Online Gambling LEGAL???

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Online Gaming Illegal (Wink Wink)
By Elliot Borin
2:00 a.m. Sep. 23, 2002 PDT


Despite the defection of several big-name credit card issuers and a recent Justice Department "advisory" declaring all Internet gambling illegal, many watchers of online casino operations remain convinced the industry is still on a roll.

As proof, they cite a federal court decision in Louisiana that could de-fang the Justice Department's virtual bite, Congress' repeated repudiation of such measures as the Internet Gambling Prohibition Act and a successful Nevada ballot initiative directing the state legislature to begin issuing online gambling licenses. (Several Las Vegas casinos now operate online by way of the Isle of Man.)


In a recent letter to the Nevada Gaming Control Board, the Justice Department restricted Nevada's Internet casino business and banned all Internet wagering that crosses state lines.

"The Wire Act appears to outlaw Internet gambling," said Bradley Gross, a partner in the Technology Law Group of Becker & Poliakoff, referring to the prohibition of the Federal Interstate Wire Act of 1960 against engaging "in the business of betting or wagering knowingly or (using) a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers."

"However, the act specifically limits its application to sporting events and contests, and casino games are generally not considered contests because the participant is competing against mathematical odds, not other people," Gross said.

Two of the few bits of online gambling case law seem to support this assertion.

In the first, a New York U.S. district judge sentenced an Antigua-based entrepreneur to 21 months in prison and a $6,000 fine for accepting bets on sporting events. In the second, a federal district court judge in Louisiana ordered a group of bettors to pay contested online-casino gambling debts charged to their credit cards because the act only prohibited wagering on sports.

Significantly, the federal government has never challenged online gambling in court. Further, the Wire Act does not prohibit the transmission of information used for placing bets -- including bets on sporting events and contests -- between states or countries "in which such betting is legal."

The proliferation of online betting operations run by Nevada casinos complicates things even more. Four decades ago, when the act was written and the only legal off-track gambling in almost every state except Nevada was church-operated bingo, that provision must have seemed pretty clear. In today's world of legal off-track betting, legalized casino gambling on and off Indian reservations, and state-run lotteries, it will likely be left up to the Supreme Court to sort out.

Gross said that while some credit card companies -- especially those headquartered in states where existing, non-Internet-specific laws may be interpreted to prohibit online gambling, or make the placing and taking of bets illegal -- are exiting the business, most will continue to process gambling transactions "unless fraud somehow starts to dramatically outweigh profit."

And credit card companies that refuse to finance online gambling may find it hard to turn their backs on customers who want to patronize Las Vegas casinos that are expanding their physical operations into cyberspace.

Non-U.S. gaming interests are not taking the Nevada threat lying down.

"The one thing we can offer that Nevada casinos can't is discretion," said one offshore-casino executive who declined to be identified. "We already have many American customers who chose to leave sums of money on deposit with us rather than make credit card transactions. And we have many others who have us deposit winnings directly into offshore bank accounts rather than remit to them in the United States."