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The Next Prohibition?

7 December 1998

The fear that gambling is about to explode across the Internet has fractured American law enforcement in unprecedented ways.

This summer the state Attorneys General adopted a Resolution asking Congress to create a new federal crime: They want it to be a misdemeanor to make a bet on the Internet. This would force the federal Department of Justice to go after gamblers who make wagers on their home personal computers.

The Department has said it is against the whole idea.

It is more than a little ironic to have state officials ask that more power be given to the federal government -- and for federal officials to say they don't want it!

Gambling, both legal and illegal, has always been solely a state concern. The federal government has only gotten involved when it had to under the U.S. Constitution, as with Indian gaming, or when it felt the gambling was run by organized crime.

The states' top law enforcement officials are the attorneys general, who tend to see only the dark side of gambling. The creation of jobs is not their concern -- the prosecution of loan sharks is. So the A.G.s are almost always against any expansion of gaming.

For the last two years, the state A.G.s have been the most active and vocal opponents of Internet gambling. Led by Hubert H. Humphrey III of Minnesota, the National Association of Attorneys General ("NAAG") created a task force of 39 states in June, 1995 "to identify deficiencies in state and federal laws which might be useful in addressing unlawful activities on the Internet."

The state A.G.s quickly recognized that, although gambling via home computer might violate their state laws, only the federal government has the resources to take on the Internet. The principal federal law in the area is the Interstate Wire Act, 18 U.S.C. section 1084. But, section 1084 was enacted 30 years ago, and was designed to go after bookies.

The NAAG task force found six "major deficiencies" in the Interstate Wire Act:

  1. Federal law only covers people in the gambling business. It is not a federal crime to make a bet, even an illegal bet.

  2. The law clearly prohibits wagers on sporting events, but it is unclear whether it covers other forms of gambling, such as lotteries or Internet casinos.

  3. It is a crime to send information that aids in the making of wagers, but the law is ambiguous about receiving such information. An Internet gambling operator could claim its computers are simply passively receiving bets.

  4. The law is limited to "wire" communications, meaning telephones and telegraphs. An Internet operator could get around the law by using microwave transmitters and home satellite dishes.

  5. Telephone companies are not criminally liable if an illegal bookie uses a telephone. The A.G.s want "Internet access providers" to fall under section 1084. Companies like CompuServe would have to keep track of and censor messages sent by their Internet customers.

  6. The present law does not allow "a prospective remedy" for law enforcement, meaning the A.G.s want the power to close down an Internet operator before he commits a crime!

The federal Department of Justice is particularly concerned with the first point -- it does not want to be in the business of arresting gamblers. The Department's Criminal Division sent NAAG a letter stating: "[T]he Department does not agree that federal law should be amended so broadly as to cover the first-time bettor who loses $5, particularly when Internet gaming is expected to mushroom and federal resources are shrinking."

How you come out on the question of making it a crime to bet via home computers may depend upon how you feel about this country's experiment with Prohibition.

The Department of Justice's position is clear: "Moreover, we believe that the envisioned expansion of federal jurisdiction would not serve as a deterrent to Internet gaming since it is unlikely that federal prosecutions will be pursued against bettors."

NAAG responded with a letter saying that having the federal government arrest bettors in their homes is the most effective means of stopping Internet gambling.

I think it is fair to believe that state A.G.s realize most home bettors would never face criminal charges. But the A.G.s, as prosecutors, also know that foreign Internet operators are going to be effectively beyond the reach of any American law. They hope they can put Internet gambling out of business by scaring away the customers.

Will Internet gambling become the next Prohibition? If Congress makes it a crime to make a bet, one thing is clear: No legitimate U.S. company will be taking Internet wagers from American gamblers.

Who will fill the void? When a product is illegal but much desired, someone will fulfill that demand. Many social scientists believe that the first Prohibition, attempting to outlaw alcoholic beverages, led to the creation of today's organized crime.

On the other hand, so far, Internet gambling has not been a big success. Will players be willing to send money to unregulated operators if making that bet becomes a federal offense?

The Next Prohibition? is republished from iGamingNews.com.
I. Nelson Rose

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Gambling and the Law

> More Books By I. Nelson Rose

I. Nelson Rose
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Gambling and the Law

> More Books By I. Nelson Rose