By Martin Owens
Don't Count Your BoDogs Before They Hatch:
I-gaming prosecutions and the Elephant in the Room.
"There is no terror in a bang, only in the anticipation of it."
by Alfred Hitchcock
This is becoming embarrassing. It's one thing for the law to be slightly behind the technology- that's more or less inevitable. But things have now reached the point where the US prosecutors chasing wicked Internet gambling are not merely trying to lock the stable after the horse is gone. Now, long after the race track has closed and the barns have been torn down, they're running around the abandoned parking lot behind the deserted grandstand, shouting "gotcha!".
A year after the BoDog.com site shut down and BoDog shifted its focus to Europe and points East, the US Department of Homeland Security confiscated the inactive site's URL and the US Attorney for Maryland indicted Calvin Ayres and some of his associates. For breaking Maryland's gambling laws by offering Internet gambling to Maryland residents. Also money laundering. More of these in just a bit.
To be fair, Calvin was always a tempting target, particularly to that sector of America's government most keenly aware of its own importance. By them, Calvin did the unforgivable. He refused to take them seriously. He simply announced that as far as he was concerned, online gaming was just fine, he was taking everybody's money, and that was that. In the fullness of time, he took BoDog.com out of the American market, but this seems to have been more economic consideration than any fear of the just vengeance of right-thinking people.
Meantime, he got rich. He had a good time being a bad boy and flaunted it. TV documentaries, magazine covers titled "Catch Me if You Can", staging his own trade shows ( and the best after-hours parties you'll never remember). A yacht in the Mediterranean. Dancing girls in fetching Middle Eastern garb, and show booths built to look like the Arabian Nights. Worse than a lawbreaker, he was a sinner unrepentant. Obviously guilty as hell. It only remained to find something to charge him with.
So this is the end of Calvin - or is it?
The Elephant in the Room
Federal anti-gambling prosecution in the USA is a curious construct. As a general proposition, you first must have somebody break a state gambling law. Federal anti-gambling laws rely on this underlying violation to trigger them- the Wire Act, the Unlawful Gambling Business Act, even the UIGEA. Because state law is the fundamental reference point of gambling law in America.
But there is, as the saying goes, an elephant in the room that nobody is talking about, hoping it will go away somehow. That elephant is called jurisdiction. This is the legal term meaning " Who gets to do what to whom, and why". So then, it's obvious that if you break Maryland law while your feet are physically planted on Maryland soil, Maryland law applies and Maryland courts have jurisdiction. But supposing the charge is gambling, but the gambling didn't take place in Maryland?
There is a complicated body of case law to describe and argue about jurisdiction ( believe me, you don't want the details). Suffice it to say that where somebody is operating out of state, involving residents of that state, there must be a clear and forceful argument to establish jurisdiction over him. This is doubly true in criminal cases. And powerful criminal penalties are threatened against Calvin & Company- namely The Money Laundering Act, (18 USC S 1956).
This is bad medicine, with a penalty of 20 years and six figure fines right out of the box, before any enhancements or special circumstances are added.
And this why , all of a sudden, the following question is very, very important:
If Mr X, resident in Maryland, contacts an offshore gaming site ( let's call ?em SITE) and places wagers or bets, using real money, does that, without more, establish Maryland's jurisdiction over SITE? Because if it does, then even if SITE is not breaking the laws of its own country, it can be hauled into a Maryland court for breaking Maryland's laws. Well, some would say, so what? Gambling is a criminal enterprise anyway. They had it coming, right?
But it's not that simple. It's not a mere question of American law enforcement. The little thing we call international law is based upon reciprocity- each sovereign nation has the same dignities, rights, and privileges. It's a two-way street, here. So if Maryland can reach out to Antigua or Gibraltar because somebody in Baltimore is dialing up an online gambling site without permission, then it follows that other countries can extend their law into Maryland and other US states as well. Which means that practitioners of Shari'a law would be entitled to go after Playboy magazine, even though it's perfectly legal to access the Playboy site in the USA. And the government in Beijing could extradite the proprietor of a "Free Tibet" website in Chicago or Washington DC. A pretty high price to pay for what is, at bottom, no more than an election year bid to lock up the mean-old- lady vote.
The particular Maryland statute at the bottom of all this, as with 15 other states and the District of Columbia, does not even offer a black letter definition of what "gambling" is or is not, online or off. And what it forbids is maintaining a gambling operation at "any place within the state". As usual, the most important question remains unanswered.
Steering by the Rear-view Mirror
And in any case it hardly matters anymore. BoDog is out of the American market.
Calvin, whose present whereabouts are unknown, is concentrating on the other online gambling markets that are developing, most notably Asia. It is, to be charitable, highly unlikely he will show up in Maryland and get arrested . The rest of the BoDog operation is, by and large, also out of Uncle Sam's reach.
More to the point, the reason for the drama has disappeared. The old notion that innocent Americans need protection against the wicked wiles of Internet gambling has been completely exploded- Illinois just started selling its state lottery tickets online, and half a dozen states are wrestling with legislation to expand their own Internet gambling programs. I say expand because in reality, Internet gambling is already a fact of life in America, has been for ten years and more.
No less than 32 of the Fifty States now use some kind of licensed Internet service to help them with their horse race betting. So what were talking about is not some moral cataclysm, as the anti-gambling folks would have it. We are simply exploring further developments of an existing reality. In an environment like that, it makes no sense to try to jail the likes of Calvin Ayres. Far better to figure out a way to get him on your side, not least because the USA is losing billions in potential tax revenue to offshore outfits who would welcome the chance to come in out of the cold anyway.
And there is a further reason to let bygones be bygones: the difference between Internet "gaming" and Internet "gambling" is melting away as we watch. Play-for-free sites, anchored in social media servers such as Facebook, have evolved a business model which does not place them under gambling law, but nevertheless is quite profitable. The gaming company known as Zynga is offering a version of Texas Hold ?em which costs nothing to play, and in facts awards you free points ( chips) as you progress. But just in case you're in a hurry, you can buy them, too (strictly optional). The result? The value of Zynga's poker market is estimated at about $7 billion. To put that in perspective, the entire world market for play-for-money online poker is between $14 billion and $16 billion.
That's what our lawmakers and regulators should be focused on- new formats and new technologies are turning the old rules and the old structures inside out, in gaming and in a whole lot of other areas. Calvin Ayres? Somebody tell the Maryland crowd to let it go, already. You win some, you lose some. And life goes on.
Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com
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