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Gaming Guru

 

Justice Department Reaffirms Prohibition on Internet Gambling

18 September 2002

One of the most frequent questions I get from readers of this column is "Are Internet casinos legal?" As those of you who have asked have learned, this is a complicated legal issue with many arguments on both sides. Notably, however, the federal government has recently given its interpretation in some informal guidance to the Nevada Gaming Control Board.

In response to our inquiry from the Nevada Gaming Control Board, the U.S. Justice Department recently affirmed its position that federal law prohibits gambling over the Internet, including casino-style gambling. The letter provides the following discussion:

"As set forth in prior Congressional testimony, the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling. While several federal statutes are applicable to Internet gambling, the main statutes are Sections 1084, 1952, and 1955, of Title 18, United States Code. . . . Section 1084 of Title 18, United States Code, prohibits one in the business of betting or wagering from knowingly using a wire communication facility for the transmission of interstate or foreign commerce of bets or wagers of information assisting in the placing of bets or wagers. Section 1952 of Title 18, United States Code, prohibits traveling in interstate or foreign commerce, or using the mails, or using a facility in interstate of foreign commerce with intent to distribute the proceeds of an unlawful activity or otherwise promoting, managing, establishing, carrying on, or facilitating the promotion, management, establishment, or carrying on of any unlawful activity and thereafter performing or attempting to perform such act. The term "unlawful activity" is defined in Section 1952(b) to mean "any business enterprise involving gambling . . . in violation of the laws of the State in which they are committed or of the United States." Section 1955 of Title 18, United States Code, prohibits illegal gambling businesses, which involve 1) a violation of state law, 2) five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such businesses, and 3) a business that has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day. In addition to criminal convictions, Section 1955 can be used to seek civil forfeiture of gambling proceeds. See, United States v. $734,578.82 in United States Currency, 286 F.3d 641 (3d Cir. 2002). Moreover, the federal money laundering statutes are applicable to unlawful Internet gambling businesses. Additionally, it is the Department's view that the gambling activity occurs both in the jurisdiction where the bettor is located and the state or foreign country where the gambling business is located."

Similarly, Michigan State officials have also made it clear that they believe Internet gambling is a crime under State law. The Michigan Gaming Control Board on its web page has the following "Frequently Asked Questions" discussion:

Q. "Is it legal to gamble over the Internet in Michigan?"

Answer:

No. All forms of gaming are illegal in Michigan except those specifically permitted under Michigan law. Contact the Michigan Attorney General's Criminal Division (517/334-6010) for more information.

According to US Attorney General Janet Reno (3/4/98), "It's a federal crime to use the Internet to conduct betting operations." She cites a 1961 Federal law making it a crime to use interstate telephone lines for gambling."

Thus, it is clear that both State and Federal officials view Internet gambling to be illegal. Furthermore, unless or until the law is changed, most of these sites are a dangerous gamble for another reason

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com