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Today most Net casino operators are in the entertainment business. They are pseudo-casinos, where you play for fun and the right to be bombarded with advertisements by the site's sponsors. You can try your luck at a couple of good free sites, such as Virtual Vegas and Game-Land. Increasingly, though, these sites offer actual gambling, where you pay money for the chance to win even more money at your favorite game of chance. While at least one of these sites claims to be doing zillions in business, the prizes being offered suggest that gambling on the Internet is in its infancy. Just how much business can some of these sites be doing when their grand prize is $250?
Net surfers can appreciate why big-time gambling is still some years away. The darn thing is still excruciatingly slow, even with a really fast modem. Waiting 20 seconds for the cyber-dealer to deal your "hit" card is even more annoying than sitting next to a chain-smoking drunk in a Vegas casino. At least in Vegas, you can get up and move to another table. And just who is running these cyber-joints? For some reason, sending $2,500 to a convicted felon who operates out of a banana republic to open an Internet account sounds like a bigger risk than banking on winning the California lottery. Just as important, how do you know this guy isn't cheating? The software that runs the casino could be set up so that the "millions and millions" won by lucky players turns out to have been paid to his cousin Sal from Brooklyn.
Another minor thing that may make some people leery is whether any of this is even legal. This has been the Sixty-Four-Thousand-Dollar Question from wannabe cybercasinos. More details on this issue are available in the Internet Gambling Report at HotelCasinoMedia Inc.. Bear with me here and I will try to summarize the arguments. (While I profess to be a lawyer, I failed the course on how to confuse non-lawyers with legalese, so this might just make some sense.) The most relevant statute is the federal wire statute, 18 U.S.C. 1084, which addresses the sending of wagering information between states or countries over telephone lines. Home users can breathe easy; federal law does not apply to the casual bettor, just the bookie. One congressman even stated, "This bill...does not get after the casual gambler who bets $2 on a race." Of course, you could be breaking state law, but state prisons for white-collar criminals are usually cleaner and nicer than federal prisons.
Many Internet casino operators have argued loopholes in the federal statute that they believe will help them avoid a two- to five-year life experience in federal prison. One thing is clear: this statute prohibits use of the Net for the transmission of sports bets to, from or between any of the 50 states. It does not, however, appear to apply to specific forms of gambling other than betting on sporting events or contests.
This turns into an exam for high school English teachers. The issue turns on whether, in the phrase "sporting event or contest," the adjective "sporting" modifies both "event" and "contest." No one has ever been convicted of 1084 except for sports wagering. Moreover, the legislative history suggests that it was meant to apply to sports wagering. This is the cybercasino's best argument, and in my view, the only winner. However, some people disagree with me, like the Department of Justice and various state attorney generals. (See the Minnesota Attorney General's position.) Given that they prosecute and put people in jail, and my experience with the criminal justice system is watching Court TV, their opinion may be a little more important if you are considering this business. But I take some solace in the fact that I am not alone in this view. Senator Kyl from Arizona and Senator Hatch from Utah apparently see the same loophole. They introduced Senate bill 1495 which would strike out the words "on any sporting event or contest." This proposed bill can be found at the Thomas site. Then, as long as it was a bet or wager, a cybercasino would have trouble.
Are there any more loopholes? I think it gets a lot tougher from here. The second part of Section 1084(a) says that the person must be "engaged in the business of betting or wagering." A party operating an online casino or sports wagering service would appear to fall into this category.
Here is the argument put forth by a sports wagering site. They proposed a system whereby they would merely broker bets for a small commission. Their attorney made the argument that brokering bets is not the same as being engaged in the business of betting or wagering. My response was basically, "Yeah, right. What business are they in, exactly?" Of course, in the next breath, the attorney said that that the company would not take bets from the United States. Good choice. Again, Senators Kyl and Hatch are out there trying to ruin everyone's fun. Their bill would add a new section that would take out the words "in the business of" and therefore would apply to anyone who wagers with the cybercasino or bookie. If this occurs, you might have to keep Aunt Ester the Slot Maniac off your computer. Sure, you could let Ester spend a few years in the slammer, where she wouldn't be able to ruin your Sundays by visiting and drinking all your beer. But it may not be worth it. The Kyl and Hatch proposal would allow the police to seize your computer and then you wouldn't be able to email Aunt Ester in Leavenworth or, more important, download pictures of Cindy Crawford or Brad Pitt, depending on your preference.
Let's go to the next element to see if there are any other loopholes. The gambling business must use a wire communications facility for the "transmission" of bets or wagers or gambling information. Some courts have interpreted "transmission" narrowly to include only the party initiating the communication—not the receiving party.
If you are in the 7th Circuit this is an argument (not a great argument, but an argument). There a court held that a person was not "transmitting" by having a ticker tape that allowed the receipt, but not the sending, of gambling information. But what we are talking about here is interactivity. Like Mr. Webster would say, "To act mutual." It would be one boring Web site if it never responded. Plus, if you show up for arraignment in the 1st, 9th or 10th Circuit, the "Hey, I was only receiving" argument doesn't even pass the "nice try" test. I know a lot of operators are relying on this argument by setting up outside the United States, in banana republics. Their argument is that online gaming has been authorized by acts of law in those countries by good, well-intentioned, hardworking and honest politicians who don't have Swiss bank accounts and are not likely to be the victims of a military coup.
As their argument goes, because they aren't violating any laws in their country, and the bettor isn't violating federal law, life is wonderful. This argument is not likely to succeed. If someone commits an act, outside the United States, that is intended to cause an effect in the United States, then he is probably subject to U.S. laws. Just ask Manuel Noriega (MNoriega@Leavenworth.pen—just kidding). Plus, the United States retains the right to prosecute its citizens regardless of where they are doing business. My favorite justification for why a person who owns a cybercasino is not breaking the law is that he is just a shareholder in a Dominican Republic corporation that owns the casino. Could you see a drug dealer argue that he didn't violate any criminal laws because he was selling crack for his offshore corporation? Another strategy is to say that the person is not operating the cybercasino but is serving as a "consultant" to the government-operated casino. Great. So instead of being the perpetrator, you are only aiding and abetting a felon.
The question of whether or not gaming on the Net is legal is not the right one, but what is? There are two right questions to ask. What will the law be tomorrow? And does it make any difference what the law is? Just like Senators Hatch and Kyl and the National Attorney General's Association are looking to tackle the loopholes in the federal law, look for other governments, both state and foreign, to begin their own assault on gambling and pornography on the Net. Then again, the toughest laws in the world may be unenforceable.