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Archive for August, 2009

Internet gambling is an essentially borderless activity that poses regulatory and enforcement challenges. The legal framework for regulating it in the United States and overseas is complex. U.S. law as it applies to Internet gambling involves both state and federal statutes. In general, gambling is regulated at the state level, with each state determining whether individuals can gamble within its borders and whether gaming businesses can legally operate there. Five states (Illinois, Louisiana, Nevada, Oregon, and South Dakota) have enacted laws that specifically prohibit certain aspects of Internet gambling, but laws in other states that prohibit some
types of gambling activities generally apply to Internet gaming as well.

Federal law recognizes that state laws vary and seeks to ensure that neither interstate nor foreign commerce is used to circumvent them. To date, 18 U.S.C. § 1084 (commonly referred to as the Wire Act) is the principal federal statute that has been used to prosecute Internet gambling activities across state lines. Although other acts appear to have direct applicability to on-line gambling, we are unaware of federal prosecutions under these statutes.  However, these other federal statutes have been used to prosecute gambling establishments (often located offshore) that accept bets over the telephone. According to an interactive gaming
industry services group, Internet gambling has been legalized in over 50 countries and jurisdictions, mostly in Europe, the Caribbean, and the Australia/Pacific region. A few countries and jurisdictions have prohibited it, but we were unable to determine the exact number.

Representatives of law enforcement agencies told us that Internet gambling could be used to launder money, but others viewed the threat as less serious. Law enforcement representatives said that the anonymity and jurisdictional issues characteristic of Internet gambling make on-line gaming a potentially powerful tool for money launderers. They noted that few money laundering cases involving Internet gambling had been prosecuted but attributed the small number of cases primarily to a lack of regulation and oversight. However, regulatory agencies and officials from the credit card and gaming industries did not believe that Internet gambling was any more susceptible to money laundering than other forms of e-commerce.

Internet gambling involves any activity that takes place via the Internet and that includes placing a bet or wager. The Internet is a complex web of computer networks that allows a person in one place in the world to communicate by computer with another  person located in another place in the world. Courts generally have defined a bet or wager as any activity that involves a prize, consideration, and chance. A prize is anything of value. Chance is usually determined by assessing whether chance or skill predominates. Consideration is what the person must pay to enter and must be something of value, such as money.