Among other things, the UIGEA prohibits the receipt or acceptance of financial instruments in connection with the placement of an illegal Internet bet. This is a good thing, considering that many state officials are concerned that the internet may be used to bring illegal gambling to their jurisdictions. But what are the legal issues involved? In particular, can states enforce federal laws?
The UIGEA isn’t the only law to target the Internet. Other federal laws include the Wire Act and the Gambling Devices Transportation Act, also known as the Johnson Act. These laws are meant to prevent illegal gambling on sporting events and the transportation of gambling devices across state lines. But as of December 2002, there were still a few state attorneys general and law enforcement officials who were concerned about the potential legal ramifications of Internet gambling. Several state officials also cited a concern about Internet gambling’s effect on consumer privacy. In a December 2002 press release, New York Attorney General Eliot Spitzer warned that “unlawful Internet gambling is prohibited in the State of New York, and that the use of an Internet gambling website in the state is a crime.”
While the law regulating the most nifty Internet gambling websites has yet to be enacted, federal prosecutors have warned PayPal and other Internet payment systems that they could face prosecution. Likewise, the Federal Communications Commission may discontinue the leasing or providing of facilities to online gambling websites, and state attorneys general have been warned that they should be prepared for the wrath of the legal system. As for legal liability, state attorneys general have also been warned that they could be found in contempt of court if they fail to prosecute online gambling websites.
The best part is that the law has actually reinforced state laws in some cases. For instance, in December 2002, the United States Marshal’s Office seized $3.2 million from a Costa Rican casino operation. In addition to confiscating the loot, U.S. marshals also accepted ads from the same operation. And, in May 2004, U.S. marshals seized $1 million from the website of the same casino, as well as $22 million from another online gambling website.
The UIGEA may be a tad overzealous, but it does provide the law enforcement community with some tools to combat online gambling. It also helps that some of the biggest Internet gambling sites operate in foreign jurisdictions. This could help state attorneys general make better enforcement decisions. Ultimately, however, the law is a complex one, and state officials may need to take a closer look at the UIGEA to determine whether it truly is a panacea or a nefarious menace. For more information, check out the Internet Gambling: An Overview of Issues. This comprehensive resource was authored by the Internet Law Institute at Harvard Law School and published by the Federal Trade Commission. It includes an abridged version of the aforementioned RS21984 report, as well as a list of state gambling laws and other relevant laws.