U.S.: Draft legislation aimed at prohibiting internet gambling

Over the weekend, a draft of the “Internet Gambling Control Act” surfaced on the internet.  This proposed legislation, attributed by industry websites to the Coalition to Stop Internet Gambling, seeks to expand the scope of The Wire Act (18 USC § 1084) to affirmatively prohibit Internet gambling.  Speculation is that Mr. Sheldon Adelson, the international casino magnate and Chairman / CEO of Las Vegas Sands, is backing the Coalition.

The Wire Act prohibits, in part, the use of “a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers…on any sporting event or contest.”  18 USC § 1084.  The scope of this federal statute had long been the subject of dispute, which was largely put to rest in 2011 when the United States Department of Justice issued an opinion stating the Wire Act ­did not apply to non-sports betting. This issuance of this opinion constituted a complete reversal for the DOJ, and opened the doors for the legalization of intrastate i-gaming in the United States.  Currently, three states currently permit and regulate i-gaming (Nevada, Delaware, and New Jersey), and many states are actively considering similar measures, either through the state-conducted lottery asset or through bricks-and-mortar casinos (California, Illinois, Minnesota, Michigan, Pennsylvania).   

The draft Internet Gambling Control Act proposes to “amend” § 1084, and to “restore long-standing United States policy that the Wire Act prohibits Internet gambling….”   The language cites concerns with “the potential use of Internet gambling sites for money laundering,” use by terrorist organizations to transfer and launder money, cyber-crimes, the potential for manipulation of games resulting in fraud, and the inability to effectively prevent participation by underage gamblers and those gamblers not located within the borders of states where i-gaming is legal.

The proposed legislation seeks to add the Internet “and any activity which involves the use , at least in part, of the Internet” to the term “wire communication.”  In addition, such amendment would criminalize any interstate transmission of “bets or wagers”, whether transmitted “incidentally or otherwise.” The draft amendment would not have an impact on activities currently permitted under (1) the Unlawful Internet Gaming Enforcement Act (“UIGEA”), such as those activities governed by the Security Exchange Act or Commodity Exchange Act, among others, or (2) the Interstate Horse Racing Act (15 USC §3001, et seq.).

However, the draft legislation is less clear when it comes to the scope of games prohibited.   Proposed Section 3 (f)(2) provides that  “any sporting event or contest” would be expanded to include “games in part or predominantly subject to chance, including games in which players compete against each other, and not against any person, entity, or fellow player hosting the game, the outcome of which, over any significant interval, is predominantly determined by the skill of the players, and the purchase of chance or opportunity to win a lottery or other prize (which opportunity to win is predominantly subject to chance.)”  It is unclear whether this includes both games of chance and skill (e.g., poker), or if a game played by a single player against the “house,” and not against a fellow participant, would be permitted.

The proposed legislation has not yet been introduced to Congress, and industry speculation anticipates such “is in the final stages and will require certain revisions.”  State governments, the casino industry, and private entities servicing legalized i-gaming will certainly follow further developments with great interest.

Topics:  Commodities Exchange Act, DOJ, Internet Gambling, Internet Gambling Control Act, Interstate Wire Act, Securities Exchange Act

Published In: Art, Entertainment & Sports Updates, Criminal Law Updates, Elections & Politics Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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