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Best of I. Nelson Rose

Gaming Guru

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The Law of Internet Gambling

29 November 1999

Editor's note: On November 19, 1999, the United States Senate passed its version of the Kyl bill (Kyl Bill Sails Through Senate, Denounced by Interactive Gaming Council). This outline was written before the Senate's vote.

I. Gambling online.
  1. Individuals may make wagers from any computer with a modem.
    1. Greatest concerns are the use of a personal computer ("PC") from home or office.
      1. Can the operator be trusted?
        1. Is the game honest?
        2. Is the financial transaction secure?
        3. Does the operator have connections with organized crime?
      2. Gambling creates dangers for society. Can the law --
        1. Minimize lost work and school time?
        2. Protect players from themselves, especially
          1. Problem gamblers?
          2. Minors? Mark Griffiths, Adolescent Gambling (1995).
        3. The Internet itself may be addicting, as are video games. Engaging gambling games compound the problem. Mark Griffiths, Presentation to National Research Council (Sept. 1, 1998).
      3. Are criminal laws being broken by the bettor? Operator? Server? Financier? Site developer?
      4. Older, established gambling businesses, especially the slower forms, such as pari-mutuel wagering on races, have difficulty competing with technologically advanced gaming machines.
        1. States have direct financial interests -- legal gaming paid $16.8 billion in state taxes in 1996.
        2. The livelihood of hundreds of thousands of workers depends upon legal gaming.
        3. Does government have a legitimate role in keeping alive obsolete businesses? The gaming market is almost never a true free market, due to artificial government barriers.
    2. Most operators have sites on the World Wide Web and are contacted by dialing a server, such as America Online, using the PC's modem.
      1. The best list is Rolling Good Times Online.
      2. Restrictions range from mere written warnings to "check your local laws" and "you must be over 18" to Finland's requiring players have a local bank account (besides being entirely in Finnish).
      3. Some computerized wagering systems, such as YouBet!'s arrangement with Pennsylvania's tracks, avoid servers and the Web -- bettors' modems call the off-track betting operators' computer direct.
      4. Other technology is being developed, such as stand-alone Internet terminals that accept cash. A Burger King restaurant in New York's financial district installed 20 computers and a T1 line and is giving 20 minutes of time for a minimum purchase of $4.99 ($3.29 for breakfast). Philip Greenberg, New "Combo" Meal: Dine and Surf, N.Y. Times (July 30, 1998) (emailed, no page available).
      5. Even the PC can be eliminated: MonaCall allows cybercasino gaming from a touch-tone phone.
    3. Gambling requires consideration, so only sites that accept money wagers are included in this discussion.
      1. Internet gambling sites require players to deposit "front money," i.e., payment in advance, by credit/debit card, wire transfer, snail-mailed check or money order, or Internet funds, like CyberCash.
      2. Credit card transactions may take days: Operators sometimes wait until payments have cleared to prevent players canceling after losing.
        1. Gambling debts are usually not legally collectable; courts leave the parties as they find them; if the transaction has cleared, players usually cannot sue to get their money back, even if the gambling was illegal.
        2. A player who lost $70,000 in 18 months online has filed a counter-claim against Visa and MasterCard, alleging the bets were illegal in California, and asking for an injunction. Providian National Bank v. Haines, Case No. V980858 (Superior Court, Marin County, California) (Cross-complaint filed July 23, 1998) Courtney Macavinta, Net Gambler Sues Credit Firms, CNET NEWS.COM, (July 24, 1998, 4 a.m. PT).
    4. Some operators claim they are licensed by foreign governments.
      1. Smaller countries, often island nations in the Caribbean and South Pacific, have issued licenses, usually to Americans and other foreigners.
        1. Government background checks of these gaming operations are often spotty or non-existent.
          1. Grenada sold an exclusive license to one operator, Sports International, and allowed that operator to sell sub-licenses. It appears the government did not check license applicants' backgrounds.
          2. However, Antigua uses the FBI, Interpol and Scotland Yard for background checks on all applicants.
        2. Government oversight of these gaming operations is also often spotty or non-existent.
          1. Players have little guarantee that the games are run honestly, they will be paid if they win, or even that they can get their front money returned.
          2. Again, there are exceptions. Antigua has set up an anti-fraud division to investigate players' complaints, funded by its annual fees of $75,000 for sports betting and $100,000 for cybercasinos.
      2. Some operators claim that they are licensed by First World Countries, including the United Kingdom, Austria and states in Australia, to accept bets over the Internet.
        1. In most cases the laws of these jurisdictions are either silent or would seem to prohibit such bets.
        2. However, some larger jurisdictions, including the U.K., have allowed their licensed operators to accept telephone wagers from the U.S. for about 10 years.
      3. Some governments run Internet games themselves: Online lotteries are owned by the Principality of Liechtenstein, Finland and the Coeur d'Alene tribe in Idaho.
      4. The operator's computer may be on American soil, even if it claims to be operating overseas under a foreign license.
    5. Some operators do not even claim to be licensed.
  2. Types of gambling.
    1. Sports betting -- May still have the greatest dollar volume, though there are now more casino sites online.
      1. Betting on professional and college sports events was the first form of Internet wagering, although operators used their websites primarily to advertise toll-free or 900 telephone numbers. Even today, more money is bet with licensed overseas sports books by phone than by computer.
      2. Players can bet ($11 to win $10) on real games against the bookie, or participate in fantasy sports leagues.
      3. Sports betting is one of the most attractive forms of at-home gambling.
        1. Bettors trust the results more than playing against an unseen computer and the outcome of wagers can be independently verified.
        2. Most Americans live in a state with a state lottery and casino gaming is legal in 29 states and U.S. territories, but legal sports betting is not readily available.
        3. Sports betting is already associated with at-home gambling: placing a bet by phone (although with an illegal bookie) and watching the game on T.V. Sports betting, legal and illegal, began to boom with the broadcasting of Monday Night Football.
    2. Casinos -- Blackjack, video poker and virtual three-reel slot machines, craps, roulette, baccarat, keno, pai gow poker and Caribbean Stud.
      1. Software quality, especially speed, graphics and sound quality, vary widely.
        1. Many games are painfully slow, because of the time needed to download illustrations like playing cards.
        2. Most sites allow front-loading, putting images on the PC's hard drive with a CD or by downloading before play begins. These games play as fast and are nearly as entertaining as their counterparts played in a live casino.
        3. Some sites allow chats, so players may have social interactions with other players.
        4. The best sites turn the PC screen into a virtual duplicate of a casino video slot machine.
      2. Minimum and maximum limits on wagers also vary widely. Even with low stakes, the fastest games can run through hundreds of dollars an hour.
      3. Remote live play is now possible -- a patent was issued in 1998 for a casino with video cameras connected to the Internet.
    3. Casinos with "no purchase necessary" -- Dozens of sites allow players to obtain a small number of chips for free.
      1. Most play is with chips purchased by credit cards.
      2. But the free alternative means of entry may make the games non-gambling "sweepstakes" under some state laws and maybe under federal law. See, Fed. Communications Com'n. v. American Broadcasting Co., 347 U.S. 284 (1954).
    4. Lotteries -- The largest operators are the Principality of Liechtenstein and the Coeur d'Alene Indian tribe of Idaho.
      1. Games vary from passive, once a week drawings to instant tickets, indistinguishable from slot machines.
      2. Unlike traditional lotteries, many games do not have a pooling of players' funds to create the prize.
    5. Bingo -- Often connected with an Indian bingo hall.
      1. True bingo -- at-home players play their cards online with and for money against other players online, or conceivably against other players both online and in real bingo halls.
      2. Proxy play -- at-home players are represented by a player or computer acting as their agent in a live game played in a bingo hall.
        1. Future play -- Players buy a card, which is then played on their behalf in a live game.
        2. Past play -- Players buy a card and watch a bingo game on T.V., which was actually played hours before. A tribe obtained an injunction allowing it to offer at-home proxy play of Megabingo, on the theory the game is being played on Indian land, as required by federal law, and the televised game was not relevant, because players did not have to watch or participate.
      3. Free -- Like other games, bingo may be played with no purchase necessary, if the prize is put up by a sponsor, similar to a promotional sweepstakes. In January, 1999 one site reported having 2,849 players competing for a $700 jackpot. www.gamesville.com, reported in article on RGT Online (Feb. 18, 1999).
    6. Off-Track Betting ("OTB") -- Players may bet on horse races and dog races.
      1. OTB, in its broadest definition, is betting on a race not taking place where the bettor is. Simulcasting allows the bettor to see the distant race live.
      2. OTB was the first legal gambling by wire. It began with intrastate intertrack wagers only when both tracks had races, then betting was allowed at fairgrounds and other tracks which were not having races, then intertrack interstate and finally stand-alone OTB parlors.
      3. Live horse racing is slow, with 20 minutes between races. Allowing bettors to wager on races taking place at other tracks creates non-stop betting action.
      4. There is no reason for bettors to be physically present, although they like to see the races on a screen.
      5. Computers have been connected with handicapping races for decades.
      6. As with sports betting, the outcome of wagers can be independently verified.
    7. Poker -- Players play against each other online, either for play money, AOL has a poker room, or for real money.
    8. Day trading – at least one Internet gaming site (www.Bestbetsports.com) is making book on the Dow Jones average. Daniel Schiffman, New York Roundup in The Gaming Lawyer submitted August 13, 1999 (to be published). The Seventh Circuit ruled on August 10 that transportation and utility stock average futures are permissible "investments," as are disguised bets on the Dow. Id.
  3. Size of the industry.
    1. 282 sites were listed on Rolling Good Times on February 13, 1999, as accepting real-money wagers. However, this includes dozens which may appear to be independent, but may actually be operated by a single company or its affiliates. See, Bigham's Viewpoint, "Internet Clogging Up With Casinos," at www.wheretobet.com/index.html (April 22, 1998). Many of these are "no purchase necessary" casinos.
    2. The figure most frequently heard is $10 billion a year in revenue for online gaming by shortly after the turn of the century.
      1. The number comes from two sources:
        1. Frank Feather, futurist, 1996 World Gaming Congress & Expo keynote speech, predicted that alternative delivery methods like the Internet could reach 20% of the industry's $50 billion North American revenue within ten years.
        2. Jason Ader, a senior gaming analyst with Smith Barney, May 1995, quoted by the Chicago Tribune as estimating at-home wagering could become a $10 billion industry.
      2. To generate $10 billion in revenue would require that $100 billion be wagered each year.
      3. Although the rate is constantly increasing, the current volume of gambling on the Internet appears to be in the range of less than $2 billion, generating revenue of no more than $200 million. I derived this estimate from the little public information available from Internet operators.
        1. Although growing exponentially, commerce on the Internet as a whole is still not very large, yet, compared to traditional markets.
          1. Online sales to Americans of all products and services first topped $1 billion in 1997. Newsweek (Jan. 12, 1998). The Home Shopping Network, a comparable media, passed the $1 billion mark in phone-in orders two years earlier.
          2. The Los Angeles Times reported Internet sales rose from $2.4 billion in 1997 to $8 billion in 1998. L.A. Times at C11 (Feb. 16, 1999). But, it is unclear whether this represents worldwide sales, or only the U.S.
          3. Even if the $8 billion is U.S. only, it is "less than 1% of the country's total retail sales. Id.
        2. eLottery, Inc., f.k.a. UniStar Entertainment (being spun off from Executone Information Systems Inc.), spent millions developing the Coeur d'Alene's US Lottery. On April 28, 1998, this Internet game had a registered customer base of about 22,000, with about 4,200 active players. Actual ticket purchases equaled approximately $600,000 during the third quarter of 1997. By comparison, the Home Shopping Network had 4.6 million active customers.
        3. In confidential conversations I had with international lottery executives in June 1997, I was told the biggest online lottery, Liechtenstein's InterLotto, has sales of approximately $50 million per year. This is consistent with published statements.
        4. Sports International, now called Interactive Gaming & Communications Corp., is publicly traded and thus one of the few companies that has to disclose its finances. The handle for 1996, the amount wagered by all customers, totaled $58,482,731. 10-K, filed Ap. 4, 1997 with the S.E.C. Revenues from net wins totaled $2,752,252. Because its costs are so great, especially its phone bills, the company actually lost money in 1996. By comparison, $2,428,600,000 was bet with licensed sports books in Nevada in 1995.
        5. When the federal government filed its first prosecutions of Internet sports betting, the U.S. Attorneys estimated that "on-line sports betting had garnered $600 million in gross revenues last year, up from about $60 million in 1996." "14 Are Charged With Taking Sports Bets Over the Internet," N.Y. Times at A1 (Mar. 5, 1998). The definition of "gross revenues" is unclear.
    3. Problems -- Internet gaming is relatively small and likely to stay that way for at least the next few years.
      1. Technology -- The Internet does not meet the Americans' high expectations of what modern technology is supposed to deliver, based on their experiences with telephones, televisions, radios, microwave ovens, etc.: easy to use, reliable, instantaneous, high quality sound and graphics.
      2. Accessing the Internet currently requires a player to expend large amounts of money and time on computer hardware and learning how to use the accompanying software.
      3. Playing games, especially downloading images, is a slow, almost painful, process, with constant computer crashes.
      4. Players do not trust revealing their credit card numbers on the Internet, let alone giving the numbers to some unknown gaming operator in a foreign country.
      5. Bettors do not know if operators, or they themselves are breaking the law.
      6. Players have no way of knowing if they are being cheated. Rolling Good Times Online has a "Dog Doo Awareness" section listing, at the time of this writing, four sites it has investigated, and found wanting, as well as a dozen more reported in players' uninvestigated complaints. Claimed cheating includes:
        1. Operators not paying off when players win. Thompson v. Handa-Lopez, Inc., 998 F.Supp. 738 (W.D.Tex. 1998) (suit alleges Internet site refused to pay $193,728.40).
        2. Operators refusing to return players' front money.
        3. Games programmed with unfair odds in favor of the operator, that do not match regulated live casinos, slots and lotteries. A separate issue is whether the free games most sites supply have odds that favor players, raising expectations that are dashed when the same type of games is played for money.
        4. Operators disappearing with investors' money.
  4. What type of gambling is it?
    1. History -- Over the centuries, governments came to realize that different forms of wagering required different controls. Until recently, the primitive state of technology made this rather easy.
      1. Casino games are the most dangerous. The games are fast and the stakes can be high. Even without the extension of easy credit, players can destroy their financial lives. So, states and countries almost always completely banned casino games, although there were sometimes exceptions for remote spas open only to foreigners.
      2. Wagering on sports events and horse races was not a widespread social problem when bettors had to be physically present at the event. The invention of the pari-mutuel machine, telephone and telegraph led to the creation of "pool rooms" in the hearts of cities and the need for off-track and phone betting to be outlawed.
      3. Lotteries depend on large numbers of customers and can raise large amounts of money, so governments either licensed or ran the games. The games took weeks before enough tickets were sold to have a drawing. Bettors had to have paper tickets to know whether their numbers had been drawn.
    2. Jurisdictions are free to define gambling terms as they wish. For example, courts have defined "lottery" as:
      1. A "widespread pestilence," meaning available throughout a society, and thus much more dangerous than casino games. Stone v. Mississippi, 101 U.S. 814 (1880) (roulette is not a lottery).
      2. A gambling game of pure chance. Harris v. Missouri Gaming Com'n., 869 S.W.2d 58 (Mo. 1994) (roulette, among other casino games lacking skill, is a lottery); Boasberg v. U.S., 60 F.2d 185 (5th Cir. 1932) (bookmaking not within federal anti-lottery statutes).
      3. A gambling game where players need not be present to win; player participation does not affect the results. Ex parte Pierotti, 42 Nev. 243, 184 P.209 (1909) (slot machines are not lotteries).
      4. A game where the prize is formed by pooling players' bets and not banking games. Western Telcon, Inc. v. California State Lottery, 13 Cal.4th 375, 53 Cal.Rptr.2d 812, 917 P.2d. 651 (June 24, 1996) (keno is not a lottery).
      5. Schemes, which people of today would recognize as being lotteries, and not gambling games. Knight v. State ex rel. Moore, 574 So.2d 662 (Miss. 1990) (bingo is not a lottery).
      6. "Any game, scheme or plan compromising prize, chance and consideration," meaning "lottery" is synonymous with "gambling." Kayden Industries, Inc. v. Murphy, 34 Wis.2d 718, 150 N.W.2d 447 (1967). A federal court ruled that Indian tribes in Wisconsin could operate casinos, because the state was operating a state lottery. Lac du Flambeau Band of Lake Superior Chippewa Indians v. State, 770 F.Supp. 480, appeal dismissed for lack of jurisdiction, 975 F.2d 515 (7th 1992).
    3. Courts are having to decide, for purposes either of legalizing or prohibiting, whether statutes dealing with one form of gambling, say "lotteries," apply to more recently invented forms, say blackjack played on a video screen. E.g., West Virginia v. Mountaineer Park, Inc., 190 W.Va. 276, 438 S.E.2d 308 (1993).
  5. Analysis of Internet gambling -- Technology is breaking down the distinctions among the various forms of gambling. Every jurisdiction is free to decide how it wants to handle gambling, including definitions of terms. But, major tests have arisen:
    1. Sports betting and OTB on the Internet probably meets every anti-bookmaking statute. Some operators, like Kerry Rogers (see discussion of State v. Granite Gate Resorts, Inc. under Personal Jurisdiction), assert they are not in the business of gambling, because they merely try to match bettors on opposite sides of sports events. This is a limited form of pool-selling, a type of bookmaking.
    2. True Internet lotteries, where there is a pooling of players' wagers, are lotteries under any test.
    3. Internet instant lottery games, where players bet against the house, are lotteries under the "pure chance" and "need not be physically present" tests. However, these are also banking and percentage games, because the house participates and has a percentage advantage; in some jurisdictions banking games are casino games and not lotteries.
    4. Internet blackjack.
      1. On the surface it appears to be a casino game. It is a banking and percentage game. But there is no casino, no dealer and not even any cards.
      2. Machines are clearly involved. The Attorney General of Missouri indicted Pennsylvania residents operating a cybercasino in Granada for setting up a gambling device, the PC located in Missouri operated by an agent of the A.G. Older statutes may require that a gaming device actually take or deliver cash before it is declared a slot machine.
      3. Since a telephone line is used, linking players' personal computers to operators' computers in foreign countries, the wagers may fall under the anti-bookmaking statutes. Older anti-bookmaking statutes often include language about wagering on contests of speed or skill. Playing a game head-to-head with a computer may not be a "contest."
      4. Winners are determined by the host computer's random number generator, players do not have to be physically present to play, and players are not really playing a card game, but only choosing numbers -- just like a lottery.
        1. State Lotteries are offering a similar game, only played on paper, or on Video Lottery Terminals (VLTs).
        2. The very few courts that have looked at the question have decided that playing a game on a video monitor is not a lottery. The State Lotteries that run VLTs usually are allowed to do so because specific statutory or constitutional provisions have been adopted permitting these devices. See, e.g., Poppen v. Walker, 520 N.W.2d 238 (S. Dakota, 1994).
        3. Some skill is involved, assuming the online casino's programming is honest. So, Internet blackjack would not be a lottery in jurisdictions following the "pure chance" test.
II. Federal laws that might apply.
  1. Criminal Statutes and Regulations.
    1. Interstate Wire Act, 18 U.S.C. §1084 -- Elements & Analysis.
      1. "Business of betting or wagering" only - not common players.
      2. "Knowingly uses a wire communication facility" -- designed for telephone and telegraph but covers Internet, unless direct uplink to satellite and downlink to home receiver.
      3. "Transmission in interstate or foreign commerce" --
        1. Explicitly designed to cover international activities.
          1. Does not cover purely intrastate wagering.
          2. Does not cover wagering information sent from international waters to the U.S. U.S. v. Montford, 27 F.3d 137 (5th Cir. 1994) (must have some contact with a foreign country).
        2. "Transmission" probably does cover Internet sites that passively receive instructions from players. The 7th Circuit held a ticker tape machine which could only receive, not transmit, gambling information did not fall within the prohibition on transmissions, United States v. Stonehouse, 452 F.2d 455 (1971); but the 8th Circuit held the opposite, United States v. Reeder, 614 F.2d 1179 (1980).
      4. "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" --
        1. Designed to cover both actual wagers and gambling information, such as instructions and "the line," i.e., point spreads.
        2. Ambiguous whether "bets or wagers" and "information" stand alone or modify "sporting event or contest;" are Internet lotteries and casinos covered? All reported court decisions deal with bookies taking wagers on sports events and races (by telephone); no reported cases on any other form of gambling.
      5. "Shall be... imprisoned not more than two years" -- a felony.
      6. Exemption for "news reporting."
      7. Exemption "for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal."
        1. Designed to allow licensed Nevada race books to receive race results from other states.
        2. Specifically not intended to allow out-of-state players to make bets across state lines. H.R. Rep. No. 967, 87th Cong., 1st Sess. 1961 (August 17, 1961), to accompany P.L. 87-216, S1656 (18 U.S.C. §1084).
        3. However, at least six states allow their off-track betting operators to accept out-of-state phone wagers, under the theory that they are completely exempt because the OTB is legal, or that this exemption allows bets from any state where betting on horse races is legal. See discussion under "State Laws which might apply" supra.
      8. Common carriers (telephone companies) required to discontinue service if told to by law enforcement agency on any level, federal, state, or local. Common carriers protected from all liability. Suit may be brought to restore service, and burden of proof is on phone companies.
      9. Off-shore sports books are probably not protected by being licensed. Courts have ruled that Congress has the power to regulate or prohibit all interstate gambling. In Martin v. United States, 389 F.2d 895 (5th 1968), convictions were upheld on a business that took bets in Texas, telephoned partners in Nevada, and placed the bets with licensed Las Vegas sports books.
    2. Conspiracy, 18 U.S.C. §371 -- A conspiracy to commit a crime is a crime itself, possibly a felony, even if the conspiracy is unsuccessful.
      1. The general conspiracy statute requires an agreement, the purpose of the agreement must be to commit an unlawful act, at least one co-conspirator must do an overt act in furtherance of the conspiracy.
      2. A co-conspirator may be convicted of a conspiracy that took place both in the United States and in a foreign country, even though he performed no overt act within the United States. United States v. Inco Bank & Trust Corp., 845 F.2d 919 (11th Cir. 1988).
      3. For special conspiracy statutes, such as conspiracy to commit racketeering, no overt act is required. Salinas v. United States, 522 U.S. 52, 118 S.Ct. 469, 139 L.Ed.2d 352 (1997).
    3. Money laundering, 18 U.S.C. §1956 -- The most dangerous statute for Internet gambling operations.
      1. Held to be separate crime from illegal gambling, no double jeopardy. United States v. Conley, 37 F.3d 970 (3d Cir. 1994).
      2. Crime includes conducting a financial transaction involving the proceeds of unlawful activity, defined as racketeering, including violating the Wire Act.
      3. Extreme punishments -- Under the Federal Sentencing Guidelines, a Wire Act violation would likely get 12 months in prison and a $30,000 fine; a conviction for money laundering begins with a mandatory sentence of four years and can easily reach 20 years, plus a fine equal to 100% of the money that passes through the site. Paul S. Hugel, Criminal Law and the Future of Internet Gaming, 2 Gaming L.R. 143 (1998).
    4. Amateur and Professional Sports Protection Act, 28 U.S.C. §§3701-3704 -- Prevents any state or tribe from authorizing sports betting.
      1. Congress grandfathered-in states with legal sports gambling.
        1. This possibly creates opportunities for Internet operators on Indian land in those states.
        2. It also may be a way to circumvent the Wire Act, which has an exemption if the bet is legal on both ends.
      2. The statute is of questionable constitutionality, because there is no rational reason for the forms of sports wagers it allows and those which it prohibits, and even which states get special treatment and benefits.
        1. It is difficult to see how the federal government is remedying the problem when it allows the largest forms of sports wagering to continue in Nevada. NRS 463.0136, 463.0193, 463.160 (Licensed sports books).
        2. Other grandfathered-in sports wagering. Other forms of gambling were recognized during the debate in Congress over the Amateur and Professional Sports Protection Act. Sen. Report No. 102-248 at p. 7 (Nov. 26, 1991) (to accompany S.474). "[T]his bill bans sports betting outright in 44 States and gives one State, New Jersey, only 1 year to act before it too would be prohibited from allowing sports betting." (Sen. Bradley) Cong. Rec. S17434-01, S17435 (Oct. 7, 1992).
        3. Delaware and Oregon - Lotteries based on sports events. 29 Del.C. §4805(b)(4), cf. National Football League v. Governor of the State of Delaware, 435 F.Supp. 1372 (D.Del. 1977) (State Lottery may run parimutuel game, if it complies with pay-out provisions of Lottery Act); Oregon - State Lottery can run games based on sporting events. ORS § 461.213.
        4. But other forms may also have been grandfathered-in. See (Sen. Bradley) Cong. Rec. S17434-01, S17435 (Oct. 7, 1992); 138 Cong. Rec. S18332-01 (Oct. 29, 1992):
          1. Mississippi - Licensed operators may run sports pools. Code 1972, §§ 75-76-55, 75-76-89, 75-76-5(gg): "'Sports pool' means the business of accepting wagers on sporting events, except for athletic events, by any system or method of wagering other than the system known as the 'pari-mutuel method of wagering.'"
          2. Montana:
            1. The Montana State Lottery may also run sports pools and other games based on sporting events: "Lottery game"... includes but is not limited to weekly (or other, longer time period) winner games... and sports pool games." MT ST §23-7-103 (4) (a) [enacted before 1992].
            2. Licensed operators may conduct sports tab games, "on premises appropriately licensed to sell alcoholic beverages for consumption on the premises..." MT ST 23-5-501, 23-5-502, 23-5-512, 23-5-513.
            3. Licensed operators may conduct sports pools. Id. and 23-5-503.
            4. Licensed operators may conduct Calcutta pools on sports events, except elementary and high school sports and horse races = all college and professional sports). MT ST 23-5-221, 23-5-222, 23-5-501.
          3. New Mexico - "Keirin," parimutuel wagering on bicycle races, allowed. N.M.S.A 1978 ch. 60, art. 2D; see, Cong. Rec. S18332-01 (Oct. 29, 1992).
          4. North Dakota:
            1. Nonprofit organizations may run sports pools on professional sports events. NDCC, 53-06.1-03(1)(a), 53-06.1-09.
            2. Qualified organizations may conduct calcuttas on amateur sports events- NDCC § 53-06.1-07.3; WY ST § 6-7-101(a)(i), 6-7-101(a)(iii)(F).
          5. Washington - Low-limit sports cards. WA.St. § 9.46.0335 (no license required).
          6. Wyoming - Qualified organizations may conduct calcuttas on amateur sports events. WY ST § 6-7-101(a)(i), 6-7-101(a)(iii)(F). See, Cong. Rec. S17434-01 (Oct. 7, 1992).
      3. The Act is concerned with limiting the power of states and tribes to authorize sports betting and does not address sports books licensed by foreign countries.
      4. It is unclear if the Act would prevent a grandfathered-in state, such as Nevada, from authorizing Internet sports books. The sports betting service must be "operating in" that state. See "Where does the bet take place," supra.
    5. Miscellaneous anti-gaming and anti-lottery laws.
      1. "Illegal gambling business" under the Organized Crime Control Act ("OCCA"), 18 U.S.C. §1955 -- Turns state gambling crimes into a federal offense. Requires five or more persons in business for more than 30 days or gross revenue of $2,000 in any single day. Federal jurisdiction is based on the presumption of an impact on interstate commerce. OCCA covers everyone involved in the financial and operational side of the gambling business, but not bettors. Present state anti-gambling statutes, with the exception of Nevada, Louisiana and Illinois, were not designed to get at out-of-state Internet operators and would not be a strong foundation for a §1955 charge.
      2. The Travel Act, 18 U.S.C. §1952 -- Makes it a federal crime to travel or use any facility in interstate or foreign commerce to carry on "unlawful activity," defined as a business enterprise involving gambling "in violation of the laws of the State in which they are committed or of the United States." The Act would seem to be limited to the transportation of physical items, but courts have held "facilities" includes telephone lines carrying gambling information. United States v. Smith, 209 F.Supp. 907 (E.D.Ill. 1962); United States v. Villano, 529 F.2d 1046, 1052 n.6 (10th Cir. 1975).
      3. Interstate Transportation of Wagering Paraphernalia ("ITWP"), 18 U.S.C. §1953 -- This law is more clear than the Travel Act in being limited to physical items. However, law does cover software that can be used by illegal bookies, if shipped on discs.
      4. Lottery Statutes, 18 U.S.C. §§1301-1307 -- Broad prohibitions on importing, shipping in interstate or foreign commerce, or using the U.S. mails for lottery material; but, probably limited to physical items.
        1. Section 1301 was amended in 1994 after the Pic-A-State case, to prohibit the use of agents in other states buying out-of-state lottery tickets. Pic-A-State Pa., Inc. v. Commonwealth, 1993 WL 325539 (M.D.Pa. 1993); 42 F.3d 175 (3rd Cir. 1994).
        2. Section 1304 puts restrictions on "broadcasting" "any advertisement... or information concerning any lottery..." The Federal Communications Commission construes "lottery" broadly, as including virtually every form of gambling, but, "broadcasting" narrowly: the signal must be able to be picked up by anyone from the air and without a scrambler. Internet communications are not broadcasts.
        3. But, the F.C.C. can fine a radio or T.V. station that broadcasts advertising for Internet gambling. 47 C.F.R. §§73.1211 and 76.213.
      5. Gaming devices, Johnson Act, 15 U.S.C. §§1171-1178 -- Restricts gambling devices from being shipped interstate or on federal land. Requires the device be "designed and manufactured primarily for use in connection with gambling," which would exclude all but dedicated terminals.
    6. Racketeer Influenced and Corrupt Organizations ("RICO"), 18 U.S.C. §§1961-1968 -- designed to reach the upper echelon of organized crime.
      1. Draconian civil and criminal punishments, fines, forfeitures and imprisonment.
      2. Covers anyone involved with an organization that commits two predicate crimes within ten years. Makes a federal crime of state felony gambling offenses. Also includes the Wire Act, Travel Act, ITWP, OCCA, money laundering and mail fraud.
      3. If Internet gambling is illegal, the operators can be charged with RICO.
    7. The Communications Act of 1934 gives the Federal Communications Commission ("FCC") authority to regulate all interstate and foreign wire communications, broadly defined. 47 U.S.C. §§151, 153. But, the FCC has made it clear it will have nothing to do with the Internet. Federal law enforcement is thus left to the Department of Justice ("DOJ"). Pure intrastate communications are outside the FCC's jurisdiction and are regulated by the states.
  2. Recent Developments.
    1. Proposals in Congress to amend the Interstate Wire Act.
      1. Internet Gambling Prohibition Act, author Jon Kyl (R.-Az), commonly called "the Kyl bill," first proposed as part of the Crime Prevention Act of 1995, 141 Cong.Rec. S19110-07, S19113-4 (Dec. 21, 1995); reintroduced as S474 (March 19, 1997), passed by Senate when attached to appropriations bill, but deleted from final version of appropriations bill, H.R. 4276, in House; reintroduced with significant amendments as S 692 (March 23, 1999). Other bills: HR 4350 (Introduced July 29, 1998), HR 2380 (introduced Sept. 3, 1997). Bills have gone through many rewrites and the Senate and House proposals differ in significant details. Major features present in some or all:
        1. Amend the Wire Act, 18 U.S.C. §§1081 and 1084;
        2. Attempt to clarify which types of gambling are illegal;
        3. For the first time, make it a federal crime (a misdemeanor, up to six months jail and a fine) to make a bet over the Internet.
        4. Increase punishment for felony of being in the business of gambling and violating §1084;
        5. Allow licensed OTB operators to take Internet bets, but only intrastate; details vary.
        6. Exempt "closed-loop subscriber-based services."
        7. Exempt fantasy sports leagues.
      2. Problems with the Kyl and other bills:
        1. First Amendment -- Language has been narrowed, but still covers advertising and other information.
        2. Treaties requiring the U.S. to consult with foreign governments before imposing criminal penalties for acts committed in those countries;
        3. Sovereignty of foreign governments may be impinged upon.
        4. Enforceability -- Federal government cannot arrest:
          1. Millions of Americans using PCs in the privacy of their own homes;
          2. Foreign citizens operating under a government license in their own country;
          3. Foreign governments, like Liechtenstein, when the government itself is the operator.
      3. The state Attorneys General -- the most active and vocal opponents of Internet gambling. The National Association of Attorneys General ("NAAG") created a task force of 39 states in June, 1995, led by Hubert H. Humphrey III, Minnesota; James E. Doyle, Wisconsin; and Daniel E. Lungren, California. It found six "major deficiencies" in the Interstate Wire Act and urged amendment of §§1084 and 1081 (definitions):
        1. Current federal law only applies to gambling businesses. It is not a federal crime to make an illegal wager. "Add a penalty for 'casual bettors.'"
        2. The law clearly prohibits wagers on sporting events, but it is unclear whether it covers other forms of gambling, such as lotteries or Internet casinos.
        3. It is a crime to send information that aids in the making of wagers, but the law is ambiguous about receiving such information. An Internet gambling operator could claim its computers are simply passively receiving bets.
        4. The law is limited to "wire" communications; an Internet operator could get around the law by using microwave transmitters and home satellite dishes.
        5. Telephone companies, let alone Internet access providers, are not criminally liable if an illegal bookie uses a telephone line.
        6. The present law does not allow "a prospective remedy" for law enforcement. NAAG wants to add a civil remedy, similar to the Red Light Abatement laws that allow closing down brothels, since obtaining a criminal conviction against an Internet operator would be so difficult.
      4. Response by U.S. Department of Justice, "Thanks, but no thanks."
        1. A unique situation: states asking the federal government to assume more power, and the feds refusing.
        2. The DOJ does not want to be in the business of arresting gamblers. The DOJ's Criminal Division sent NAAG a letter stating: "[T]he Department does not agree that federal law should be amended so broadly as to cover the first-time bettor who loses $5, particularly when Internet gaming is expected to mushroom and federal resources are shrinking." "Moreover, we believe that the envisioned expansion of federal jurisdiction would not serve as a deterrent to Internet gaming since it is unlikely that federal prosecutions will be pursued against bettors."
        3. Under pressure from NAAG and Congressional hearings, DOJ made a showy arrest of Internet operators using laws already on the books. See below.
      5. Present operators want exemptions.
        1. Legitimate Internet gambling operations want to be regulated, not outlawed.
        2. Horse racing interests --
          1. Racing industry wants to preserve the Interstate Horse Racing Act, 15 U.S.C. §§3001-3007, which set up a complicated system to allow licensed OTB operators to take bets on foreign races.
          2. Some OTB operators presently taking interstate telephone wagers do not want to at-home bettors explicitly excluded.
        3. Indian tribes -- Only one, the Coeur d'Alene, is presently taking Internet wagers. But tribes are concerned about any infringement on their sovereignty. And many tribes have Internet linked slot machines and bingo games to protect.
    2. Criminal complaints filed by U.S. Attorney in New York City.
      1. The first federal charges for Internet gambling were filed in March, 1998 against 14 individuals connected with six companies. All defendants claim their gambling businesses were licensed by foreign countries. All were operating openly, even taking out ads in Pro Football Weekly and other magazines. There is no allegation of any connection with organized crime.
      2. Some commentators have said it is going to be hard to get convictions. But the federal prosecutors spent months gathering evidence, choosing only the most vulnerable defendants and framing their Complaints to make the strongest possible case:
        1. Only Americans were charged, avoiding the sticky question of whether this country can arrest a citizen of another country who claims to be licensed by his own government. There is little dispute that the U.S. can charge American citizens with certain crimes, no matter where in the world they may live.
        2. The only form of gambling involved was sports betting. If the Wire Act covers anything, it is sports betting.
        3. The defendants were not charged with violating the Wire Act, but rather with conspiracy to violate the Wire Act. Prosecutors do not have to prove the defendants transmitted any bet by wire to another country, only that they agreed to do so and one of them did an "overt act" in furtherance of the conspiracy.
        4. Only operators and others involved in the business of gambling were charged. As a matter of public relations, it would have been awkward to explain arresting bettors, when the whole point of the anti-gambling laws is supposed to be to protect the public.
        5. The government only charged individuals who made the mistake of conducting part of their operations within the U.S.: Defendants sent envelopes with return addresses of Costa Rica, Curacao and the Dominican Republic, but with postmarks from Florida, Texas and Nevada and carrying U.S. stamps; 800-numbers had been given to U.S., not foreign, companies; defendants wrote checks on banks in this country; one undercover agent even received a $400 U.S. Postal Money Order with a handwritten note that it was sent from Las Vegas.
        6. Every sports book took at least one bet over the telephone, giving prosecutors a fall-back position if a court rules the Wire Act does not apply to the Internet.
      3. The immediate impact of these criminal charges was virtual panic among cyber-bettors. Foreign sportsbooks that accept bets by phone or online are barring Americans -- or closing their doors completely; apparently some operators are disappearing with the loot. The Las Vegas Sporting News reported that a sportsbook located in the Dominican Republic folded, leaving at least one player unable to retrieve $10,500 from his telephone-betting account.
      4. The DOJ pulled off a great public relations coup. It showed it can put the fear of God into the entire industry -- using laws already on the books; thus, that the new laws are unnecessary -- at least for the easy cases.
      5. Many defendants have accepted plea bargains, but at least one has made motions to dismiss. United States v. Jay Cohen, Indictment No. 98 CR 294 (TPG) (S.D.N.Y. 1998).
III. State laws that might apply.
  1. Statutes explicitly designed to cover Internet gaming.
    1. Nevada -- SB 318 (codified at in NRS 465.091 to 465.094), signed into law on July 17, 1997 by Gov. Bob Miller, makes Nevada the first state to explicitly prohibit -- and allow -- gambling via the Internet.
      1. An Internet operator, anywhere in the world, who accepts a wager from a person who is physically present in Nevada commits a misdemeanor and "may be prosecuted within this state." There is no exception for licensed out-of-state operators.
      2. Anyone who makes a bet from Nevada via the Internet is committing a misdemeanor, regardless of where the person accepting the wager may be. Even before Prohibition, there have been few attempts to go after common bettors. This is the first, and so far only, law in this country which makes it a crime to make a bet on the Internet. Sen. Kyl's bill would make it a federal crime, as well.
      3. Servers, like America Online, are also now covered, if they are aware gambling is taking place. It is a crime to "knowingly... send, transmit or relay" a wager from within Nevada to anywhere via the Internet, or from outside the state into Nevada via the Internet.
      4. Exceptions: Because this is Nevada, it should come as no surprise that the new criminal penalties do not apply to wagers accepted in the state by:
        1. Nevada-licensed race and sports books;
        2. Nevada-licensed off-track pari-mutuel betting operators; and
        3. "Any other person or establishment that is licensed to engage in wagering" in Nevada; meaning casinos. Notice it is a crime for a Nevada resident to make an out-of-state bet, but perfectly legal for Nevada operators to accept wagers from anywhere in the world.
    2. Louisiana -- LSA-R.S. 14:90.3, enacted July 15, 1997.
      1. Makes gambling by computer a misdemeanor. Defined as "conducting as a business of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit" over the Internet; bettors not covered.
      2. Makes it a felony, up to five years hard labor and $20,000 fine, to design, develop, provide etc. any computer services or any server providing a web site "or any other product accessing the Internet... offering to any client for the primary purpose of the conducting as a business" any gambling.
      3. Statute exempts providers of online access, web sites, etc. if done "in the normal course of their business," unless "its primary purpose in providing such service is to conduct gambling as a business."
      4. Statute does not explicitly give state jurisdiction over out-of-state offenders.
    3. Illinois - Pub.L. 91-257 (S.B.4) signed into law by governor July 23, 1999, amending the Illinois Criminal Code of 1961, §§ 28-1, 28-1.1 and 28-2.
      1. Makes it a Class A misdemeanor to make or accept a bet over the Internet. Operating a gambling business is a Class 4 felony for the second conviction.
      2. Declares "A person commits syndicated gambling when he or she accesses the Internet to operate a 'policy game' or to engage in the business of bookmaking."
      3. Jurisdictional reach is unclear. Bettors and web sites set up in Illinois are clearly covered. But there is nothing to indicate this new law is designed to reach activities taking place outside the state. In a case involving cash transactions by Illinois credit cardholders at licensed race courses and casinos, a State Court of Appeals held that "gambling offenses are defined by conduct, not results" and therefore "Section 1-5 of the Criminal Code of 1961 (Ill.Rev.Stat.1991, ch. 38, par. 1-5 (now 720 ILCS 5/1-5 (West 1994)) limits Illinois' jurisdiction to cases in which an element of the crime occurs within its borders." Cie v. Comdata Network, Inc., 211 Ill.Dec. 931, 937, 275 Ill.App.3d 759, 767-768, 656 N.E.2d 123, 129 (1995), appeal denied > 214 Ill.Dec. 857, 165 Ill.2d 548, 662 N.E.2d 423. But see Aaron Chambers, Ryan Signs Bill Outlawing Internet Gambling Sites, 145 Chi. Daily L. Bull. 3 (7/27/99 ).
    4. Bills under consideration:
      1. Arizona -- HB 2367 (Introduced 1997).
      2. California -- SB 777 (1997) would have outlawed all Internet betting; while SB 141 (1997) would have permitted racing associations to accept out-of-state wagers by phone or any other approved communications technology.
      3. Hawaii -- House Concurrent Resolution No. 150 (1997).
      4. Illinois -- HB 793 (2/10/99), HB 1484 (1/19/99).
      5. Indiana -- HB 1484 (1/19/99); HB 1134 (1/6/99).
      6. Michigan -- HB 4689 (5/18/99) would make it a felony to conduct a gambling business over the Internet. Gaming legal in Michigan, including multi-state lotteries, bingo and horse racing, are exempt.
      7. Minnesota -- SB 2273 (5/15/99) - would require the house research office, the Minnesota lottery research division and the office of senate counsel and research to conduct a study of gambling on the Internet and issue a report. 81st Legislative Session (1999-2000).
      8. New York -- AB5650 (3/01/99) - would require anyone providing gambling over the Internet to post a bond, unless they are offering exclusively wagering on horse races. 1999-2000 Regular Sessions. SB 917 (1/1/2/99), SB 2044 (2/2/99); SB 4174 (1997) and AB 8044 (1997) would have required foreign companies to register with the Secretary of State; AB 7818 (1997) would have required posting bonds.
      9. Pennsylvania -- HB 2271 (2/24/98).
  2. Statutes that have been construed as covering Internet gaming.
    1. Minnesota -- see discussion under Personal Jurisdiction. First attorney general to post notice on Internet -- legal theory appears to be that an Internet gaming operator aids and abets the crime of making a bet in Minnesota. This will not work, because the state legislature has differentiated between individuals making a bet and those accepting a bet. If a gaming operation is guilty of aiding and abetting making a bet, then a drug buyer is guilty of aiding and abetting selling drugs.
    2. Missouri -- Attorney General Jay Nixon has been one of the most active governmental officials in pursuing civil and criminal actions against Internet gambling operators.
      1. In State v. Interactive Gaming & Communications Corp., CV97-7808 (Cir.Ct. Jackson County, Mo. May 22, 1997), Nixon obtained a permanent injunction against defendant and its subsidiary, Global Casino, Ltd.
        1. Defendant was served in its headquarters in Blue Bell, PA, but refused to answer or appear.
        2. Undercover agents send a money order for $100 to defendant's address in Pennsylvania.
        3. Defendant agreed not to accept any applications from Missouri residents for casino gambling services, but did.
        4. The court in Missouri held there was personal jurisdiction.
        5. Defendant was enjoined from marketing in Missouri, from representing that its services were legal in that state, from accepting applications from residents of Missouri, and was ordered to post notices. Defendant was also fined and ordered to pay costs.
      2. Interactive Gaming Corp. and its President, Michael Simone, continued to take wagers from Missouri -- pleaded guilty.
        1. Nixon obtained a criminal indictment that Simone had "traveled to" Missouri and "set up" a "gambling device" (the undercover agent's PC), which contacted defendant's Pennsylvania web site.
        2. Nixon obtained an extradition order from a trial court in Pennsylvania, upheld on appeal.
      3. Nixon was almost as successful against the Coeur d'Alene Indian Tribe's US Lottery; see discussion infra.
    3. Florida -- Attorney General Butterworth ordered Western Union to cease wiring players' money to off-shore sports books. Butterworth had previously issued an Opinion that state law prohibits individuals within the state from placing a bet by wire. Fla.AGO 95-70 (Oct. 18, 1995).
    4. Indiana -- In the Attorney General's opinion, "A Hoosier gambling on the Internet by sitting at her computer, feet firmly planted on Indiana soil, with credit-card number close at hand, is 'gambling' unlawfully in Indiana; for that Hoosier to gamble over the Internet from her home, office, or favorite tavern is not different in practical or legal terms from gambling by telephone, even if the person or computer taking the bet is at some exotic location; consequently, the individual making a bet and the person taking the bet are both lawbreakers." 1998 Op.Atty.Gen. 98-8. Indiana Attorney General Jeff Modisett sent emails to several dozen gambling-related websites asking administrators to inform visitors accessing the Net from Indiana that they are breaking the law. (Click here for RGT Online's copy of the e-mail.)
    5. California -- Attorney General Dan Lungren, held Penal Code §§330 & 337a prohibits making a bet by phone from within the state to a licensed foreign sports book. 80 Ops.Cal.Atty.Gen. 98 (April 25, 1997). These statutes do make it criminal to place as well as take wagers; however, §330 covers only casino banking and percentage games and §337a only sports contests and races. Internet lotteries and bingo would not be covered; nor would Internet casinos, if computerized craps is legally a lottery rather than a banking or percentage game.
    6. Texas AG Op. -- Dan Morales opined that the federal Wire Act would apply not only to sports betting, but also to card games on the Internet. Tex.A.G.Op. No. DM-344 (1995).
    7. Kansas -- Kan.Atty.Gen.Op. No. 96-31 (March 25, 1996) -- Anyone placing a bet on an Internet virtual casino using a computer in the state may be prosecuted in Kansas.
    8. Wisconsin -- See personal jurisdiction, supra.
  3. States allowing telephone, and sometimes computer, off-track betting. New York and Nevada are the only states with statutes which expressly allow out-of-state phone wagers. In other states, legislative silence is taken as permission. Pennsylvania is the only state, at present, accepting computer wagers from bettors located in other states.
    1. Pennsylvania -- The Commonwealth's Legislature authorized telephone betting. 4 Pa. Stat. §325.218(b). Racing regulators decided this means OTBs may accept wagers by computer, under the theory that computers use telephone lines. Regulators also feel the federal Wire Act simply does not apply, so bets are accepted from anywhere in the world.
    2. New York -- NY Rac.Pari-M. §1012. The New York Racing Association announced in 1997 that it would be accepting wagers by computer; New York Senate's Committee on Gaming and Wagering held public hearings on March 12 and March 20, 1997, on the issue of whether New York's off-track betting corporations should be prohibited from offering online wagering services.
    3. Nevada -- Gaming Control Act §464.020 3(b) restricted pari-mutuel wagering to places where the race or sporting event is taking place and to licensed race and sports books; while regulations have allowed intrastate telephone wagers for at least ten years. Regs. 22.140. In 1995 the Nevada Legislature passed SB 401, amending the Act to allow "wagers made by wire communication from patrons within the State of Nevada or from states in which such wagering is legal." However, no regulations have as yet been promulgated.
    4. Oregon -- In 1997 the Legislature authorized "account wagering," in which players deposit money in advance and then bet "in person, by direct telephone call or by communication through other electronic media." O.R.S. §462.142. Regulations have not yet been promulgated, but will probably allow out-of-state bettors.
    5. Connecticut -- In 1993 the state sold its off-track betting system to Autotote, a publicly traded corporation. Regulations prohibiting out-of-state telephone wagers were deleted. In December 1995 Autotote suspended accepting bets from 28 states, fearing that it might be violating state (not federal) laws.
    6. Kentucky -- Ky. Rev. Stat. §230.379. Ellis Park is accepting telephone wagers from throughout the nation. The Kentucky Racing Commission conducted tests of "in-home access:" televisions with a box for the fan to swipe his credit card before making bets.
    7. Maryland -- Md Code, Bus. Reg., tit. 11 §11-805. Statute allows telephone wagers, but governor refuses to allow regulations to be promulgated.
    8. Ohio -- Beulah Park had been taking interstate phone bets. The racing board abolished its enabling regulation after the Attorney General ruled telephone wagering illegal, 1995 Ohio Op. Atty. Gen. No. 95-034 (Oct. 10, 1995). Legislation is pending.
  4. States have considered other forms of at-home wagering -- intrastate only, so far.
    1. At least three state lotteries tried telephone games: California, Indiana and Massachusetts. Second-chance games let players with losing paper lottery tickets enter by calling 800- or 900-numbers. The games had consideration, because players could bet more, by dialing the 900-number, for the chance of winning more.
    2. The most interesting U.S. experiment never got off the ground. In 1991, the Minnesota State Lottery announced that it would conduct a market test of at-home lottery games played on Nintendo video sets. The governor warned the Lottery that if it did, he would cut its marketing budget to zero.
IV. Problems for law enforcement and civil plaintiffs when the operator is physically within the U.S.
  1. Although the Internet is not without precedent, the law is having trouble deciding upon the appropriate analogy: is it more like direct mail or television?
    1. Although the Internet is interactive, like mail or telephone, websites are passive and the user has to choose to receive the message, like television or radio, and similarly there is no way of stopping it at the border.
    2. The law is able to adapt to major technological developments. For example, a more revolutionary idea was the telegraph. For the first time Americans could be in easy and instantaneous communication with individuals in other states and countries. Pensacola Telegraph Co. v. Western Union Telegraph Co., 96 U.S. 1 (Mem), 6 Otto 1, 24 L.Ed. 708 (1877).
  2. Where does the act take place?
    1. Criminal law:
      1. Substantive -- Sports book licensed in Jamaica and the Dominican Republic which took telephone wagers from the U.S. held did not accept bets in Texas under state anti-bookmaking law. Title 10, Texas Penal Code, Chapter 47 defines bookmaking as "to receive and record or to forward a bet." United States v. Truesdale, 152 F.3d 443 (5th Cir. 1998), convictions for illegal gambling in violation of the OCCA (18 U.S.C. §1955) and companion counts, conspiracy (18 U.S.C. §371) and money laundering (18 U.S.C. §1956), overturned.
      2. Jurisdiction -- In Lamar v. United States, 240 U.S. 60 (1916), defendant was charged with impersonating a member of Congress with intent to defraud; held: the federal court in New York had jurisdiction because defendant's impersonation was by phone to a person in New York, so the crime took effect there.
      3. Venue -- Criminal venue statutes for interstate cr
The Law of Internet Gambling is republished from Online.CasinoCity.com.
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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:

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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

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