Using the internet for illegal gambling is unlawful. According to 31 U.S.C. 5362(10), unlawful Internet gambling means placing bets, transmitting bets, or receiving bets over the Internet, or using at least part of the Internet for such purposes. It also includes betting on sporting events. However, certain types of online gambling are legal. These include sports betting, casinos, and virtual poker. In addition, gaming laws differ from state to state. Some states allow gambling to take place through online channels, while other states do not.
The first online gambling venue for the general public was the Liechtenstein International Lottery. It has been cited in the CRS Report RS21984 and is available in abridged form. It includes a citation to state gambling laws and text of a number of statutes.
While the United States has passed several laws to prevent unlawful online gambling, it has faced some constitutional challenges. These issues have raised questions about the Commerce Clause and the First Amendment’s limited protection for speech.
Several cases have been brought against Internet poker operators. These include the 4th Circuit case of United States v. Nicolaou, which involved five persons on a single day and a total of $2,000. The case is a criminal case. The federal government also charges the company with violations of 18 U.S.C. 1955 for money laundering. In response to this charge, the company agreed to pay a $4.2 million fine and launch a $3 million public service campaign.
Another case involves the federal government’s seizure of $3.2 million from a casino operation in Costa Rica. The federal government claimed that the business operated under the name Tropical Paradise. The Costa Rican government denied the claim and claimed that it did not violate federal law. In response, the federal marshals seized the money. The government then warned PayPal that it could face prosecution for its financial transactions with the online gambling business.
The Lopez Amendment is another piece of legislation designed to protect low-level gambling cases. It regulates commercial activity and comes with Congressional findings about the effect on interstate commerce. It also contains elements to weed out low-level gambling cases.
In addition, the Federal Communications Commission (FCC) has jurisdiction over common carriers and telecommunications services. The FCC may also discontinue providing facilities or leasing them. The agency has found that these elements can be used to frustrate state enforcement policies.
In December 2002, the General Accounting Office (GAO) issued a report titled Internet Gambling: Overview of Issues. It cites the various state and federal gambling laws and discusses the impact on interstate commerce. These reports are published annually and are useful resources for both consumers and attorneys. The report is available on the GAO website.
While the Commerce Clause raises constitutional concerns about the ability of the government to prosecute unlawful Internet gambling, it is clear that the commercial nature of the gambling business has satisfied many of these doubts. In cases where financial transactions occur within the United States, due process arguments are inherently compromised.