California Bill Would Have Brought Back Prohibition

23 August 2002

The California State Legislature almost voted to reinstate prohibition.

The last time we had prohibition, 1919 to 1930, it was prohibiting "intoxicating liquors for beverage purposes." This time, California is going after gambling on the Internet.

The proposed California laws would actually go further than the old prohibition. The 18th Amendment to the U.S. Constitution only attacked the business-end of the booze trade. One bill, which passed the California Assembly 61-2, would have not only made it a crime to have anything to do with the business of Internet gambling, it also would have made mere betting a crime.

The bill, AB 1229, was introduced by Assemblyman Dario Frommer (D-Glendale), so we might as well call it the Frommer Internet Gambling Prohibition Act, or FIGPA. Bills like FIGPA are sure to be reintroduced.

Under FIGPA, you do not have to take bets from California to be a criminal. Anyone who "causes to be opened," whatever that means, or "offers for play" any prohibited online gambling game is guilty of a misdemeanor. The potential punishment is enormous: up to 90 days in jail is bad enough, but the fine is up to $1,000 per transaction, and a transaction is defined as "each transfer of funds... in connection with the making of a wager, series of wagers, or parlay wager."

Under FIGPA, aiding and abetting a person in California to play or bet online is a misdemeanor. Even having the Internet server in the state is illegal.

The scope is so large that FIGPA contains an limited exemption for advertising, to avoid violating the First Amendment. But even here FIGPA would reach out and grab anyone who merely directs online gambling ads to California. Worse, magazines would be required to gather detailed information about their advertisers and turn that information over to the attorney general or any district attorney who asks for it.

Bills like FIGPA are sure to be reintroduced.

The bill's only saving grace is that it does not try to arrest the world. Only an operator (or anyone who helps them, including advertisers), who knows or "has reason to know" that the game is being offered to someone in California would be guilty.

The most amazing provision of FIGPA is its attempt to make criminal what people now do legally in their own homes. "Every person who plays or bets at or against any prohibited online gambling game for money... while that person is physically located within this state," would be guilty of an infraction and fined up to $25 per transaction.

This means that a player who bets online commits a crime, even if the operator is licensed by a foreign government and operating legally under FIGPA (for example, by not knowingly accepting wagers from California).

This would open cans of worms for businesses. It is fairly well established that employees have no right of privacy when they use company computers. Management can track everything done online. If a boss dislikes someone, all he or she has to do is tap into the worker's terminal. Employees have been fired for sending racy e-mail and using their company computers to download legal pornography. A worker caught repeatedly violating the law, by making a few small-time bets online, could be fired on the spot.

But this sword has two edges. If a company routinely monitors its employees' computer use, as many do, what happens when it discovers workers playing online casino games for money and does not stop them?

Giving workers the means to make bets (the computer and access to the Internet) and allowing them to continue, knowing exactly what they are doing, would be "aiding and abetting a person in California to play or bet online." With only a few workers, or one worker who makes wagers on a number of different Web sites, we are talking serious penalties for multiple misdemeanors.

How about office pools? Putting one together to buy a California Lottery ticket is not only legal but encouraged by the state. There is no state law, today, preventing workers from getting together to buy lottery tickets from another state; when PowerBall hit $200 million, many Californians did exactly that.

Many state lotteries, particularly in Europe, are selling tickets online, and more will join.

Under FIGPA, playing a lottery game on the Internet is a crime. In California, making an agreement to violate the law can be a misdemeanor, or a felony!

The most amazing provision of FIGPA is its attempt to make criminal what people now do legally in their own homes.

In 1885, California passed a law, virtually never used, making it a crime to play an illegal casino game for money. In 1909, the Legislature passed another law, prohibiting making, recording or accepting a bet on a "contest of skill, speed or power of endurance of man or beast."

California's licensed tracks are exempt, and Gov. Davis signed another bill allowing online bets on horse races.

Maybe that is why FIGPA was endorsed by race tracks, but opposed by the California Council on Alcohol Problems and other anti-gambling activists.

The state Senate Governmental Organization Committee killed FIGPA in its present form. But it voted to send FIGPA's subject matter to other committees for further study.

The big losers, besides every licensed gaming Web site, would be the California State Lottery and federally recognized Indian tribes.

The State Lottery has run telephone games and could take bets online from residents of the state, unless FIGPA passes.

Tribes agreed in their compacts not to operate Internet lotteries. But tribes have the right to demand that the state renegotiate. FIGPA would take that right away, forever.

The tribes understand this and are using their considerable political power to kill bills like FIGPA in committees. In fact, California's gaming tribes have been the only thing preventing a bill like FIGPA from becoming law.

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I. Nelson Rose

Articles by Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law. Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law. A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States. With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic. He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

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