Return to Cyberspace
Law & Policy Institute Home Page.HOW MUCH DO YOU WANT TO BET THAT THE INTERNET GAMBLING PROHIBITION ACT OF 1997 IS NOT THE MOST EFFECTIVE WAY TO TACKLE THE PROBLEMS OF ONLINE GAMBLING?
Andrea M. Lessani
May 1998
I. INTRODUCTION
To many, the word "gambling" conjures up images of Las Vegas casinos, riverboat casinos, or, more recently, state-run lotteries. But in an era marked by the Internet, the new trend in gambling is occurring on the Internet. Internet gambling is at least a $200 million-per-year business.(1) By the end of the century, Internet gambling may be a $10 billion-per-year business.(2)
While the popularity of Internet gambling is skyrocketing, ambiguity surrounds its legality.(3) Although most states allow some form of gambling activities(4), many states seek to prohibit online gambling because of the following four dangers unique to online gambling: (a) the potential for fraud over the Internet; (b) children's access to gambling sites; (c) an increase in gambling addictions; and (d) the need to preserve state revenues generated from legally enforced (and state-run) gambling operations.(5)
In order to understand the first concern - the potential for fraud over the Internet - one must understand how a typical Internet gambling site works: Gamblers provide their credit card numbers and social security numbers, or mail in deposits between $100 to $500, to open up accounts. The bets that gamblers place are received by on-site operators. On-site operators use computers to run complex programs that simulate gambling games, such as the spin of a roulette wheel. Upon completion of a game, an on-site operator reports back to gamblers whether they won or lost.(6)
The design of an online gambling site precludes gamblers from investigating whether games are operated fairly.(7) Therefore, gamblers are at the mercy of those on-site operators who manipulate the odds or who falsely report game results. As Bernard Horn of the National Coalition Against Gambling Expansion states, "[t]here's just no way to tell if virtual dice, roulette or cards are rolled, spun or dealt randomly...or whether they're responding to a sequence...to cheat customers."(8) In contrast, traditional casinos are investigated to ensure that gamblers are provided with fair opportunities to win.(9) A further danger of online gambling is that on-site operators will not properly credit winnings. If on-site operators fail to properly credit winnings, gamblers have little recourse because of the difficulty of finding on-site operators in cyberspace.(10) Often, when too many gamblers win, online operators simply shut down their web sites and open new online gambling sites.(11)
A second problem with online gambling is the ease with which children can access cyber-casinos. This easy accessibility stems, in part, from the pervasiveness of the Internet in homes.(12)
A third danger is that online gambling will lead to a rise in gambling addictions. Gambling addictions may increase because of the detached gambling environment on the Internet. The Internet provides a detached gambling atmosphere because there is no tangible representation of money, such as chips, being won or lost over the Internet.(13) As a result, gamblers may lose track of how much money is being won or lost and may gamble beyond their means. In contrast, at traditional casinos, gamblers are able to see how many chips are being won or lost and, consequently, they may gamble in moderation.
Although unspoken by most state officials, a fourth reason why states want to prohibit online gambling may be the need to protect state revenues generated by legal and state-run gambling operations. States profit from taxes on winnings and net revenues from legalized gambling.(14) The legalization of Internet gambling may cause states to lose some revenue generated from legalized gambling operations because many gamblers would spend their money online.(15) Moreover, states lose revenue by not being able to tax gamblers who win over the Internet; gamblers who win over the Internet have an incentive not to pay taxes on their winnings because the Internal Revenue Service ("IRS") lacks the resources to track online gamblers.(16)
In light of the four dangers of online gambling, states have taken action to prohibit Internet gambling. Some states, including Minnesota and Missouri, have relied on state gambling laws or consumer protection laws to prohibit online gambling. Although some states have taken decisive action to prohibit or regulate online gambling, state regulation is largely ineffective because the Internet transcends state and national boundaries.(17)
Until recently, the federal government has played a minimal role in regulating gambling, leaving the states to adopt their own laws and regulations.(18) However, because Internet gambling transcends state boundaries and is difficult for states to regulate, the federal government has taken decisive action. Specifically, Senator Jon Kyl of Arizona recently introduced the Internet Gambling Prohibition Act of 1997 ("Internet Act")(19), which is a federal bill that would prohibit Internet gambling. Shortly thereafter, Representative Bob Goodlatte of Virginia introduced the House of Representative's version of the Internet Act, which generally tracks the Internet Act.(20)
This article explores the recent efforts by the federal government to tackle the hazards of Internet gambling. In Part II, I will briefly review how some states have addressed online gambling. In Part III(A), I will discuss federal legislation pertaining to online gambling as well as the specific features of the Internet Act. In Part III(B), I will explain why enforcement problems as well as sovereignty and comity concerns prevent the Internet Act from being an effective tool to protect against the dangers of Internet gambling. In Part IV, I will explore alternative ways to tackle the dangers of Internet gambling. In Part V, I will conclude that government licensing, regulatory, and taxation schemes, in conjunction with regulation by parents and schools, are the most effective ways to protect against the dangers of Internet gambling.
II. STATE EFFORTS TO CHALLENGE INTERNET GAMBLING
Many states, including California, Connecticut, Louisiana, New York, and Virginia, have responded to threats of Internet gambling by proposing to amend existing gambling regulations and laws.(21) In addition, Nevada has become the first state to pass a law that specifically prohibits its residents from placing or accepting bets over the Internet.(22)
At least two states, Missouri and Minnesota, have resorted to courts of law to challenge Internet gambling. In these two states, the Attorneys General have successfully challenged online gambling operators, asserting that the operators fraudulently represented to state residents that online gambling in their respective states is legal. What is particularly noteworthy about the approach taken by the Attorneys General is their theory of jurisdiction. They have advanced the theory that they have jurisdiction over out-of-state defendants by arguing that the gambling activity occurred within their states' borders, even though the sites' computer servers were located out of state.(23)
For example, in State v. Interactive Gaming Communications Corp., the state court determined that an out-of-state online operator violated a Missouri consumer protection law and issued a permanent injunction against the defendant's operation within Missouri's territory.(24) This civil action was followed by a criminal indictment against an online operator and his Philadelphia-based company for accepting illegal bets from Missouri residents over the Internet.(25)
Minnesota has also taken decisive legal action to prohibit Internet gambling. In State v. Granite Gate Resorts, Inc.,(26) the Minnesota Attorney General brought an action against an out-of-state online operator alleging deceptive trade practices, false advertising, and consumer fraud. The issue before the Minnesota Court of Appeals was whether the district court erred in denying the appellants' motion to dismiss for lack of personal jurisdiction.(27) In deciding this issue, the court examined whether the appellants had "minimum contacts" with Minnesota such that a lawsuit would not offend "traditional notions of fair play and substantial justice," and whether the appellants "purposefully avail[ed] [themselves] of the privilege of conducting activities" within Minnesota.(28) In holding that Minnesota had personal jurisdiction over the nonresident appellants, the court reasoned that the appellants had sufficient "minimum contacts" and "purposefully availed" themselves of the privilege of doing business in Minnesota for some of the following reasons: (1) Minnesota residents accessed and received transmissions from the appellants' Web site; (2) Minnesota residents called the toll-free number advertised on the Web site; and (3) at least one Minnesota resident was placed on the appellants' mailing list.(29) Furthermore, the court held that the appellants could not avoid jurisdiction by arguing that the inconvenience of defending a suit in Minnesota offended "traditional notions of fair play and substantial justice" because the appellants reserved the right to sue customers in the customers' home forums, and Minnesota had an interest in enforcing its consumer protection laws.(30)
Although some states have had success in regulating Internet gambling, state regulation is largely ineffective:
State regulation makes logical sense when dealing with a lottery or a casino, since the establishment and regulation of those can be confined within a particular state's borders. The Internet, however, is not confined to a specific locality....The Internet is global and any regulation of the Internet's contents must account for this very basic fact. Consequently, legislators addressing Internet gambling cannot rely on existing gambling laws. Rather, lawmakers must create a new regulatory scheme capable of dealing with the specific hazards of Internet gambling.(31)
Consequently, many states have turned to the federal government for help in regulating Internet gambling.
III. FEDERAL LEGISLATION
A. FEDERAL LEGISLATION PERTAINING TO ONLINE GAMBLING
Currently, there are five existing federal statutes that apply, in some manner, to online gambling:(32) (1) the Wire Act(33); (2) the Travel Act (34); (3) the Interstate Transportation of Wagering Paraphernalia Act (35); (4) the Professional and Amateur Sports Protection Act (36); and (5) the aiding and abetting statute.(37)
The existing federal legislation that is most applicable to general Internet gambling is the Wire Act. Under the Wire Act, persons or organizations "engaged in the business of betting or wagering [who] knowingly use[] a wire communication in interstate or foreign commerce" are subject to penalties.(38) Operators of cyber-casinos fall within the scope of the statute, but online gamblers and Internet service providers ("ISPs") fall outside the purview of the statute because they are not "engaged in the business" of gambling.
In an effort to extend the Wire Act and to specifically tailor federal legislation to tackle the hazards of Internet gambling, Senator Kyl introduced the Internet Act. The Internet Act would extend the Wire Act by imposing penalties, not only on operators of cyber-casinos, but also on online gamblers and ISPs.(39) Under the Internet Act, the definition of "betting or wagering" has been clarified to encompass the offering of prizes in lieu of money.(40) The "betting or wagering" activities that fall within the scope of the Internet Act must be of more than de minimis value.(41) Penalties for online gamblers include fines up to $2,500 and/or a jail term not to exceed six months.(42) Operators of cyber-casinos are subject to fines up to $20,000 and/or a jail term not to exceed four years.(43) Furthermore, the Internet Act authorizes local authorities to seek injunctions against operators of cyber-casinos as well as ISPs and telephone companies that, upon notice of gambling sites, do not block access to these sites.(44)
B. A CRITIQUE OF THE INTERNET ACT
A prohibition on Internet gambling, as proposed in the Internet Act, is problematic for three reasons.(45) First, the federal government has neither the human nor technological resources to effectively enforce a ban on gambling. Second, the Internet Act's effect of driving online gambling underground may increase the dangers of online gambling. Third, while the U.S. may have jurisdiction over off-shore cyber-casinos, exercising jurisdiction offends principles of comity and sovereignty.
1. Problems of Enforcement
The Internet Act's prohibition on online gambling is not likely to eliminate gambling over the Internet. Instead, this legislation is likely to drive more cyber-casinos and individual gamblers underground.(46) The difficulty with underground online gambling is that inexpensive, sophisticated technology renders detection of online gambling difficult.(47) The following examples provide illustrations of how this technology renders detection difficult:
[T]he ease with which an Internet gambler may disguise his or her identity makes it difficult to trace users of Internet gambling sites. Indecipherable and untraceable financial transactions, accomplished through the use of encryption and electronic money, could essentially thwart law enforcement's ability to trace violations of gambling laws over the Internet.(48)
Even when law enforcement is able to trace the identities of gamblers, they may not have enough time. For instance, although law enforcement may unmask a false identity after a few hours through the use of tracing procedures, most gamblers will not play games for hours. Ultimately, the time required by tracing procedures often renders tracing ineffective.(49)
Even assuming that law enforcement has the technological resources to easily detect gambling violations over the Internet, they lack the substantial human resources that would be necessary to enforce the Internet Act. The provision in the Internet Act that allows for prosecution of gamblers would require law enforcement to obtain thousands of search warrants, subpoenas, and undercover agents.(50) Therefore, prosecuting gamblers is a cost-ineffective and time-consuming approach to combat Internet gambling.(51)
In short, federal and state officials could not effectively enforce the Internet Act given the ease of evading detection as well as the extraordinary time, money, and human resources necessary for enforcement.
2. Increasing the Dangers of Online Gambling
By driving online gambling underground, the Internet Act would not eliminate the dangers of Internet gambling. Instead, it may even increase the dangers:
If...prohibition is enacted, it will only drive the industry off-shore, where enforcement of age-restrictions [sic.] and other regulations are far less likely to be in place, and virtually impossible for U.S. authorities to enforce (especially when sovereign governments have already set their own gaming standards). As such, passage of the Goodlatte...bill [the House of Representative's counterpart to the Internet Act that generally tracks the Internet Act] may have the unintended effect of actually increasing the exposure of children and compulsive gamblers to on-line wagering....(52)
Furthermore, law enforcement officials would not be able to monitor the fairness of games if online gambling goes underground. Consequently, the Internet Act may also increase fraud over the Internet.
3. Jurisdiction, Comity, and Sovereignty Concerns
A third reason why the Internet Act is flawed is because it raises jurisdiction, comity, and sovereignty concerns. With respect to jurisdiction issues, the question of whether U.S. courts may exercise personal jurisdiction over overseas defendants because of contacts with the United States via the Internet is a murky one. The question of jurisdiction is murky, in part, because it is hard to define where the defendants' prohibited activity took place; did the activity take place where the bet was placed or where the cyber-casino's server was located?(53)
To determine whether the U.S. may exercise extraterritorial jurisdiction, courts look to whether the express language of the statute clearly indicates an intent to apply to acts outside the U.S. If the express language of the statute clearly indicates an intent to apply to acts outside the U.S., then federal law may apply to foreign defendants.(54) It appears that the Internet Act would permit the federal government to exercise personal jurisdiction over overseas defendants. The Internet Act contains a provision stating that "[i]t is the sense of the Senate that the Federal Government should have extraterritorial jurisdiction...."(55) Thus, the Internet Act makes explicit the intent of Congress to have extraterritorial jurisdiction.
Assuming the U.S. clearly has personal jurisdiction over foreign defendants, it is still troubling for the U.S. to exercise jurisdiction.(56) Exercising jurisdiction over overseas defendants may undermine principles of comity and sovereignty.(57) Unlike the U.S., many countries have chosen to legitimately regulate Internet gambling. For instance, in Antigua, cyber-casinos pay a licensing fee between $50,000 and $75,000, undergo personal and credit investigations, and post $500,000 bonds.(58) The U.S. should not impose its views of online gambling on sovereign countries, like Antigua, that have chosen to legitimately regulate Internet gambling. As Sue Schneider, chairman of the Interactive Gaming Council ("IGC") and editor of Rolling Good Times Online, asserts, "how arrogant is it for American politicians to say that those nations aren't good enough to regulate this industry?"(59) Others have expressed similar sentiments, stating "[t]he problem with Senator Kyl's view is that it follows the old American vision of the world as being headed by the United States. But the United States does not control the world."(60) Ultimately, actions by the U.S. to interfere with foreign laws may result in international destabilization of legal and commercial relations.(61)
Furthermore, America's attempts to impose its laws on others may ultimately have an adverse impact on the Internet:
If every state and nation...attempts to apply its laws with respect to Internet activities it deems illegal, the end result will be an Internet that satisfies the lowest common denominator in terms of acceptable activity...Values and mores are so different and the desire to regulate so different--especially from country-to-country--that agreeing to a common framework would be difficult.(62)
IV. ALTERNATIVES TO THE INTERNET ACT
Given the flaws in the Internet Act, it is important to explore alternative ways to protect against the dangers of online gambling. The Internet Act's ban represents one way to address the problems of Internet gambling. There are, however, other alternatives, including: (1) government licensing and regulation in conjunction with the taxation of winnings; (2) regulation by parents and schools; and (3) a uniform international policy against online gambling.(63)
The first alternative would require cyber-casinos to be licensed and regulated by the federal government.(64) Strict licensing and regulatory requirements may help legitimize online gambling operations by requiring online operators to pay licensing fees, by subjecting online operators to personal and credit investigations, and by mandating that online operators post bonds. Once online operators have complied with strict licensing requirements, the government could continue to monitor their activities by relying on existing technology to randomly audit web sites to ensure the fairness of games.(65) The government could pay for the costs of monitoring gambling activities through licensing fees rather than taxpayer dollars. Although cyber-casinos may be able to evade licensing requirements and government monitoring, online gamblers could choose to interact only with licensed cyber-casinos. Therefore, online gamblers could reasonably be assured that they are dealing with legitimate organizations. In conjunction with imposing licensing requirements on cyber-casinos and monitoring their activities, the government could control online gambling by taxing winnings. However, whether the taxation of Internet commerce is a viable alternative is a murky question open for debate. A second alternative to prohibiting all online gambling is to encourage parental and school regulation of online gambling. Parents and schools could employ two types of programs - filters and an Internet rating system - to block children's access to online gambling.(66) A filtering program typically compares a user's informational requests with a list of prohibited sites. Some filtering programs allow parents and schools to add sites to the list of blocked sources, while others allow parents and schools to prohibit access to gambling sites during certain hours of the day.(67) In addition to filtering programs, a ratings system also may help block children's access to Internet gambling sites: "A ratings tool would be encoded into the browser software used to gain access to Internet data sites...Parents could choose a browser endorsed by the Christian Coalition, for example, or by the local school board...."(68) A benefit to both filtering programs and a ratings system is that parents and schools can select what they want their children to see without imposing their views on everyone.(69)
A third alternative to prohibiting online gambling is to establish an international policy prohibiting or regulating online gambling. This alternative would ultimately require countries to uniformly agree on how to address the issue of Internet gambling.
V. CONCLUSION
As I discussed in Part III(B), problems with enforcement and increasing the dangers of online gambling, as well as concerns about threatening comity and sovereignty principles, render the Internet Act an ineffective tool to protect against the dangers of Internet gambling. Government licensing, regulatory, and taxation schemes, in conjunction with regulation by parents and schools, represent the most efficient ways to tackle many of the hazards of Internet gambling, like fraud, children's access to online gambling, and increased gambling addictions.
Before I discuss why these alternatives most efficiently address the problems of Internet gambling, I would like to briefly explain why adopting an international policy against online gambling is not a viable alternative. The effectiveness of an international agreement depends on the number of countries that agree to it: "unless there is some uniform policy against gambling among the different countries, there will always be gambling sites on the Internet."(70) Given that many countries, like Antigua, permit Internet gambling and others, like Monaco, openly embrace it, it is unlikely that the U.S. would be able to establish a uniform international policy against Internet gambling.(71)
Moreover, even assuming that all countries agreed to a uniform policy, it is unlikely that such a policy would eliminate Internet gambling because of the difficulty of enforcing it. Like a federal ban on online gambling, an international prohibition on online gambling is likely to drive the activity underground. Given the inexpensive, sophisticated technology that renders detection of online gambling difficult, an international ban on online gambling would suffer from the same enforcement problems that the Internet Act would suffer from.
While an international ban on Internet gambling is both infeasible to establish and enforce, government licensing, regulatory, and taxation schemes, as well as regulation by parents and schools, are possible to establish and enforce. Online operators would be more willing to comply with licensing and taxation requirements than a ban.(72) The benefits of these requirements would be to discourage a significant amount of online gambling from going underground and to assure online gamblers that they are dealing with legitimate gambling operations. As a proponent of these requirements suggested:
Most Americans...would prefer to play at a U.S. licensed site rather than at a foreign one. 'This would effectively force foreign operators to apply for federal licenses and meet U.S. standards or be put out of business due to consumer flight. This would put the sites under U.S. jurisdiction and bring in tax revenue.' Further, if necessary, a federal agency could oversee the industry, so that consumers would have a forum in which to bring complaints.(73)
Furthermore, not only would licensing and regulatory schemes force cyber-casinos to comply with U.S. standards and bring in tax revenue, but they would also allow the government to trace licensed online operators who fail to properly credit gamblers' accounts.
In contrast to government regulation, the Internet Act, which would drive online gambling underground, does not provide individuals who continue to gamble with any tools to monitor whether games are operated fairly. Furthermore, the Internet Act does not aid law enforcement in tracing off-shore operators who cheat gamblers. Thus, government regulation would more effectively reduce fraud over the Internet than would the Internet Act.
Similarly, a blanket ban on online gambling would not resolve the problem of children's access to online gambling. A blanket ban is likely to drive online gambling underground, which would still provide children with opportunities to access gambling sites. The only way to alleviate this problem is to block children's access to online gambling sites. One tool that exists to prevent online gambling among minors is a comprehensive registration procedure that is cross-verified with available databases.(74) As part of its licensing scheme, the government could require that online operators utilize this procedure to verify a gambler's age and identity. Other tools that could be used by parents and schools to help block children's access to online gambling sites are filtering programs and rating systems.
While filtering programs and rating systems would help block children's access to online gambling sites, these programs would not substantially mitigate the problem of increased gambling addictions. These "techniques do not stop the addict from gambling[;] they [merely]...provide an initial means of protection for people who are concerned about others' gambling habits."(75) Nor would a blanket ban resolve the problem of rising gambling addictions because compulsive gamblers would merely go underground to satiate their needs.
The best approach to prevent against an increase in gambling addictions is to implement government regulatory and taxation schemes. As part of its licensing requirements, the government could require all gambling sites to have credit limits.(76) Furthermore, taxing winnings may be another way to prevent against a rise in gambling addictions. While the taxation of winnings may not eliminate gambling addictions, it may aid in curbing them. If winnings are taxed, gamblers may be more inclined to gamble in moderation.
In conclusion, the passage of the Internet Act would not eliminate online gambling and protect against the dangers of Internet gambling. Instead, its passage would drive online gambling underground and may even intensify the problems of Internet gambling. Law enforcement officials would not be able to enforce the Internet Act because inexpensive, sophisticated technology renders detection of online gambling difficult. Additionally, by attempting to prohibit online gambling on a global medium, the Internet Act would threaten principles of comity and subject the American view on other countries that permit online gambling. In sum, to more effectively address the problems of online gambling, we should implement a multifaceted scheme that encompasses government, parental, and school regulation of online gambling as well as the taxation of winnings.
Footnotes:
(1) Beth Berselli, Gamblers Play the Odds Online: Despite Calls to Outlaw It, Internet Gambling Takes Off, WASH. POST, Aug. 19, 1997, at A1.
(2) Richard Raysman & Peter Brown, Cyber-Casinos: Gambling Meets the Internet, 218 N.Y.L.J. 3 (Aug. 12, 1997).
(3) Nicholas W. Allard & David A. Kass, Law and Order in Cyberspace: Washington Report, 19 HASTINGS COMM. & ENT. L.J. 563, 609 (1997). Given the ambiguity concerning the legality of Internet gambling in the U.S., almost all of the estimated 130 cyber-casinos are located outside the U.S. Many cyber-casinos are located in places like the Caribbean and Central America. See Internet Gambling Backers Want Regulation, Not Ban, SAN DIEGO UNION-TRIB., Feb. 10, 1998, available in WESTLAW, GOVNEWS Database.
(4) Forty-eight states and the District of Colombia allow some form of legalized gambling. See Raysman & Brown, supra note 2, at 3.
(5) See House Witnesses Clash on Merits of Regulating, Not Banning, Online Gambling, Bureau of National Affairs (BNA) Washington Insider, Feb. 5, 1998, available in WESTLAW, BNA-DNEWS Database.
(6) Berselli, supra note 1, at A1, A8.
(7) See id.
(8) Pat Doyle, Internet Gambling Takes A Hit in Congress, MINNEAPOLIS-ST. PAUL STAR-TRIB., Feb. 5, 1998, available in WESTLAW, GOVNEWS Database.
(9) See generally David Post, Betting on Cyberspace, THE RECORDER, June 5, 1997, at 4.
(10) Berselli, supra note 1, at A1, A8 (referring to a statement by Wisconsin Attorney General James Doyle, who heads the National Association of Attorneys General).
(11) Internet Gambling: House Subcommittee Hearing on Crime, 105th Cong., 2d Sess. (Feb. 4, 1998), available in WESTLAW, CONGTMY Database (statement of Bill McCollum, Chairman).
(12) See David Braun, Don't Bet on Internet Gambling, Nov. 24, 1997, available at http://www.techweb.com:3030/wire/news/1997/11/1124gambling1.htm.
(13) Scott M. Montpas, Gambling On-Line: For A Hundred Dollars, I Bet You Government Regulation Will Not Stop the Newest Form of Gambling, 22 U. DAYTON L. REV. 163, 172 (1996).
(14) As much as $482 billion per year is spent on legalized gambling in the U.S. See Raysman & Brown, supra note 2, at 3.
(15) See Nicholas Robbins, Baby Needs a New Pair of Cybershoes: The Legality of Casino Gambling on the Internet, 2 B.U.J. SCI. & TECH. L. 7 (1996).
(16) Montpas, supra note 13, at 169 n.51.
(17) L.A. Lorek, Virtual Casino: Gambling On the Internet Sparks Worries About Who's Playing and Who's Dealing, FT. LAUDERDALE SUN-SENTINEL, July 6, 1997, available in WESTLAW, ALLNEWS Database.
(18) Id.
(19) S. 474, 105th Cong., 1st Sess. (1997).
(20) H.R. 2380, 105th Cong., 1st Sess. (1997). See Richard Raysman & Peter Brown, Pending Key Internet Legislation, 218 N.Y.L.J. 3 (Dec. 9, 1997), available in WESTLAW, ALLNEWS Database, for a discussion of how H.R. 2380 generally tracks S. 474.
(21) Raysman & Brown, supra note 2, at 3.
(22) Philip P. McGuigan, Stakes Are High in Battle to Bar Internet Gambling, NAT'L L.J., Nov. 3, 1997, at B8, B9.
(23) See Federal Legislation Is Needed to Prohibit Internet Gambling, Senate Witnesses Say, July 29, 1997, available in WESTLAW, BNA-DNEWS Database.
(24) No. CV 97-7808 (Mo. Cir. Ct., Jackson Co., filed Apr. 7, 1997).
(25) State v. Interactive Gaming & Communications Corp., No. 197CF0014 (1) (Mo. Cir. Ct., Greene Co., filed June 26, 1997).
(26) 568 N.W.2d 715 (Minn. Ct. App. 1997).
(27) Id. at 718.
(28) Id.
(29) Id.
(30) Id. at 721.
(31) Montpas, supra note 13, at 164.
(32) Raysman & Brown, supra note 2, at 3, 7.
(33) 18 U.S.C.A. § 1084 (West Supp. 1998).
(34) 18 U.S.C.A § 1952 (West Supp. 1998).
(35) 18 U.S.C.A § 1953 (West Supp. 1998).
(36) 28 U.S.C.A § 3702 (West Supp. 1998).
(37)18 U.S.C.A § 2 (West Supp. 1998).
(38) Supra note 33, at § 1084(a).
(39) See supra note 19, at § 474 sec. 3(b)-(c).
(40) Id. at § 474 sec. 2(6)(B) (amending 18 U.S.C. § 1081).
(41) Id. at § 474 sec. 2(6)(A) (amending 18 U.S.C. § 1081). Securities-related transactions, indemnity or guarantee contracts, and insurance-related contracts are exempted from the Internet Act. Id. at § 474 sec. 2(6)(C)(i)-(iii) (amending 18 U.S.C. § 1081). Other exemptions include information used for news reporting, bets or wagers if the activity is legal in both the state or country in which the transmission originates and is received, and information used to assist bets where it is legal in the state where the bet is transmitted and received. Id. at § 474 sec. 3(b)(1)(A), (B)(i)-(ii) (amending 18 U.S.C. § 1084).
(42) Id. at § 474 sec. 3(b)(2)(A)-(C).
(43) Id. at § 474 sec. 3(c)(2)(A)-(C).
(44) For example, if the Attorney General of Kansas, after gathering sufficient evidence, finds that a cyber-casino in Belize is enticing citizens of Kansas to bet on its site, then he may obtain a court order ordering America Online to cut off service to the site in question. Id. at § 474 sec. 4(b)(1)-(2).
(45) Although I argue that the Internet Act is not the best way to protect against the dangers of Internet gambling, I am not asserting that the Internet Act is not without some merit. One benefit of the Internet Act is that proposed threats to penalize persons in violation of anti-gambling laws might deter some gambling over the Internet. See Raysman & Brown, supra note 2, at 3, 7. However, as I discuss in Part III(B)(1), the Internet Act's deterrent effect cannot be strong because gamblers and online operators recognize that law enforcement officials will not be able to effectively enforce it.
(46) See McGuigan, supra note 22, at B9.
(47) Raysman & Brown, supra note 2, at 3, 7.
(48) Id.
(49) See Seth Gorman & Antony Loo, Blackjack or Bust: Can U.S. Law Stop Internet Gambling?, 16 LOY. L.A. ENT. L.J. 667, 692 (1996).
(50) Tom Curry, States Strive to Regulate Betting, available in WESTLAW, BNA-DNEWS Database.
(51) Id.
(52) Internet Gambling: House Subcommittee Hearing on Crime, 105th Cong., 2d Sess. (Feb. 4, 1998), available in WESTLAW, CONGTMY Database (statement of Frank Miller, Esq.).
(53) The state cases discussed earlier take the view that the defendants' activity took place where the bet was placed. See Missouri Indicts Internet Gaming Company; Case Highlights Online Jurisdiction Issues, July 17, 1997, available in WESTLAW, BNA-DNEWS Database.
(54) See United States v. Bowman, 260 U.S. 94, 97-8 (1922); Smith v. United States, 507 U.S. 197, 203-04 (1993). See also Raysman & Brown, supra note 2, at 3, 7.
(55) Supra note 19, at § 474 sec. 4 (amending 18 U.S.C. § 1084).
(56) Aside from comity and sovereignty concerns, there may be problems enforcing personal jurisdiction over overseas defendants:
Unlike traditional casinos, operators of cyber-casinos have the ability to move from country to country, since operation of a cyber-casino merely requires maintenance of a Web site. Thus, the exercise of extraterritorial jurisdiction becomes increasingly difficult where the defendant's physical location further complicates effective law enforcement.
Raysman & Brown, supra note 2, at 3, 7. Therefore, federal regulation appears to suffer from the same problem that state regulation does, namely the inability to control a global medium:
[T]he United States is only one part of the global network. So just as Minnesota's ability to restrict the amount of accessible gambling sites on the Internet is severely limited when Wisconsin permits Internet gambling, the United States cannot stop Internet gambling if Canada decides to legalize it.
Montpas, supra note 13, at 181.
(57) The Supreme Court has defined "comity" to be:
The recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its citizens, or of other persons who are under the protection of the laws.
Hilton v. Guyot, 159 U.S. 113, 164 (1895).
(58) Steven Crist, All Bets Are Off, SPORTS ILLUSTRATED, Jan. 26, 1998, at 82, 88.
(59) Id.
(60) Id. (quoting Gyneth McAllister, Expeditor of International Investments for the Antiguan Government).
(61) Destabilization of legal and commercial relations has occurred where the U.S. attempted to impose its views on other countries. For instance, when the U.S. passed legislation concerning drug trafficking, money laundering, high-tech smuggling, and terrorism that increased its presence abroad, other countries responded by passing their own legislation aimed at the U.S. These types of retaliatory measures are one reason why the U.S. has traditionally abstained from interfering with the laws of other countries. See Gorman & Loo, supra note 49, at 689-90.
(62) Supra note 53.
(63) See generally Montpas, supra note 13, at 182-84.
(64) In her testimony before Congress, Sue Schneider, the Chairwoman of the Interactive Gaming Council, discussed how the U.S. could look to other countries, including Australia, New Zealand, Antigua, Germany, Finland, and Sweden, for guidance on how to design and implement licensing and regulatory schemes. See Internet Gambling: House Subcommittee Hearing on Crime, Feb. 4, 1998, available in WESTLAW, CONGTMY Database (statement of Sue Schneider, Chairwoman of the Interactive Gaming Council and Managing Editor and Chief Executive Officer of Rolling Good Times Online).
(65) See id. See also supra note 52. ("Technology currently exists to extensively and thoroughly audit on-line casino style games. Auditors would be able to make unannounced 'inspections' of virtual games electronically, without the casino ever knowing.")
(66) See Montpas, supra note 13, at 183-84.
(67) Id.
(68) Id. at 184.
(69) Id.
(70) Id. at 182.
(71) See id.
(72) Supra note 64. ("[L]egitimate operators would welcome U.S. regulation and taxation of the gaming side of the transaction.")
(73) Supra note 23 (referring to a statement by Mr. Cohen, of the World Sports Exchange).
(74) See supra note 64.
(75) Montpas, supra note 13, at 184.
(76) Currently, there is one gambling site that has voluntarily set a $200-per-week credit limit for all its customers. See supra note 64.
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