Online Gambling
Background
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Millions of Americans play various gambling games on the Internet, even though the businesses are typically illegal, unregulated, and offer no consumer protections. An estimated 1,700 offshore sites accept these bets, with the annual market estimated at $4 to $6 billion.
Since 2001, there has been much discussion around implementing public policy related to online gaming in the United States. In 2006, the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) that would ban the use of credit cards and other financial instruments for the purpose of illegal Internet gambling. UIGEA was attached to federal legislation designed to increase the security of U.S. ports during the waning hours of the 109th Congress, and was signed into law by President Bush. Coupled with the 1961 Wire Act, these federal statutes have been in place to combat illegal Internet gambling.
However the December 2011 Department of Justice (DOJ) ruling limits the Wire Act’s applicability to sports betting and changes the paradigm for enforcement of federal prohibitions against illegal Internet gambling. It also removes the Wire Act as a tool to prosecute providers of other online gambling games and gives license to states to make available a wide array of games of chance on the Internet. Given the inherently interstate nature of the Internet, which has no borders, and the demonstrated willingness of offshore operators to violate US laws, making the Wire Act of 1961 applicable to Internet games of chance is necessary to 1) keep illegal offshore operators out of the US market and 2) provide strong and consistent enforcement protections that will not be possible as individual states pursue intrastate Internet gambling.
Federal Activity (Status as of 10/16/12)
Follow the links to the Library of Congress’ Thomas website for more details and official status updates on these bills.
Internet Gambling Regulation, Consumer Protection, and Enforcement Act (H.R. 1174)
On March 17, 2011, Rep. John Campbell (R-Calif.) introduced the Internet Gambling Regulation, Consumer Protection, & Enforcement Act of 2011. The bill would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States.
Internet Gambling Regulation and Tax Enforcement Act of 2011 (H.R. 2230)
The bill, introduced by Rep. Jim McDermott (D-Wash.) on June 16, 2011, is the companion bill to H.R. 1174 and would require online gambling providers to pay impose a two percent federal tax on the deposits they receive each month, and individual states would be given the option of taxing online gambling operators at a rate of six percent.
Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011 (H.R. 2366)
The bill, introduced by Rep. Joe Barton (R-Texas) on June 24, 2011, calls for the legalization and federal regulation of online poker. Potential operators would apply through a newly created office in the Commerce Department and need to have gambling licenses under at least one state or tribe. States would have the option to choose whether they want to allow residents to play poker on the Internet.
Department of Justice Office of Legal Counsel Ruling
On December 21, 2011, the Department of Justice’s Office of Legal Counsel released its legal opinion in response to letters of inquiry from the New York and Illinois state lotteries that affirmed that the Wire Act of 1961 only prohibits the transmission of communications relative to bests or wagers on sporting events or contests. The opinion made clear that intrastate sales of lottery tickets online are legal so long as the lottery games do not involve “sports wagering”.
AGA Position
The following position was adopted by the AGA Board of Directors in March 2010.
The American Gaming Association has followed the issue of Internet gambling since the mid-1990s. Historically, AGA members have questioned the adequacy of technological safeguards to prevent money laundering, underage gambling and participation by residents of jurisdictions where it is deemed illegal. After considerable study, however, our concerns about technology have been eliminated by advancements in the field, and the AGA believes that the technology now exists to properly regulate Internet gambling with appropriate law enforcement oversight and to provide appropriate consumer protections for individuals gambling online. However, the AGA also believes that existing laws do not adequately protect the millions of Americans who gamble online every day.
Thus, the AGA acknowledges that a properly regulated legal framework for Internet gambling is the best way to protect consumers. The AGA also believes that online gambling operators and suppliers should be held to the same level of probity to which AGA members adhere in their traditional land-based operations. Decisions on whether to support, oppose or remain neutral on individual pieces of legislation will be made by the AGA board on a case-by-case basis.
More recently, the AGA has expressed support for the licensing and regulation of online poker. Poker, a game of skill, is a beloved pastime enjoyed by millions from all walks of life and has played a strong role in the nation’s cultural history. It is not a “house-banked” game, and individuals play against each other and not the casino.
Strong enforcement against illegal operators and unambiguous U.S. laws are vital. But the recent indictments against a select number of offshore operators are only a half measure. The full solution is law enforcement and federally sanctioned state licensing and regulation of online poker for gaming companies that currently abide by U.S. law. Legislation is needed that removes the current ambiguity of UIGEA, restores clarity to the Wire Act and provides a strong regulatory framework to preserve states’ rights to determine the online poker options available to their residents.
