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.  What is clear though, is that there is very little by way of legislation drafted specifically to deal with online gambling, whether positive or negative, and the application of existing laws is proving problematic.

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 stats lottery.  Nevada is the obvious example of a State which has embraced gambling as a legal form of commerce, while Utah is a 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 

So far, US Government attempts to pass legislation dealing specifically with online gambling have been unsuccessful.  Separate Bills sponsored by Sen. Kyle and Rep. Goodlatte, which both attempted to ban online gambling both failed to attract the required 2/3 majority Senate vote required to become law.  And while it is likely that there will be more attempts to pass legislation dealing specifically with online gambling (to regulate or ban), until such legislation is passed existing federal legislation serves as the only guide on this issue. 

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.  Although passed recently, 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 as 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.

Hopefully legislation on point will soon be enacted to clear up what is currently a very gray legal area.

US Federal Gambling Laws - Post September 30 2006

In September 2006 Congress passed the Unlawful Internet Gambling Enforcement Act of 2006. The Act makes it a crime for a bank or financial institution to transfer money to an online gambling site, thus curtailing US players ability to fund their online casino/sports book/poker room account.   While act does not specifically address the legality of online betting from the players perspective, its implications for operators are a little less clear and it has had the effect of persuading many large online gambling organizations from offering their product to US players.

WTO Ruling

Just to confuse things further, while US law makers look to various avenues to outlaw online gambling, 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.  

The effect that the ruling will have on any future attempts by Congress to outlaw online gambling is unclear.

Other Countries...

The UK

The following summary of the current legal situation with respect to Internet gambling in the UK is extracted from a report to the Home Secretary issued by The Gaming Board of Great Britain.  For the full paper, click here .

"British gambling legislation - apart from that setting up the National Lottery - is all over a quarter of a century old and was enacted at a time when the power of the Internet could not have been imagined. Unsurprisingly therefore, that legislation impinges on Internet gambling in ways which were unintended and are erratic. In broad terms, the position, as the Board understands it, is as follows.

• Betting Bookmakers have for many years been able to accept telephone bets from clients with credit accounts. There is therefore nothing to prevent them accepting such bets by e-mail. Likewise, football pools have always been able to accept entries by post and can therefore also use e-mail. The reason why bookmakers have been choosing offshore locations for their telephone and Internet betting operations is because taxes are lower and not because such operations would be illegal here.

• As for casinos, bingo and gaming machines, such gaming can only take place on licensed and registered premises and, in particular, the persons taking part in the gaming must be on the premises at the time when the gaming takes place. Hence no licence could be obtained by an operator who wished to offer such Internet gaming here and to set up such a site would be illegal. The Board has stated that it would seek to take action against anyone who did so.

• The position with lotteries is more complicated. Tickets for lotteries can be sold almost anywhere other than in the street. They can be sold for instance at people’s homes including over the telephone. But they cannot be sold by means of a machine. The Board’s view is that a lottery run entirely by computer via the Internet amounts to selling tickets by means of a machine and it has refused to authorise such lotteries. However, the Board has been approached by lottery managing companies with proposals to use the Internet to run lotteries in much the same way as someone might use the telephone. With these, the Internet is simply used as a means of communication by which one person offers another a lottery ticket and that second person agrees to buy. Two such proposals have been approved.

• There is nothing in the legislation which makes it illegal, or seeks to prevent, British residents gambling on the Internet from their own homes. The position in respect of public places such as Internet cafes is less clear and more difficult.

• Overseas gambling operations are subject to restrictions on the extent to which they can advertise here. In the case of casino and similar gaming, this does not amount to a total ban but prevents advertisements which, to paraphrase, invite the public to subscribe money or to apply for information about facilities for subscribing money. Some Internet casino operators have begun to advertise within these constraints. Added complications arise because the whole question of what constitutes an advertisement on the Internet, and then what can or cannot be done if it is, remains far from clear. "

Although the above summary represents the law as it currently stands in the UK, it should be noted that moves are afoot to introduce legislation dealing specifically with online gambling.  

In March 2002, a British Government reply to an independent review of Britain's restrictive gambling laws by Sir Alan Budd, a former chief economic adviser to the Treasury, said that the prohibition of online gambling to British consumers would be an entirely unrealistic objective, even if it were thought to be desirable.

"Instead, we will as the review body has proposed, move towards legalising the provision of the full range of online gambling services by operators located in the UK, including gaming," it said.

We eagerly await the release of this new legislation.

Australia

Australia is one of the few countries in the world to have already enacted 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 Government’s 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 ‘Australian’ 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.

For a PDF version of the full legislation click here.

Last updated 20 April 2002 

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