Update 10/16/06

Internet gambling has always been illegal in the United States. But recently, in October 2006, President Bush signed the Unlawful Internet Gambling Enforcement Act. This law makes it illegal for US banking and credit card companies to process transactions for customers of internet gambling sites.

Section 5363 provides the basic thrust of the new law, it makes it illegal for banks and credit card companies to process transactions which involve internet gambling and : (1) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card; (2) an electronic fund transfer, or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer of money transmitting service, from of on behalf of such other person; (3) any check draft or similar instrument which is drawn by or on behalf of such other person and is drawn on or payable through any financial institution'; or (4) the proceeds of any other form of financial transaction, as the Secretary of the Treasury) and the Board of Governors of the Federal Reserve System may jointly prescribe by regulation, which involves a financial institution as a payor or financial intermediary on the behalf of or for the benefit of such other person. Section 5362(4) defines "financial transaction provider" as including any "international,,, payment network utilized to effect electronic fund transfers. Therefore, services such as NET Teller and Pay Pal are also prohibited from processing gambling transactions.

Given that internet gambling has always been illegal in the United States, yet has remained extremely popular, it remains to be seen if the new law will prevent or significantly reduce internet gambling. Internet Gambling and Bankruptcy. A 2000 study by economists John Barron, Michael Staten and Stephanie Wilshusen estimated that an abolition of casino gambling would reduce personal bankruptcies by 1.4 percent in the United States in general. The study found that personal bankruptcies would be reduced by 8 percent in counties which are adjacent to casinos. More information about bankruptcy in Colorado can be found at www.denverbankruptcylawyers.com

Despite the new law, advertising for internet gambling continues to flourish. Manhattan billboards are full of ads for online gaming sites. There is significant advertising during the commercial breaks of the newly popular World Series of Poker televison show on ESPN. (these ads are for 'learn to play sites,' but the real gambling sites are just a click away) After the new ban was announced, the British parent of the popular website www.sportsbook.com sold the company to an Antiguan firm for $1.00. Many popular internet gambling sites did close their electronic doors in the wake of the new law, but don't bet against gamblers finding a way to circumvent the law, sooner rather than later. Given that laws already prohibited internet gambling in the United States, the question is whether this new regulation aimed at the financial industry in the US will curtail Internet gambling given the diffuse and multinational nature of the Internet.

History of Attempts to Regulate of Internet Gambling

In the US internet gambling has always been illegal, and the principal federal act which has been used to prosecute violators is the Wire Act at 11 USC 1804. The Wire Act prohibits gambling businesses from knowingly receiving or sending certain types of bets or information that assists in placing bets over interstate and international wires. Therefore, an internet casino, in any country which receives a bet transmitted by an individual in the United States, violates the Wire Act. The Illegal Gaming Business Act makes it a federal crime to operate an illegal gambling business, and therefore any internet gaming business which takes a bet in violation of a law of a particular state within the U.S., would presumably violate the act. The Travel Act, which, provides criminal penalties for anyone who undertakes interstate or foreign commerce with the intent to distribute proceeds of any unlawful activity, would also apply to internet gambling and, unlike the Wire Act and the Gaming Act, would apply to the individual bettor.

Five states, Illinois, Nevada, Oregon and South Dakota, and Michigan have passed laws prohibiting internet gambling. In some states, all gambling or all unlicensed gambling is illegal, so those laws would prohibit internet gambling. In the United State's Congress, the current debate is often over whether the States or the Federal Government can best regulate internet gambling. Since gambling is such a large industry, the traditional land based casinos have taken an active role in lobbying against internet gambling.

The Future of Internet Gambling

The big players in internet gambling have predictably established physical presence offshore, notably Antigua, Belize, the Caicos Islands. Therefore addressing the legality of internet gambling involves an analysis of state, local, tribal, national, and international law. Because it is the focus of interest by lawmakers everywhere, attention must also be given to the likely content of law in the near future. Underlying all of these laws is the opinion shared by many that it is not possible to effectively regulate internet gambling. Well established members of the international community that are inclined to allow internet gambling such as Britain or Ireland may be subject to pressure of the international community, but nascent economies and clannish governments in say, Africa, can not be cowed into accepting regulation which limits much needed income.

Most of the activity on internet gambling sites comes from Europe and the United States. This is largely because the games themselves are better when the gambler is using a high speed cable type connection. In parts of Asia where high speed connections are prevalent, internet gambling is also prevalent. Given the enormous popularity of Internet gambling, it is probably just a matter of time before Americans are back at it in full swing.

Copyright 2003-2006, The Gauss Law Firm.