Using the internet for gambling is illegal under both state and federal law. A number of state officials have expressed concerns that the internet could be used to transport illegal gambling into their jurisdictions. However, the federal government has taken a softer approach. In fact, it has imposed penalties on individuals allegedly using the Internet to make illegal bets. The most recent case in point was a fine against the Internet gambling operation of Sporting News. The company agreed to pay a $4.2 million fine and launch a public service campaign to educate the public about Internet gambling.
On the federal side, the Illegal Gambling Business Act makes it illegal to use the internet to conduct illegal gambling. The statute covers both physical and electronic gambling devices, including computers, cell phones and games of chance. Its most important component is the prohibition on accepting financial instruments for an illegal Internet bet. It is also illegal to engage in remote gambling, or the use of the Internet to gamble without physically being present in the same location. The same law also covers sports betting.
The statute contains a few more complicated provisions. For example, the Unlawful Internet Gambling Enforcement Act (UIGEA) creates several new crimes, including one for laundering money for the promotion of illicit activity. The law also requires certain data security measures to be put into place. This is one of the most complex statutes in the United States.
There are a number of other statutes that are involved in the prosecution of illegal online gambling. Some of these include the Wire Act, which prohibits betting on sporting events, and the Travel Act, which prohibits illegal gambling in interstate commerce. There are also the RICO (Racketeer Influenced and Corrupt Organizations) provisions, which are designed to stymie illegal gambling businesses. These laws, among others, are the reason federal prosecutors warned PayPal that it may be subject to prosecution.
There have been many legal debates about the efficacy of federal law in dealing with online gambling. While the law is a bit of a mixed bag, it reinforces state law in certain cases and can serve as a check and balance for state officials. The law also is susceptible to challenges on constitutional grounds. In particular, the First Amendment, which prohibits state governments from interfering with the free speech of private citizens, has been raised.
In the case of online gambling, the law does not offer much clarity on the question of whether state laws are trumped by federal legislation. However, a handful of notable federal cases, including the aforementioned Sporting News and PayPal, have shown that the government is prepared to take the high road. However, it is still too early to determine whether the law will have a lasting impact on Internet gambling. A more important question is whether state and federal officials will have the ability to work together to enforce laws against online gambling. In the mean time, Internet gambling is illegal, and prosecutors are keeping a close eye on companies that engage in illegal gambling.