Federal and State Laws and Online Gambling

online gambling

Whether the internet can be used to promote illegal gambling, or if there are indeed illegal gambling sites operating on the web, is a matter of great concern to state and federal officials. While state laws prohibiting gambling are enforceable, a number of foreign and interstate elements can complicate or outright frustrate the efforts of state enforcement officials. A number of state and federal laws have been enacted to address this issue, including the Wire Act, the Gambling Devices Transportation Act, and the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Among the federal statutes implicated by illegal internet gambling is the Illegal Gambling Business Act (IGBA), which imposes penalties on operators of gambling sites. The Act prohibits gambling sites from providing financial instruments to customers who place bets on illegal Internet games. The act is also a means of enforcing the Federal Wire Act, which prohibits the transfer of wire or electronic communications for the purpose of facilitating gambling. The Act also makes the act of placing a bet online a felony. Other federal laws, such as the Federal Communications Commission’s rules on the use of wireless devices, are also relevant.

The most recent federal prosecution of online gambling sites, involving the alleged violations of the aforementioned IGBA, resulted in the seizure of $3.2 million from the operators of Discovery Communications. Other notable prosecutions include those against PayPal and the Costa Rican casino operation Tropical Paradise. These federal prosecutions have prompted state officials to reassess whether or not online gambling is legal in their jurisdiction. State officials have also questioned whether or not Internet gambling sites are protected by the state’s privacy laws, which are intended to protect citizens from invasive Internet surveillance. These issues have also been the focus of state legislation, including a recently enacted state law, which is modeled on the federal statute.

The most notable of the federal statutes, however, is the Unlawful Internet Gambling Enforcement Act (UIGEA), which imposes a penalty of up to a year in prison on those found to have engaged in a variety of illegal gambling practices. The statute, which was enacted in July 2008, covers several aspects of online gambling, including the use of financial instruments to place bets on illegal Internet games, and the use of financial institutions to receive and transfer money to and from Internet gambling sites. The statute also includes provisions for the proper handling of data and the protection of consumers from financial fraud. Some of the UIGEA’s more notable provisions include the requirement to report illegal gambling operations to federal law enforcement agencies and the ability of federal prosecutors to warn Internet poker operators that they may be indicted for violations of the aforementioned 18 U.S.C. 1955.

The aforementioned UIGEA has spawned a number of lawsuits, some of which are still pending. The case of the day, however, is that of K23 Group Financial Services, an offshore Internet poker operator that was indicted for violations of the aforementioned UIGEA and the aforementioned 18 U.S.C.