Gambling

Five federal statutes address Internet gambling, particularly the Wire Act (18 U.S.C. & 1084), which makes illegal the use of "wire communications" to assist with placing bets or wagers. The Wire Act's applicability to the Internet is nevertheless questionable in an era of wireless cellular and satellite technologies.

Several states, including Nevada, Texas, Illinois, and Louisiana, have introduced or passed legislation specifically prohibiting Internet gambling. Nevertheless, the large majority of Internet gambling sites, along with their owners or operators, are beyond the reach of state attorneys general.

On 17 July 2000, the U.S. House of Representatives voted down the Internet Act, legislation that sought to shut down many new online gambling sites—the number of such sites was estimated at between seven hundred and one thousand—most of which operated beyond U.S. borders. Proponents of the legislation included an unusual coalition of Nevada gaming interests, major sports leagues, and Christian conservatives. Proponents cited the potential dangers of Internet gambling, including the undermining of the integrity of sporting events; the potential for defrauding unsophisticated gamblers; the ease of access by children; an increase in gambling addictions; and the need to preserve state revenues from legal, state-run gambling.

Opponents carried the day arguing that the legislation would drive online gambling underground; tamper with the Internet economy; invade Internet privacy; and be difficult to enforce against sophisticated but inexpensive technologies. Even assuming that law enforcement could develop the technological capacity to detect violations, provisions allowing for prosecution of gamblers would require enormous expansion of federal law enforcement to obtain and administer search warrants and subpoenas. Also cited were issues of jurisdiction, comity, and sovereignty, especially where other countries have chosen, or likely will choose, to regulate, that is, license and tax, Internet gambling.

Most basic to the legal and social issues of Internet gambling is the reality that cyberspace transcends borders. Consequently, Internet gambling markets are inherently global, undermining the traditional territorial basis for legal regulation of borders. Governments have the power to grant licenses and to tax within their sovereign territory. The Internet makes it possible to supply the demand for gambling "services" such as blackjack, poker, sports, or horse race betting outside any state or national borders, and without paying gambling privilege taxes. State-licensed casinos in the United States are taxed on their winnings at 7.75 to 8 percent, as in Nevada and New Jersey, and to two to three times that amount in some riverboat states. Internet purveyors will be able to offer better odds to price-sensitive gambling consumers. Will gamblers demand better odds from land-based gambling sites, such as casinos and racetracks? Will states be forced to lower gambling taxes? Will cyberspace gambling replace sited gambling or increase the demand for it? At the onset of the twenty-first century, predictions are difficult. Nevertheless, most commentators agree that gambling on the Internet will increase, perhaps exponentially, as the new century unfolds—and with uncertain but feared consequences regarding gambling taxation, the social costs of expanded gambling, and the viability of present control systems through licensing, taxation, and enforcement.