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Old 09-12-04, 10:42 AM
HPG ADMIN HPG ADMIN is offline
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Is online gambling illegal?

[url="http://www.cybercrime.gov/JGM_Intgambling.htm"]http://www.cybercrime.gov/JGM_Intgambling.htm[/url]



Statement of
John G. Malcolm
Deputy Assistant Attorney General

Criminal Division
United States Department of Justice

At
Special Briefing: Money Laundering and Payment Systems in Online Gambling Sponsored
By World Online Gambling Law Report
London, England




It is a pleasure to speak to you today about some of the many issues involved with on-line gambling. Let me state at the outset that when I refer to on-line gambling, I am including within that definition gambling and gaming of all types, be it casino-type games or sporting events, and I am also including gambling by other technologies, such as through interactive television. For purposes of United States law, these distinctions are not as significant as they are under the laws of other countries.

As you all know, the number of Internet gambling sites has increased substantially in recent years. While there were approximately 700 Internet gambling sites in 1999, it is estimated that by 2003, there will be approximately 1,800 such sites generating around $4.2 billion. In addition to on-line casino-style gambling sites, there are also numerous off-shore sports books operating telephone betting services. These developments are of great concern to the United States Department of Justice, particularly because many of these operations are currently accepting bets from United States citizens, when we believe that it is illegal to do so. The United States has other concerns too, some of which I would like to talk about today.

In the United Kingdom, as you know, many forms of on-line gambling are permitted. Moreover, it is not illegal for British residents to gamble on-line nor is it illegal for overseas operators to offer on-line gambling to British residents. In short, the United Kingdom has opted to regulate the on-line gaming industry. The United States has taken a different approach, opting instead to prohibit on-line gambling.

The Internet and other emerging technologies, such as interactive television, have made possible types of gambling that were not feasible a few years ago. For example, a United States citizen can now, from his home at any hour of the day or night, participate in an interactive Internet poker game operated by a computer located in the Caribbean. Indeed, a tech-savvy gambler can route his bets through computers located in other countries throughout the world, thereby obscuring the fact that he is placing his bet from the United States or from some other country where it is illegal to do so.

On-line gambling also makes it far more difficult to prevent minors from gambling. Gambling websites cannot look at their customers to assess their age and request photo identification as is possible in traditional physical casinos and Off-Track-Betting parlors. Similarly, minors, many of whom are more tech-savvy than their parents, can and do devise methods of defeating age-verification procedures offered by some, but not all, on-line gambling companies.
Although some companies are developing software to try to detect whether a player is old enough to gamble or whether that player is from a legal jurisdiction, such software has not been perfected and would, of course, be subject to the same types of flaws and vulnerabilities that could be exploited by hackers.

Unlike on-site gambling, on-line gambling is readily available to all and permits the user to gamble, in many cases, anonymously. As was recently pointed out by the American Psychiatric Society: “Internet gambling, unlike many other types of gambling activity, is a solitary activity, which makes it even more dangerous: people can gamble uninterrupted and undetected for unlimited periods of time.” Indeed, the problems associated with pathological and problem gamblers, a frighteningly-large percentage of which are young people, are well-established and can be measured in the ruined lives of both the gamblers themselves and their families.

Although there are certainly legitimate companies who are either operating or who want to operate on-line casinos in an honest manner, the potential for fraud connected with casinos and bookmaking operations in the virtual world is far greater than in the physical realm. Start-up costs are relatively low and cheap servers and unsophisticated software are readily-available. On-line casinos and bookmaking establishments operate in many countries where effective regulation and law enforcement is minimal or non-existent. Like scam telemarketing operations, on-line gambling establishments appear and disappear with regularity, collecting from losers and not paying winners, and with little fear of being apprehended and prosecuted.

Through slight alterations of the software, unscrupulous gambling operations can manipulate the odds in their favor, make unauthorized credit card charges to the accounts of unsuspecting gamblers, or alter their own accounts to skim money. There is also a danger that hackers can manipulate the online games in their favor or can steal credit card or other information about other gamblers using the site.

In the United States, both federal and state laws apply to on-line gambling. Historically, the individual states were left to determine what forms of gambling could be offered within an individual state’s borders and to regulate such gambling. Not surprisingly, different states have different laws about gambling. For example, the State of Nevada permits and regulates casinos and sports bookmaking operations; while the neighboring State of Utah, on the other hand, does not permit any gambling. This poses a particular problem in the on-line world because, as I previously stated, the person placing a bet may not be located in the same state or even the same country as the person receiving the bet.

The Department of Justice views a gambling transaction as occurring in both the jurisdiction where the bet is placed by the bettor and in the jurisdiction where the gambling business that receives the bet is located. Thus, if Internet gambling were regulated in the United States, it would be subject to, and would need to be in compliance with, fifty differing sets of gambling laws, which would pose certain unique problems.

While the prosecution of individual bettors and intra-state gambling crimes are largely left to the individual states, there are numerous federal gambling statutes that the Department of Justice has employed against large-scale gambling businesses that operate interstate or internationally.

One such statute is the so-called Wire Act, which is codified at Section 1084 of Title 18 of the United States Code. This statute makes it a crime, punishable up to two years in prison, to knowingly transmit in interstate or foreign commerce bets on any sporting event or contest. It is the Department of Justice’s position that this prohibition applies to both sporting events and other forms of gambling, and that it also applies to those who send or receive bets in interstate or foreign commerce even if it is legal to place or receive such a bet in both the sending jurisdiction and the receiving jurisdiction. This view was upheld by the Second Circuit Court of Appeals in the recent successful federal prosecution of Jay Cohen, who was the President of World Sports Exchange, a company which was based in Antigua but which accepted bets via the telephone and the Internet from citizens in the United States.

Another federal statute that is applicable to on-line gambling is Section 1955 of Title 18, United States Code, which makes it a crime, punishable by up to five years in prison, to conduct, finance, manage, supervise, direct, or own all or part of a gambling business, so long as it is illegal to operate such a business under state law. In addition to criminal penalties, this section also contains a civil forfeiture provision, which the Department of Justice has used on occasion to great effect. For instance, the Department of Justice recently used this provision to forfeit nearly three-quarters of a million dollars that had been seized from a New Jersey corporation named Intercash Ltd. that served as an intermediary between U.S. gamblers and an English gambling house named American Sports Limited.[url="http://www.cybercrime.gov/JGM_Intgambling.htm#1"]1[/url]

Other statutes which the Department of Justice has employed against illegal on-line gambling operations would include the Racketeer Influenced and Corrupt Organizations Act (more commonly known by its acronym RICO), which can be found at Sections 1961-1968 of Title 18 of the United States Code, as well as Section 1952 of Title 18, United States Code, which is also referred to as the Travel Act, which makes it a crime to use interstate or foreign facilities in aid of unlawful activity, which includes gambling. There is also Section 1953, which prohibits the transmission of wagering paraphernalia, as well as other criminal and civil statutes that can be applied in this context.

In addition to these statutes that have already been enacted, Congress is currently considering legislation that would prohibit certain forms of payments, including credit card payments, for illegal Internet gambling. This bill passed the House of Representatives last month and is still pending in the Senate.
In addition to the federal government, various state governments have also taken actions against on-line gambling. For instance, in New York State, where unauthorized gambling is illegal, the New York State Attorney General reached an agreement with Citibank to block credit card payments of on-line gambling transactions by its customers. The same Attorney General recently reached an agreement with PayPal, which agreed to stop processing payments from New York State customers to on-line gambling merchants.

Some companies have taken steps themselves against on-line gambling businesses. For instance, just last month, PayPal was acquired by E-Bay, the on-line auction service, which announced that it will phase out PayPal’s on-line gambling business by the end of the year. Both Discover and American Express have company policies that restrict the use of their credit cards for Internet gambling and prevent Internet gambling sites from being issued credit card merchant accounts.

In addition to on-line gambling itself, the United States government is also concerned about the substance and scope of advertising for on-line gambling. Advertisements for on-line gambling are omnipresent on the Internet, in print ads, and over the radio. The United States Federal Trade Commission recently looked at this issue and found, not surprisingly, that advertisements for gambling over the Internet appear even on websites oriented towards children. The shear volume of advertisements for offshore sports books and online casinos is troubling because it misleads the public in the United States to believe that such gambling is legal, when in fact, it is not. Indeed, as I am sure you all know, many of these advertisements affirmatively foster that erroneous belief.

Some states which outlaw the promotion of gambling have taken action to curtail these advertisements. For instance, in December 2001, the Colorado Attorney General and the Colorado Limited Gaming Control Commission sent notices to certain radio operators asking them to stop broadcasting advertisements for Internet casinos and sports bookmaking operations. Similarly, in February 2002, the California Horse Racing Board and the California Broadcasters Association sent notices to every radio and television station in California to stop running advertisements for illegal off-shore wagering services.

Another major concern that the Department of Justice has about on-line gambling is that Internet gambling businesses provide criminals with an easy and excellent vehicle for money laundering, due in large part to the volume, speed, and international reach of Internet transaction and the offshore locations of most Internet gambling sites, as well as the fact that the industry itself is already cash-intensive.

It is a fact that money launderers have to go to financial institutions either to conceal their illegal funds or recycle those funds back into the economy for their use. Because criminals are aware that banks have been subjected to greater scrutiny and regulation, not surprisingly, they have turned to other non-bank financial institutions, such as casinos, to launder their money. On-line casinos are a particularly inviting target because, in addition to using the gambling that casinos offer as a way to hide or transfer money, casinos offer a broad array of financial services to their customers, such as providing credit accounts, fund transmittal services, check cashing services, and currency exchange services.

Individuals wanting to launder ill-gotten gains through an on-line casino can do so in a variety of ways. For example, a customer could establish an account with a casino using illegally-derived proceeds, conduct a minimal amount of betting or engage in offsetting bets with an overseas confederate, and then request repayment from the casino, thereby providing a new “source” of the funds. If a gambler wants to transfer money to an inside source in the casino, who may be located in another country, he can just play til he loses the requisite amount. Similarly, if an insider wants to transfer money to the gambler, perhaps as payment for some illicit activity, he can rig the game so the bettor wins.

The anonymous nature of the Internet and the use of encryption makes it difficult to trace the transactions. The gambling business may also not maintain the transaction records, in which case tracing may be impossible. While regulators in the United States can visit physical casinos, observe their operations, and examine their books and records to ensure compliance with regulations, this is far more difficult, if not impossible, with virtual casinos.

Similarly, in the United States, land-based casinos are now required to file suspicious activity reports with the Treasury Department’s Financial Crimes Enforcement Network. The USA Patriot Act, which was enacted in the aftermath of the tragic events of September 11, 2001, requires all financial institutions, which now specifically includes casinos, to adopt money laundering compliance programs. Less than two months ago, the Treasury Department published its final rules pertaining to the maintenance of Bank Secrecy Act compliance programs by casinos and card clubs. Detecting money laundering and ensuring compliance with these new regulations will be difficult enough when it comes to physical casinos. The difficulty of these tasks will increase immeasurably, and perhaps become insurmountable, if virtual casinos are permitted to flourish.

In conclusion, let me state that although the United States Department of Justice continues to believe that interstate on-line gambling should be prohibited, we realize that other countries disagree and have opted to pursue the regulatory route. Because not all countries have outlawed on-line gambling and because of the inherently-international nature of these on-line operations, the United States recognizes the need for international cooperation to combat money laundering and other illicit activities connected with the on-line gaming industry, problems which we all share. We look forward to working together with you in that effort.

__________________________________________________ ____ 1 United States v. $734,578.82 in United States Currency, 286 F. 3d 641 (3d Cir. 2002)
  #2  
Old 03-03-08, 07:02 AM
simons simons is offline
 
Join Date: Jul 2007
Posts: 6
What I know about gambling is it is illegal in many part of the world but in many part of the world it is most liked game and the revenue which it generate is tremendous. My suggestion would be simple if the game is illegal or comes under law so give respect to the law and don't play the game.
  #3  
Old 03-05-08, 01:55 AM
eken eken is offline
 
Join Date: Jul 2007
Posts: 6
Gamble online and you could go to jail. It's illegal because it's hard to tax. Governments only make gambling legal where they've managed to figure out how to get their cut. But in many parts of the world it is still legal.
  #4  
Old 04-27-08, 09:00 PM
Lottery Larry Lottery Larry is offline
 
Join Date: Aug 2004
Location: East Coast outside of Philly
Posts: 19
Everything I've read about the legal analysis behind online poker is that it is not illegal to play. The DOJ stance has not been fully tested legally, in regards to the legality of online poker at a federal level.

But, I'm not a lawyer
 

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