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Is Online Gambling Legal?

Aug 26, 2007
Internet casinos and sportsbooks have become hugely popular over the past several years. The number of people wagering their money online continues to increase exponentially every year. But is it legal?

The answer is, I don't really know. Seriously, I'm not really sure. Allow me to explain. I'm not a lawyer, but I think that even most lawyers would find it difficult to defend or prosecute an online gambling service given the current legal climate in the world of cyberbetting. Let's lay out the facts and see if we can come to a conclusion.

First, what are the types of gambling that you can engage in online? Well, you can play poker and other card games, you can bet on sports, or you can play games of chance, such as roulette, craps, etc. Poker and cards in general seem like a perfectly fair game to play over the internet, as it would be impossible for a computer to deal more favorable cards to one player over another. Also, card games are, generally speaking, games of skill and strategy with an element of chance, where each player controls their own destiny. Betting on sports also seems like a perfectly legitimate form of online betting - the computer doesn't control who wins the weekend's football games. Games of chance probably should be outlawed, as a computerized roulette wheel can easily be programmed to stop far away from the player's chosen number, allowing just enough winning bets to make the game seem credible, while insuring that the house still profits big in the end.

But, are any of the aforementioned gambling activities legal if hosted by an internet based company? According to the Wire Wager Act, betting on sports is the only form of online wagering that is illegal. The Wire Wager Act reads as follows:

"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers, or information assisting in the placement 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, shall be fined under this title or imprisoned not more than two years or both."

Simply put, this means that it's illegal for companies based in the U.S. and/or taking bets from Americans to use the internet to accept bets on sports or other "contests." However, most online gambling enterprises have moved their operations offshore to countries in Central America and other countries around the world. It's common for most of these companies to be incorporated in places like Antigua or the Caribbean islands. PartyPoker, the most popular website for playing poker for money online, is licensed and regulated by the Government of Gibraltar.

Online sportsbooks, often run by Americans offshore, still accept bets from Americans, and this is where the problem arises. Americans are the biggest betters, and most of the income stream for online sports betting comes from American wagers. These companies usually provide wire instructions to the gamblers so that the player can wire money into a pre-funded betting account before they can begin wagering.

So, the question is, is it legal for an offshore company to run their business offshore but still accept bets from the United States, where online sports betting is technically illegal? Yes and no. Theoretically it is illegal, but it's very difficult to compel an online sports betting service to shut itself down if they operate under the laws of a foreign government where it is legal. After all, if these Americans took a plane to these foreign countries for a nice vacation, they'd be allowed to go to those casinos and gamble, so why can't they do the same thing while sitting in front of their computer? It's been very difficult for the Department of Justice to enforce the Wire Wager Act when it comes to offshore companies, and the offshore betting business continues to get bigger and bigger. In 1998, the sum total of all internet wagers was estimated at $600 million, and has grown by 10 or more times that between then and the year 2006.

The Wire Wager Act was upheld when the U.S. Supreme Court, during 2001 and 2002, refused to review the conviction of Jay Cohen, who had been running an internet sportsbook based in Antigua. And, even though the Department of Justice has said in recent years that that the Wire Wager Act also declares online casino games, not just sports betting, to be illegal, the Federal Appeals Court has ruled that that interpretation is not correct. Therefore, online casino games might be considered legal in the United States, but it's hard to officially state whether it is or isn't.

So, what have we learned? We've learned that it's illegal to run an online sportsbook if that book is based in the United States and/or accepts bets from Americans, but it's difficult to prosecute offshore betting services. It's possibly legal to host online casino and card games, though the Department of Justice would like to change that. And, it's hard to tell whether online casino and card games are truly legal in the U.S., despite the fact that the Federal Appeals Court says it is legal, considering that so many online poker companies have decided to run their operations in Latin America and overseas. The U.S. Government is just trying to protect betters from getting screwed by unscrupulous, offshore criminals, but ultimately, online casinos and sports betting should be allowed. The United States simply needs to implement a system whereby the online casino industry is regulated, making it mandatory for the companies to disclose the details of their operations and apply for a casino or sportsbook license.
About the Author
Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make email forms.
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