I receive numerous e-mails with suggestions for topics to write about, but the most commonly asked for topic far and away relates to the legality of online betting for American citizens. It seems that readers are just confused what the law says about betting online for those who like to wager recreationally. After reading articles and opinion pieces in the newspapers and on the web, that isn't surprising. Several articles in major publications have stated that Americans are breaking the law by placing wagers online. The articles generally do not offer any proof, but just expect readers to accept the illegality of online gambling by the bettor as a matter of fact. If one didn't know any better, he would swear those articles were often proofread or written by the DOJ. On the other hand, there are internet web sites which state that online gambling by the bettor is absolutely legal, but again they offer no proof of that claim. The truth, as usual, lies somewhere in the middle and this article plus a series of others will look at the legality of online gambling for the casual bettor.
It must first be noted that these articles are only looking at betting by the recreational gambler, whether that wagering is on sports, poker or casino games. The law in the United States relating to those in the business of betting (except for licensed casinos) and operating within the confines of the U.S. is clear - the activity is illegal. Several laws related to bookmaking or operating a common gaming house make it illegal to be a proprietor profiting from gambling of any kind, whether it's land based, by telephone or on the Internet. But when it comes to gambling by the bettor himself, the legality is not so evident.
Currently there are 13 laws that mention gambling at the Federal level, but only 3 relate to Internet wagering. These include the UIGEA, the Amendment to the Interstate Horseracing Act and the Wire Act. The DOJ feels that federal laws supersede any state laws, but whether that is the case or not is uncertain. Federal statutes have always related to areas that affect the security of the country, as well as capital crimes like murder, rape, treason, etc. On "moral" issues state laws are usually what determine the legality of an activity and each state determines for itself what to criminalize. Gambling has always fallen under these "morals" grounds and consequently the state determines whether the activity is legal. Nevada, for example, decided to open up all areas of gambling back in the 1930s, Mississippi and Missouri decided riverboats were best for their states, Florida was the only state to legalize wagering on greyhounds and jai alai, while Utah outlawed all forms of gambling likely due to the huge Mormon population there. Again, each state has decided for itself what is in its best interest in the area of gambling. For that specific reason, iMEGA's challenge to the legality of the UIGEA specifically mentioned that the federal government has overstepped its boundaries in passing the UIGEA since gambling is a state concern.
That said, let's make the assumption that the Supreme Court throws out all appeals to the UIGEA and upholds the federal government's right to pass these laws. Let's also assume that the courts decide that federal laws supersede state laws. What exactly does each of these laws say relating to the casual bettor? First we'll look at the UIGEA that was passed in October of 2006. The law specifically makes it illegal for a financial institution to process funds for the purpose of online gambling, but as far as anything relating to the online gambler there really isn't much there. The UIGEA simply states that a bettor is breaking the law if he/she places a bet on the Internet that is already prohibited under other federal or state laws. It also specifically gives exclusions for fantasy sports, tribal gaming, horse racing and bets that take place solely within a state should the state deem that legal. But the fact of the matter is that there is nothing in the UIGEA that specifically states a bettor is breaking the law by betting online.
Next is the Interstate Wire Act of 1961. There have been many questions of whether the wire act actually applies to the Internet, but that seemed to be settled in 2000 when the Supreme Court found Jay Cohen guilty of accepting wagers on the Internet from the Island of Antigua. The court argued that the intent of the wire act was to be applied to all forms of communication that crosses borders, and new technology did not nullify that law. The court also argued that if any part of the transaction takes place in the U.S. then it is deemed to have occurred in the United States. However, once again, there is nothing the wire act that talks about the bettor himself. The very first stated criterion which must be met for the wire act to apply, is that "The person is engaged in the business of betting or wagering." The business of wagering implies that the person is taking bets or is running a business that profits from accepting bets. The casual bettor does not fall into this category, and hence under the wire act they are excluded. Consequently, everything else in the wire act is irrelevant for the recreational bettor.
Lastly, the Amendment to the Interstate Horseracing Act makes it legal for any person to place pari-mutuel wagers and companies to accept those wagers, between states, by any means of communication including the internet, provided the activity is legal in both states where the transaction takes place. It is this federal statute that has given the USTR headaches after the WTO ruled that the U.S. is in violation of a GATS agreement to provide cross border gambling services, because it allows this type of wagering to take place domestically, while making it illegal if the bets take place from another country. The reason that horse bets are accepted at offshore sportsbooks do not fall under this category is that those pay the track odds but are not pari-mutuel (i.e. they aren't bet into a common pool). As well, the U.S. argues that the exemption is only meant for U.S. tracks and countries with which it has an agreement.
All the other federal laws on the books such as the Travel Act of 1961, the Gambling Ship Act, the Illegal gambling Business Act of 1970 and other statutes all relate to those in the business of betting and/or advertising for the purpose of promoting gambling. None of the acts discuss the bettor himself. As such it is safe to conclude that there is no federal statute that currently precludes an American from recreationally wagering on the Internet on sports, poker or casino games. That brings us back to the state laws, which are really what determine whether the activity is legal or not. As mentioned, the UIGEA makes it illegal for Americans to place wagers online if they are prohibited under state law. Of course, that being the case, the state law is what is relevant and the UIGEA is a support mechanism for those state laws. Unfortunately, the State statutes are not so clear-cut as to their legality. In fact, within some state laws there are specific areas of the state where some types of gambling are legal and others are not. Over the next few weeks I will try and look at every single state to determine which states expressly forbid online gambling by its citizens and which ones don't. As well, I will show whether online betting is a criminal charge or a misdemeanour in the states where it is expressly forbidden. One thing that must be pointed out, however, is that currently there have been no cases to my knowledge where any bettor has been jailed in the U.S. for placing bets online. For the most part, online gambling is not on the priority list for police and likely will never be. So the casual bettor is likely safe to place wagers or play poker from the comfort of his/her home without worrying about the police busting down his/her door. The purpose of this series of articles is to simply answer the question that many have asked me by e-mail: "Am I breaking any type of law by placing wagers online?"
The next article will look at the first dozen states and their specific laws for online betting by the recreational gambler.
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