are legal.

Plaintiffs' lawyers had again made a terrible mistake. Not once did they allege that either Thompson or Bradley, who gambled for years online, ever bet on a sporting event.

The case had other weaknesses. But it is easy to see why credit card companies are uneasy. There are states which make illegal gambling a felony.

And next time, the plaintiff will be someone who is happy even when his team loses, so long as it beats the spread.

Copyright 2003, all rights reserved worldwide Gambling and the Law® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

MasterCard Wins Hollow Victory is republished from Online.CasinoCity.com.
Recent Articles
Best of I. Nelson Rose
I. Nelson Rose

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Gambling and the Law

> More Books By I. Nelson Rose

I. Nelson Rose
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Compulsive Gambling and the Law

> More Books By I. Nelson Rose