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The legalities of gambling online...

 

In most jurisdictions around the world, the law is still a long way behind the technology and issues applying to online gambling.  As a result, the question of whether or not it is legal to gambling online can rarely be answered definitively.  It is probably fair to say also, that government attitudes to online gambling vary significantly, from whole hearted support, to strong opposition, to indifference. 

Efforts are being made by governments around the world to enact online gambling specific legislation specifically addressing the legality of internet gambling within their respective jurisdictions and the stance being taken (ie ban versus regulate) differs substantially from jurisdiction to jurisdiction. 

The UK and European Union most notably seems to be leaning toward the regulation approach, while the US grapples with the practical obstacles associated with their decision in 2006 to illegalize payment processing for internet gambling operations.

What is clear though is that most legislative efforts are being aimed at operators (the casinos) and facilitators (eg credit card companies etc) and not players.  This is an important point to note and means that amongst all the confusion the one clear position is that aside from some exceptions, it is not illegal for you the player to play online regardless of where you live.  You may however be unable to play at certain casinos because they are legally prohibited from taking your business.

A great summary of the current legal position pertaining to online gambling around the world is set out at Wikipedia


The position in the US...

US State Gambling Laws

Up until reasonably recently, regulation of gambling in the United States was left exclusively to the State Legislatures, who determined the legality or otherwise of gambling activities within their jurisdiction.  Some states have legalized many forms of gambling, while others have legislated to make it illegal to participate in any form of gambling other then the states lottery.  Nevada is the obvious example of a State which has embraced gambling as a legal form of commerce, while Utah is noted for its strong anti-gambling stance, and laws deeming all forms of gambling within its jurisdiction illegal.

US State gambling laws were all drafted long before the advent of the Internet, and they do not have provisions dealing specifically with online gambling.

US Federal Gambling Laws - Pre September 30 2006

Specific online gambling legislation  

Existing Federal Laws

Federal laws relating to gambling were passed by Congress more recently (than State laws) to deal with inconsistencies in State based gambling laws, especially as they applied to interstate commerce.  Until 2006, US federal laws applying gambling activities were all drafted before the advent of Internet gambling.  There are a number of current federal laws that have indirect application to online gambling.  These are discussed below.

1. The Wire Wager Act

The Wire Wager Act is the statute that may be applied most directly to restrict the use of the Internet to gamble.  It prohibits the use of a wire transmission facility to foster a gambling pursuit. It provides, in part:

"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both."

Exactly how this Act applies to Internet wagering is hotly debated.  One school of thought in legal circles is that the Wire Act broadly covers any interstate use of the Internet that is related to placing or receiving bets. A second school of thought is that the Wire Wager Act cannot be applied to online gambling generally for two reasons.  First,  the words "wire communication facility" only apply to transmissions that use wires and the proliferation of wireless Internet access would therefore fall outside the scope of the Act.  Second, reference to "bets or wagers on any sporting event or contest" implies the Act might only apply to wagering upon sporting events (not card games or other games based upon chance). 

The above issues aside, it is clear that whether or not the Wire Wager Act can be applied to Internet gambling, it can only be applied to those "being engaged in the business of betting or wagering."  It cannot apply against the online gambler or Internet service providers.

2. The Travel Act, The Interstate Transportation of Wagering Paraphernalia Act, The Professional and Amateur Sports Protection Act, The Federal Aiding and Abetting Statute

The above 4 Statutes all contain provisions that could be construed to apply to internet gambling.  However, as for the Wire Wager Act, the appropriateness of their application is strongly argued, and even if they could be adjudged to apply to Internet gambling, their application would be restricted to operators only, and not players or peripheries (ISP's etc).  

Given these Statutes questionable validity with regard to their application to online gambling, and also the fact that US prosecutors will always have a difficult time coercing defendants to appear in the United States to stand trial, actual prosecutions in the US in this area are extremely rare.

US Federal Gambling Laws - Post September 30 2006

In September 2006 Congress passed the Unlawful Internet Gambling Enforcement Act of 2006 ("UIGEA").  UIGEA makes it a crime for a bank or financial institution to facilitate the transfer of money to an online gambling site, thus curtailing US residents ability to fund their online casino/sports book/poker room account.  

Its implications for operators, many of whom are outside the jurisdiction of US lawmakers anyway is interesting.  Some have taken the position that efforts by the US Government to prohibit banks and credit card companies from allowing players to deposit funds is enough to warrant closing US player accounts and not accepting new US players. Others have continued to accept US player accounts via a number of payment mechanisms available to US residents such as UseMyBank.

WTO Ruling

Just to muddy the waters further, the small Caribbean nation of Antigua Barbuda has recently won a World Trade Organization ruling, finding that U.S. legislation criminalizing online betting violates WTO commercial services accords.  

Further, the UIGEA has been condemned by European Union officials who claim that it beaches free trade agreements in place between the US and Euro zone.  Further, financial institutions in the US, who are most affected by the operative provisions of UIGEA have complained that practical compliance with the Act will prove an onerous burden on their payment processing systems and is virtually unworkable.

European Commission Finding

Adding further pressure to US lawmakers to amend their current legislative approach to online gambling, the European Commission, the EU's executive arm recently handed down a report finding that US anti online gambling laws were protectionist and contrary to EU-US free trade covenants.

 

Current moves are afoot by members of US Congress to have the law repealed.


The position in the UK

The UK's position is set out in the (reasonably) recently enacted Gambling Act 2005, the operative provisions of which came into effect on September 2007.  The new Act provides a single, all encompassing piece of law to cover all forms of gambling in the United Kingdom (besides the National Lottery and Spread Betting), and supersedes the now defunct Betting, Gaming and Lotteries Act 1963, the Gaming Act 1968 and the Lotteries and Amusements Act 1976.

Key provisions of the Act relevant to internet gambling (termed "Remote Gambling" in the Act), including casinos, sports betting, poker rooms and any other form of real money wagering online or via mobile telephony devices are listed below:

  • British-based online gaming sites will be governed by the UK Gambling Commission (new authority set up to monitor all operators covered by the Act;

  • Any operator of a Remote gambling service who has any piece of Remote Gambling Equipment (eg servers) located in the UK must obtain a license from the UK Gambling Commission;

  • Operators of Remote gambling services from outside the UK, are free to offer their product to UK residents, provided they are complying with the licensing requirements of the jurisdiction in which the service is hosted;

  • Nothing in the Act makes it illegal, or seeks to prevent, British residents gambling on the internet in their own homes;

  • Remote gambling operators from EEA (European Economic Area) countries and Gibraltar can advertise within Great Britain. In addition, operators from within jurisdictions granted white listing status can also advertise within the UK;


The position in the rest of the EU

All EU Member States are are bound to observe the provisions set out in the European Communities Treaty.  Key among these is the four freedoms principle, one of which is the freedom to provide services - set out in Article 49 of the EC Treaty.

In essence this Article makes it illegal for a Member State to legislate to prohibit residents from accessing a service provided by operators from other Member State, where that same service is able to be provided by local operators.  The law was formulated to foster free trade between Member States and to discourage restrictive trade practices and the protection of locally licensed monopoly operators.

The European Commission has rules that the freedom to provide services provision applies to online gambling services as it does all others.  As a result, any Member State with locally licensed online gambling operations (eg state lottery etc) cannot legislate to try to block foreign providers of the same service.  Such legislation will be legally unenforceable and will also attract infringement proceedings from the EC.

As at April 2009, 10 Member States, including France and Germany have been the subject of EC infringement proceedings.  The French Government have since announced plans in March 2009 to enact proposed laws that will regulate and tax internet gambling.  The laws new laws are planned to come into effect early 2010.


The position in Australia

Australia was one of the first countries in the world to enact legislation aimed specifically at online gambling.  

On 28 June 2000 the Interactive Gambling Bill became law.

The legislation:

  • Makes it illegal for any interactive gambling service provider based outside Australia (including online casinos, sportsbooks, race betting sites, lotteries etc) to offer its product to Australian residents;

  • Makes it illegal for any Australian based online casino to offer its product to:
    a) Australian residents, and
    b) residents of any country around the world that chooses to opt in on the Australian Governmentís ban;

  • Makes it legal for Australian licensed online sports books, race betting and lottery sites to offer their product to Australian and international customers;

  • Makes the advertising of any interactive gambling service on any medium within Australia (including ĎAustralianí web sites) illegal;

The legislation is clearly aimed at the casino/sportsbook operators and not players.  The Australian Government is now faced with the very onerous task of trying to enforce this legislation.

 

 

Disclaimer: 4 Online Gambling is not a legal authority.  The information contained on this page is a complication of various information sources and  does not constitute formal legal advice or opinion.

 

Udated 29 April 2009 

         

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