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Mark Grossman

Internet Gambling--Computer Law Tip

21 April 1998

The law surrounding Internet casino gambling has become the hottest Internet law topic. The Internet gambling industry is rapidly expanding while the U.S. government and a few states are aggressively trying to shut it down.

This is happening while legal scholars can't even agree on whether online casino gambling violates current law.

Still, while Internet casino gambling is by itself an important issue, it's not as important as some of the basic policy issues that it implicates. For example, let's say that the computer that hosts the online casino is physically located in Australia and the bettor is in Kansas. Further, what if the digital data that constitutes the bet travels via the Internet through nine states and six countries on its way to Australia. Could you please tell me whose law applies? To say that the answer to this question is controversial is an understatement. Legal scholars are lighting up their keyboards writing about this one.

Federal Arrests

The federal government takes the position that U.S. law applies. (Are you surprised?) According to Mary Jo White, the U.S. Attorney for the Southern District of New York, "Offshore sports betting operators who use the telephones, Internet, or other forms of wire communications to solicit bettors from the United States are acting in violation of federal law. We will continue to monitor and vigorously prosecute offshore sports betting operations that engage in this blatantly illegal activity."

One subtlety here is that White directed her comments specifically to sports betting and didn't address casino gambling. That's because of ambiguities in federal law. The applicable statute (18 U.S.C. 1084) talks about "bets and wagers on any sporting event or contest." Clearly, a casino game isn't a "sporting event," but is it a "contest?" Most people argue that it isn't.

This issue is further muddied because this same statute makes it illegal "to knowingly [use] a wire communication facility ... for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers ..." Notice, no mention of "sporting event or contest" in this phrase. Also consider, is the Internet, which didn't exist in 1961 when Congress enacted this statute, "a wire communication facility?" The statute's definition of a "wire communication facility" is ambiguous at best.

Avoiding the casino gambling ambiguities, the FBI and the U.S. Attorney for the Southern District of New York worked together on a sting operation against Internet and telephone sports betting companies headquartered in the Caribbean. This culminated in charges of conspiracy to transmit bets and wagers on sporting events via the Internet and telephones against 21 owners, managers, and employees of these companies.

All of the companies advertise and promote their sports betting operations to U.S. customers on Web sites on the Internet, according to the complaints. All of those charged are American citizens.

Could they have been charged if they weren't American citizens? I suspect that. White would argue yes since the gambling, which is the perceived "harm," arguably occurred in the United States. Is this the policy we want for the Net?

Whatever your reaction to the United States enforcing its law governing activities that are arguably not on its territory, how would you feel if Libya or Iraq attempted the same stunt? How will there ever be legal certainty on the Net if every country could conceivably claim a right to regulate any Internet activity that enters its borders from cyberspace?

Does that mean that when my clients ask me if their Web page complies with the law that I need to consider every nation on earth? Should I advise them to consider a French language version to satisfy France and Quebec, a version without comparative advertising to appease the Germans, and absolutely no women with unveiled faces to appease Islamic fundamentalist nations. Absurd.

Missing the Cold War

So, what do we have here? What we have is the land of the free, the home of the brave, and the proud home of free speech leading the charge to regulate and stifle the Internet, which is the future of communications. Moreover, of course, regulate it according to our sense of what's right. As an American, I think that this position is embarrassing in its imperialist arrogance.

It can almost make you miss the Cold War. At least then we knew that the enemies of world freedom were the Soviet Union and Red China. We were the good guys. It was an era when we were forced to be more true to our own ideals to differentiate us from the "commies." (Does anybody under 25 know what a "commie" is?)

Today, we don't seem to be true to our Cold War rhetoric. Now we're the nation seeking to impose its sense of law on the entire world. During the Cold War, we loved to mock those nations that jammed radio signals filled with "truth" as presented by Radio Free Europe. Now, we're right out there among the leaders in seeking to regulate, block and criminalize Internet transmissions that we don't like.

Kyl Bill

Sen. Jon Kyl, R-Arizona, is leading the charge with his bill that seeks to close any "loopholes" and make it clear that Internet gambling is illegal subject to a few minor exceptions. It even requires the Secretary of State to enter into negotiations with foreign countries in order to conclude treaties that would allow the United States to enforce this law outside of its borders.

I wonder how countries that are supporters of Internet gambling, like Antigua and Australia, will feel about this. I suspect that the rhetoric will get nasty if the operators of foreign licensed online casinos are arrested in the United States. Many countries will scoff at our request that they cooperate with our investigations.

With modern forms of transportation and communication, the world is rapidly outgrowing 19th century notions of territory and sovereignty. The telephone created its own thorny legal questions when it began to impact interstate and international commerce and crime. Many feel that questions of Internet law are easy. The answer is just to treat the Internet like a telephone. They say that you can answer any question by answering what the law would be had the issue arisen over the telephone instead of the Internet.

It's not that simple though. The Internet is more than just a means of communication like a telephone. It's part of cyberspace. It's a full and rich environment that allows you to seamlessly jump from one spot to another, no matter how far apart. It's a world with few cues about geography. Your online casino could be in Antigua or down the street. When you're Net surfing, you have no way to tell.

Maybe, someday in the distant future, there will be a "law of cyberspace" that will be a single worldwide law. In this future world, I won't have to advise my clients on the law of individual countries.

Until there is a law of cyberspace, we need to stop trying to control the Internet based upon our sense of what the law should be. We're setting the worst kind of example for other countries that may look to us for leadership. We're starting to look like our Cold War enemies. Now we're the ones who don't want to let information in if we don't approve of it. Twenty-five years ago, it was the Soviets who wanted to regulate and control radio signals. Now it's the United States seeking to regulate and control Internet data.

This country stands to make so much money through the Internet. Sadly though, we may help create an Internet without commerce because of concern about conflicting rules between countries. We may create an Internet where the only available content is that fit for a religious fundamentalist child provided that there are multiple language options.

We stand to lose too much by playing this control game. We can't win this game. The rest of the world may just choose to play by rules other than ours. Internet gambling havens are just a single example of how the Internet levels the playing field. It's easy and relatively inexpensive to set up a cyber casino. Why let this business help other economies? Let's keep them honest, fair and taxed, but let's not lose them.

We should not be the leader in Internet censorship. I know how to keep my children away from content that's inappropriate and you can learn how to do it too. As for adults, I think that our government should have faith. Adults can take care of themselves without a paternalistic federal government determining what they should be able to do on the Net. I think that we used to say these things about Radio Free Europe.

Internet Gambling--Computer Law Tip is republished from
Mark Grossman
Mark Grossman