Making the Case

By Joe Kelly
Contributing Editor

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    Making the Case

    The Unlawful Internet Gambling Enforcement Act

    Philadelphia, PA (Sports Network) - To paraphrase Winston Churchill, U.S. internet gambling laws are a riddle, wrapped in a mystery, inside an enigma. It is generally accepted that offshore online sports betting operators who accept U.S. players are in violation of the Wire Act (1961). It is legally unclear whether federal law prohibits non-sports interactive gambling such as poker. The U.S. Justice Department insists that all interactive wagering including interstate, state- licensed interactive horse racing in about twenty-nine states, is illegal. The General Agreement on Trade in Services (GATS) which involved an internet gambling complaint by Antigua against the U.S., concluded that the U.S. violated the GATS in allowing domestic interactive horse race wagering while excluding foreign operators.

    In October 2006, congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA), which did little to resolve the legal uncertainty as to what was prohibited internet gambling. The primary purpose of UIGEA was to block monies going from the player to the offshore gaming operator. Federal regulators, pursuant to UIGEA required non-exempt participants in designated payment systems to develop procedures by December 1, 2009 to block prohibited payments to on-line gambling operators.

    The U.S. Justice Department, which had earlier taken action against payment processors such as Neteller, Citidel, and Paypal seized in June 2009 over thirty-million dollars in poker payments going from the off-shore operator to the U.S. players. This seizure is being contested by both payment processors and pro-poker groups. In April 2009, a Canadian payment processor was indicted in New York Federal Court for bank fraud conspiracy and the catchall Illegal Gambling Business Act and the Anti-Money Laundering Act. Interestingly there was no UIGEA allegation, perhaps because the recent federal statute specifically did not include payments going from the gaming operator to the player. Federal seizure of funds may be contested successfully .For example Bill Scott, who operated an offshore sports betting operation and had been indicted along with twenty other individuals in 1998, had funds seized pursuant to the Fugitive Disentitlement Statute. This law allowed seizure of funds from someone who was avoiding prosecution by remaining outside the United States and was engaged in a money laundering scheme through an unlawful internet gambling enterprise. In a civil proceeding, the federal district court granted summary judgment to the U.S., which was reversed on appeal (2009) because the U.S. could not show that Scott remained outside the United States in order to avoid the criminal charge.

    There are several bills now before congress that would legalize and regulate online gambling operators. Unfortunately, they specifically exclude internet sports wagering from regulation. There is a remote chance that UIGEA will be declared unconstitutional or that New Jersey plaintiffs will be successful in overturning the 1992 Bradley bill that had the effect of restricting sports wagering to four states .In the meantime, offshore sports operators will continue to accept billions of dollars from U.S. players.

    Joseph M. Kelly, Ph.D., J.D., is a Professor of Business Law at State College at Buffalo, and an associate of Catania, Ehrlich & Suarez Law Offices and Catania Gaming Consultants, Inc. He is licensed to practice law in Illinois, Nevada, and Wisconsin. He is also co-editor of Gaming Law Review.

    Professor Kelly is considered an expert in the field of gaming and has been an invited speaker on gaming topics throughout the world. His extensive writings include works on British, German, Native American, West Indian, and Internet gambling law and Professor Kelly?s law review publications have been cited on nine occasions as authority by federal district and appellate courts, as well as state appellate and supreme courts

    Professor Kelly has been an expert witness for Park Place Casino, Boyd Gaming, and Harvey?s Casino as well as card clubs in San Jose California. He has appeared as an expert witness before the Virgin Islands Casino Control Commission (2004), the South African Parliamentary Committee on Trade and Industry (2003)and as recent as 2007 appeared as an expert poker witness in the trial of R v Kelly (Gutshot) in Snaresbrook Crown Court (London), UK.

    Copyright 2009

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