• What is the current status of online gambling laws in the US?

    Gambling is subject to both federal and state law, banning it in certain states, limiting the means and types of gambling, and regulating gambling itself. Although Congress passed federal law under the Dormant Commerce Clause, regulating interstate gambling, international gambling, and relations between the United States and Native American territories, state laws are hesitant to enact the laws due to conflict with the Dormant Commerce Clause. Specifically, the federal law regulates the transportation and possession of gambling devices across state lines, sports betting on a game held in a different state, how and where bets can be made, and internet gambling. The consequences of violation of federal gambling laws include steep fines, forfeiture of winnings, jail time, and felony conviction.

    The federal Indian Gaming Authority Act, codified under Title 25 of the United States Code, Section 29 in 2000, regulated gambling activity on Indian reservations. Some statutes enacted under state law, determine the types of acceptable gambling within state lines and who is allowed to gamble. Most gambling businesses bypass illegal gambling laws by operating near state borders, on cruise ships, or on Indian reservations. Internet gambling businesses uses this same tactic to avoid state law.

    The United States government has interpreted the federal Wire Communications Act, codified under Title 18 of the United States Code, Section 1084, and also known as the Wire Act, as a tool to make all forms of Internet gambling to be illegal, which also includes online gambling. More specifically, the federal Wire Act prohibited online websites from taking casino and poker bets.

    In April 2011, the U.S. Attorney in Manhattan, New York indicted eleven individuals for violations under the Unlawful Internet Gambling Enforcement Act and the Illegal Gambling Business Act, alleging online poker violations. The Unlawful Internet Gambling Enforcement Act, enacted in 2006, prohibits restricted transactions by gambling businesses, which includes acceptance of payments related to a bet or wager through the Internet and in violation of any federal or state law. The Illegal Gambling Business Act, codified under Title 18 of the United States Code, Section 1955, makes it illegal for any person to conduct, finance, manage, supervise, direct, or own all or part of an illegal gambling business, which is a gambling business in violation of State law, involving five or more persons, and has been or remains in substantially continuous operation for more than thirty days or has a gross revenue of $2,000 in any single day.

    Under current law, online poker participants can play for money in the country, but cannot collect their earnings legally. Recently, at the year’s end in December 2011, the Department of Justice changed its position on this issue and stated that the federal Wire Act only applies to sports betting, legalizing other forms of Internet gambling. As a result, the federal Wire Act no longer prohibits online websites from taking casino or poker bets. However, in states that expressly ban gambling in various forms, the Department of Justice maintains the capacity to investigate and prosecute gambling businesses under the Unlawful Internet Gambling Enforcement Act and other sections of the criminal code. This shift in policy allows states to sell state-based lottery tickets online. In fact, this may spark cooperation between states for lottery programs and other gambling offerings, such as online poker and numerous casino games.

    This policy change by the Department of Justice is a reaction to the amount of attention on the studies and discussions pertaining to problems associated with gambling, such as addiction, poor job performance, crime, money laundering, decreased investment, participation by minors, etc. Unfortunately there is not much information available that discusses the societal effects of Internet gambling. The Department of Justice relies on the studies by the National Gambling Impact Study Commission, which in 1996 was assigned to assess the impact of gambling and electronic gambling on individuals, families, business, social institutions, and the economy. Before passing any new legislation related to the regulation or prohibition of Internet gambling, the Department of Justice will await the conclusion of the studies by the Commission.

    Prior to this decision, the American Gaming Association and the Poker Players Alliance spent considerable funds, lobbying Congress for online gambling regulation in efforts to protect American online poker players. American Indian communities involved in gambling businesses have also lobbied Congress on issues pertaining to online gambling, a huge industry for the groups. As a result, at least seven bills have been introduced by Congressional members, addressing the same matters presented. A majority of these matters deal with American Indian gambling facilities located outside of tribal reservations.
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