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Gaming Guru

 

The Risks of Internet Gambling

21 February 2001

Perhaps the most frequent question I get from readers of this column is about Internet gambling. "Is this something I can feel comfortable in engaging in?" is often how the question is framed.

Fundamentally, anyone interested in this activity has to understand that most of the Internet gambling sites are not set up in a regulated fashion. Thus, even if the activity was legal, there is still a very real danger that the person operating the site will take your money and run. Most of these sites are set up off-shore, leaving very little recourse to a gambler who does not get paid his or her winnings.

In contrast, land based and riverboat casinos in this country have gaming commissions, or, like Michigan, a Gaming Control Board, to ensure the integrity of the industry and to make sure that customers of the casino are treated fairly. Similarly, Indian casinos have gaming commissions set up to oversee the fair conduct of the games within the facility. Indian casinos must also conform to federal laws and rules adopted by the National Indian Gaming Commission. Virtually every casino I am familiar with in this country goes to great lengths to make sure that organized crime is not involved in any way. All owners of the casinos, and frequently all of their suppliers, are subject to very thorough background checks and ongoing "suitability" review by regulators to assure that the industry is of the highest moral integrity.

The Internet is an entirely different matter. With very little investment, any individual who wants to set up a casino web site can do so. Recognizing that this activity is illegal in this country, most of the operators set up off shore where they hope to be beyond the reach of the state and federal authorities in this country. They then post statements on their sites claiming that the activity is "perfectly legal." As PT Barnum used to say, there is a sucker born every minute.

If the likelihood of losing your money without having a legitimate chance of winning is not enough to convince you that Internet gambling is not wise, how about the risk of engaging in an illegal activity. Admittedly, the legal issues relating to Internet gambling are complex. Most of the federal laws dealing with gambling activities were drafted long before the Internet was even conceived of. Congress has been considering legislation on point for several sessions now, but so far legislation has not been enacted, in part because there are some people who feel that the existing laws on the books sufficiently ban the activity and others view enforcement of a broad prohibition as impossible. For a detailed discussion of all the legal issues relating to Internet gambling from a federal perspective, I highly recommend Whittier Law School Professor I. Nelson Rose's "The Law of Internet Gambling" which is available on his web site at www.GamblingandtheLaw.com

The Michigan Gaming Control Board has a series of Frequently Asked Questions posted on its web site. The Internet gambling issue is directly addressed as follows:

Is it legal to gamble over the Internet in Michigan? - 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 U.S. 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.

Clearly, the State of Michigan has taken a strong position on this matter and has stated in unequivocal terms that Internet gambling is illegal. Although there may be many defenses that one could raise to seek to avoid prosecution, the wisest course of action is clearly to steer clear of this activity unless or until there are new laws enacted. When and if that ever occurs, you can bet that the major casino operators that you know and trust will begin to offer the product to you on line. From a policy standpoint, it is imperative that the industry regulators work to understand the issue of Internet gaming before making harsh determination on its fate. Technology is advancing at an inconceivable pace and if the appropriate resources are used a system for developing an on-line wagering product that is fair and protects and serves the public interest is obtainable.

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