Federal law murky on Internet gambling

David Strow

Friday, April 20, 2001 | 5:06 a.m.

An effort to specifically make Internet gaming illegal under federal law, headed by Sen. Jon Kyl, R-Ariz., was unsuccessful in Congress last year.

That's left something of a vacuum in federal laws dealing with gambling on the Internet. The only law with jurisdiction is the Wire Act -- and its application to Internet gaming is still being defined.

The Wire Act bans the use of any "wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placement of bets or wagers on any sporting event or contest ..."

The Justice Department has taken the position this applies to Internet casino games.

If that opinion is put into practice, Nevada casinos could face a flood of federal criminal indictments if they tried to put their gambling products in cyberspace.

Bobby Siller of the state Gaming Control Board says this needs to be addressed before he could support legalized Nevada Internet gambling, he said. "I'd like to have some assurance the use of the Internet (in betting) isn't violating the Wire Act."

Sports betting on the Internet is illegal. That was made clear last year when a federal jury in New York convicted Jay Cohen of violating the Wire Act by operating an Internet sports book in Antigua and accepting bets from the United States.

Although no charges have ever been brought against an operator of online table games or slots, Justice maintains that the Wire Act's "sporting event or contest" also applies to casino games played online.

That opinion suffered a blow last month in a federal court in New Orleans.

In a class-action lawsuit, Visa and MasterCard were accused under racketeering law of aiding violations of the Wire Act by allowing credit cards to be used to accept bets at Internet casinos. In March U.S. District Judge Stanwood R. Duval Jr. threw out these claims.

"Even a summary glance at the recent legislative history of Internet gambling legislation reinforces the court's determination that Internet gambling on a game of chance is not prohibited conduct under (the Wire Act)," Duval wrote.

Las Vegas gaming attorney Tony Cabot expects this decision to be appealed. If it holds, he thinks the ramifications for Nevada could be huge.

"If this decision holds up, then the precedent is we can take bets from any place in the world," Cabot said.

However, Cabot believes Nevada casinos will not take wagers from other states unless those states specifically permit Internet gambling, as doing so could be a federal offense.