Online Gambling Laws
Online gambling refers to gambling that is conducted over the internet. This includes online casinos and sports betting. It is illegal under the Wire Act and the Illegal Gambling Business Act. These laws prohibit illegal Internet gambling.
There are seven federal criminal statutes involving unlawful Internet gambling. These include the Wire Act, the Illegal Gambling Business Act, the Unlawful Internet Gambling Enforcement Act, and Racketeer Influenced and Corrupt Organizations Act (RICO). In addition to these criminal statutes, the Federal Communications Commission (FCC) also has jurisdiction over common carriers. The FCC may rescind the leasing and maintaining of facilities, as well as the furnishing of services.
The Illegal Gambling Business Act is a proscription against operating a gambling business that is not licensed by a state. Owners of a business that is involved in illegal gambling can face up to five years in prison. They must have gross revenue of $2,000 per day, and they must have a substantially continuous operation for thirty days or more. However, the federal government has been unsuccessful in prosecuting many low-level gambling cases.
Several court cases have been based on the First Amendment. These include United States v. Nicolaou, United States v. O’Brien, United States v. Mick, United States v. Heacock, and United States v. Lee. Many of the cited cases involved bartenders and managers of establishments with video poker machines.
Other caselaws have been based on the Commerce Clause. Several questions have been raised about the constitutionality of such an approach. While it seems that the commercial nature of the gambling business may provide a sufficient basis for a strong Commerce Clause argument, the First Amendment has been far less successful.
State officials have expressed concerns that Internet gambling could bring illegal gambling into their jurisdictions. Illinois residents, for example, can only wager on sports events in the state, and on in-state colleges. Although more than half of the country will be able to place bets on sports in the near future, only a few states have legalized gambling on the Internet. Indiana and Massachusetts plan to legalize gambling on the Internet in the near future.
Some courts have argued that a state cannot regulate gambling activities if the Internet is the medium. The United States, however, has been criticized for using the Commerce Clause to punish Internet gambling operations. Specifically, Section 1956 of the Wire Act prohibits the promotion of unlawful gambling. Furthermore, the Travel Act applies to players who use interstate facilities for unlawful activities.
As of May 2010, there were only seven states that allowed legal Internet gambling. In response to these complaints, the Government Accountability Office warned PayPal that it would likely be subject to prosecution if it did not stop accepting financial instruments from individuals who were engaged in illegal Internet bets. Eventually, Governor Laura Kelly signed legislation into law in May 2010 to protect consumers from the dangers of Internet gambling.
Legal Internet gambling is expected to take time to develop. Although the first legalized Internet casino is set to open in Michigan in 2021, there are a number of smaller Michigan-based brands already available.