IGN has come across the musings of attorney, Anthony Cabot before. He's a gaming attorney who is developing a specialty in the area of internet gaming. Cabot recently undertook the task of writing a primer on the legalities of the burgeoning internet gaming industry and, of course, has interspersed some interesting debate with his great sense of humor.
A regular contributor to Casino Journal, the September issue offered some interesting additions to the debate about online gaming. While Cabot began the article with the basics as you would expect in a primer, he advanced toward a more in-depth discussion of the issue...the type of issues which sophisticated IGN readers may appreciate.
First, let's recap with a basic: Cabot writes: "The most relevant statute is the federal wire statute, 18 U.S.C. 1084, which addresses the transmitting of certain types of wagering information by interstate wire facilities. Subsection (a), a criminal provision, provides as follows:
Whoever being engaged in the business of betting or wagering knowingly uses a wire communications facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
From there, Cabot let's his legal knowledge and his dry sense of humor loose: "Let's break this down so you can see the various arguments proffered by those proposing to avoid a two- to five-year life experience in federal prison. One thing is clear: This statute prohibits using the Internet for the transmission of sports bets. It does not, however, appear to apply to specific forms of gambling other than betting on sporting events or contests. Here the issue turns on whether, in the phrase 'sporting event or contest,' the adjective 'sporting' modifies both 'event' and 'contest' and, if so, whether the reference to sports-related betting determines the scope of all of the remaining references to 'bets and wagers.' No one has ever been convicted under 1084 except for sports wagering." Moreover, the legislative history suggests that it was meant to apply to sports wagering.
He continues: "This is the cyber-casino's best argument, and, in my view, the only winner. However, some people disagree with me, like the U.S. Department of Justice and various state attorneys general. Given that they prosecute and put people in jail, while my experience with the criminal justice system is watching courtroom TV, their opinion may be a little more important if you are considering this business. But I take some solace in the fact that I am not alone in this view. Senator Kyl from Arizona and Senator Hatch from Utah apparently see the same loophole. They've introduced Senate bill 1495, which would strike out the words "on any sporting event or contest." This, as long as it is a bet or wager, will cause the cyber-casinos trouble.
Indeed, though those of us at IGN are not lawyers, common sense dictates the same analysis. If this were actually illegal already, why would these Congressman be undertaking the process of clarifying this issue?
Cabot continues by discussing the "loopholes" in depth: "The second part of Section 1084(a) says that the person must be "engaged in the business of betting or wagering." A party operating an on-line casino or sports wagering service would appear to fall into this category."
Of more interest to you as a reader is the consumer standpoint. As you click that mouse to transact a wager, are you at risk of being carted off to the pokey??? Cabot offers this viewpoint: "Casual bettors, however, would not appear to be reached by this statute, as they would not be in the business of betting or wagering. If you look at the legislative history, the statute was intended to specifically target professional gamblers and bookmakers, in particular those associated with organized crime, and was not aimed at the 'casual' gambler. One congressman even stated, 'This bill does not get after the casual gambler who bets $2 on a race.'"
The pool argument is often advanced by those who plan to get into internet sports wagering. They are merely offering a service by accepting the sports wagers into a pool and exacting a fee for that service. Cabot speaks out on that legal theory: "Here is the argument put forth by sports wagering sites. They proposed a system whereby they would merely broker bets for a small commission. Their attorney made the argument that brokering bets is not being engaged in the business of betting or wagering. (My response was basically, 'Yeah, right. What business are they in exactly?') Of course, in the next breath, the attorney said that the company would not take bets from the United States. Good choice."
As regular IGN readers are aware, Congress had a bill this year to go after you, the consumer. It went nowhere this session but could certainly rear its ugly head again in January. Cabot pointed out the fundamental issues with this bill: "Again, Senators Kyl and Hatch are trying to ruin everyone's fun. Their bill would add a new section that would take out the words 'in the business of' and therefore would apply to anyone who wagers with a cyber-casino or bookie. If this occurs, you might have to keep Aunt Esther (the slot maniac) off your computer. The Kyl and Hatch proposal would allow police to seize it."
Then, he gets to the heart of the report on internet gambling issued by the National Assn. of Attorneys General (NAAG) this year which called for changes in the Wire Act. Cabot said, "The gambling business must use a wire communications facility for the 'transmission' of bets or wagers or gambling information. Some courts have interpreted 'transmission' narrowly to include only the party initiating the communication and not the receiving party."
"If you live in the jurisdiction of the 7th U.S. Circuit Court of Appeals, this is an argument. Not a great argument, but an argument. There, a court held that a person was not 'transmitting' by having a ticker tape that allowed the reception but not the sending of gambling information. But, what we are talking about here is interactive. As Mr. Webster would say: 'to act mutually.' It would be one boring Web site if it never responded. Plus, if you show up for arraignment in the 1st, 9th or 10th circuits, the 'Hey, I was only receiving' argument doesn't even pass the 'nice try' test."
Cabot next tackled the issue of sovereignty and being licensed in another nation. This was his comment about that tactic: "I know a lot of operators are relying on this argument in setting up shop outside the United States. Their argument is that on-line gaming has been authorized by acts of law in those countries. As their argument goes, because they aren't violating any laws in their country, and the bettor isn't violating federal law, life is wonderful. This argument is not likely to succeed. If someone commits an act outside the United States that is intended to cause an effect in the United States, then he or she is probably subject to U.S. laws. Just ask Manuel Noriega. Plus, the United States retains the right to prosecute its citizens regardless of where they are doing business."
"My favorite justification for why a person that owns a cyber-casino is not breaking the law," Cabot continued, "is that he is just a shareholder in a foreign corporation
that owns the casino. Could you see a drug dealer arguing that he didn't violate any criminal laws because he was selling crack for his off-shore corporation? Another one is that the person is not operating the cyber-casino but is serving as a "consultant" to the government-operated casino. Great. So instead of being the perpetrator, you are only aiding and abetting a felony."
While the Wire Act is the main legal vehicle being referenced by state and federal prosecutors , Cabot points out that there are other laws to watch out for. He said, "Besides 1084, some other federal laws may come into play. Like the Amateur and Professional Sports Protection Act and the racketeering statutes in 18 U.S.C. 1952, which elevates violations of state law into federal crimes if they occur in interstate or foreign commerce, or 18 U.S.C. 1955, which makes it illegal to finance, own, manage or operate an illegal gaming enterprise."
In closing, Cabot posed some interesting questions in this debate: "I said earlier that whether gaming on the Internet is legal is not the right question. Then, what is? There are two right questions to ask: What will the law be tomorrow? And does it make any difference what the law is? Just as Senators Hatch and Kyl are looking to tackle the loopholes in the federal law, look for other governments, both state and foreign, to begin their own assault on gambling and pornography on the Net. But, the toughest laws in the world may be unenforceable."
Cabot invites your comments on the subject. He says, "If you have any thoughts on the enforceability of federal law on those using the Internet, or on privacy issues, you can e-mail him at acabot@ix.netcom.com." We know that IGN readers have strong opinions on the subject.
Anthony Cabot is a partner in the law firm of Lionel Sawyer & Collins and coordinator of the firm's International Gaming Law division. He is lead editor of International Casino Law, published by the Institute for the Study of Gambling and Commercial Gaming.
IGN has come across the musings of attorney, Anthony Cabot before. He's a gaming attorney who is developing a specialty in the area of internet gaming. Cabot recently undertook the task of writing a primer on the legalities of the burgeoning internet gaming industry and, of course, has interspersed some interesting debate with his great sense of humor.
A regular contributor to Casino Journal, the September issue offered some interesting additions to the debate about online gaming. While Cabot began the article with the basics as you would expect in a primer, he advanced toward a more in-depth discussion of the issue...the type of issues which sophisticated IGN readers may appreciate.
First, let's recap with a basic: Cabot writes: "The most relevant statute is the federal wire statute, 18 U.S.C. 1084, which addresses the transmitting of certain types of wagering information by interstate wire facilities. Subsection (a), a criminal provision, provides as follows:
Whoever being engaged in the business of betting or wagering knowingly uses a wire communications facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
From there, Cabot let's his legal knowledge and his dry sense of humor loose: "Let's break this down so you can see the various arguments proffered by those proposing to avoid a two- to five-year life experience in federal prison. One thing is clear: This statute prohibits using the Internet for the transmission of sports bets. It does not, however, appear to apply to specific forms of gambling other than betting on sporting events or contests. Here the issue turns on whether, in the phrase 'sporting event or contest,' the adjective 'sporting' modifies both 'event' and 'contest' and, if so, whether the reference to sports-related betting determines the scope of all of the remaining references to 'bets and wagers.' No one has ever been convicted under 1084 except for sports wagering." Moreover, the legislative history suggests that it was meant to apply to sports wagering.
He continues: "This is the cyber-casino's best argument, and, in my view, the only winner. However, some people disagree with me, like the U.S. Department of Justice and various state attorneys general. Given that they prosecute and put people in jail, while my experience with the criminal justice system is watching courtroom TV, their opinion may be a little more important if you are considering this business. But I take some solace in the fact that I am not alone in this view. Senator Kyl from Arizona and Senator Hatch from Utah apparently see the same loophole. They've introduced Senate bill 1495, which would strike out the words "on any sporting event or contest." This, as long as it is a bet or wager, will cause the cyber-casinos trouble.
Indeed, though those of us at IGN are not lawyers, common sense dictates the same analysis. If this were actually illegal already, why would these Congressman be undertaking the process of clarifying this issue?
Cabot continues by discussing the "loopholes" in depth: "The second part of Section 1084(a) says that the person must be "engaged in the business of betting or wagering." A party operating an on-line casino or sports wagering service would appear to fall into this category."
Of more interest to you as a reader is the consumer standpoint. As you click that mouse to transact a wager, are you at risk of being carted off to the pokey??? Cabot offers this viewpoint: "Casual bettors, however, would not appear to be reached by this statute, as they would not be in the business of betting or wagering. If you look at the legislative history, the statute was intended to specifically target professional gamblers and bookmakers, in particular those associated with organized crime, and was not aimed at the 'casual' gambler. One congressman even stated, 'This bill does not get after the casual gambler who bets $2 on a race.'"
The pool argument is often advanced by those who plan to get into internet sports wagering. They are merely offering a service by accepting the sports wagers into a pool and exacting a fee for that service. Cabot speaks out on that legal theory: "Here is the argument put forth by sports wagering sites. They proposed a system whereby they would merely broker bets for a small commission. Their attorney made the argument that brokering bets is not being engaged in the business of betting or wagering. (My response was basically, 'Yeah, right. What business are they in exactly?') Of course, in the next breath, the attorney said that the company would not take bets from the United States. Good choice."
As regular IGN readers are aware, Congress had a bill this year to go after you, the consumer. It went nowhere this session but could certainly rear its ugly head again in January. Cabot pointed out the fundamental issues with this bill: "Again, Senators Kyl and Hatch are trying to ruin everyone's fun. Their bill would add a new section that would take out the words 'in the business of' and therefore would apply to anyone who wagers with a cyber-casino or bookie. If this occurs, you might have to keep Aunt Esther (the slot maniac) off your computer. The Kyl and Hatch proposal would allow police to seize it."
Then, he gets to the heart of the report on internet gambling issued by the National Assn. of Attorneys General (NAAG) this year which called for changes in the Wire Act. Cabot said, "The gambling business must use a wire communications facility for the 'transmission' of bets or wagers or gambling information. Some courts have interpreted 'transmission' narrowly to include only the party initiating the communication and not the receiving party."
"If you live in the jurisdiction of the 7th U.S. Circuit Court of Appeals, this is an argument. Not a great argument, but an argument. There, a court held that a person was not 'transmitting' by having a ticker tape that allowed the reception but not the sending of gambling information. But, what we are talking about here is interactive. As Mr. Webster would say: 'to act mutually.' It would be one boring Web site if it never responded. Plus, if you show up for arraignment in the 1st, 9th or 10th circuits, the 'Hey, I was only receiving' argument doesn't even pass the 'nice try' test."
Cabot next tackled the issue of sovereignty and being licensed in another nation. This was his comment about that tactic: "I know a lot of operators are relying on this argument in setting up shop outside the United States. Their argument is that on-line gaming has been authorized by acts of law in those countries. As their argument goes, because they aren't violating any laws in their country, and the bettor isn't violating federal law, life is wonderful. This argument is not likely to succeed. If someone commits an act outside the United States that is intended to cause an effect in the United States, then he or she is probably subject to U.S. laws. Just ask Manuel Noriega. Plus, the United States retains the right to prosecute its citizens regardless of where they are doing business."
"My favorite justification for why a person that owns a cyber-casino is not breaking the law," Cabot continued, "is that he is just a shareholder in a foreign corporation
that owns the casino. Could you see a drug dealer arguing that he didn't violate any criminal laws because he was selling crack for his off-shore corporation? Another one is that the person is not operating the cyber-casino but is serving as a "consultant" to the government-operated casino. Great. So instead of being the perpetrator, you are only aiding and abetting a felony."
While the Wire Act is the main legal vehicle being referenced by state and federal prosecutors , Cabot points out that there are other laws to watch out for. He said, "Besides 1084, some other federal laws may come into play. Like the Amateur and Professional Sports Protection Act and the racketeering statutes in 18 U.S.C. 1952, which elevates violations of state law into federal crimes if they occur in interstate or foreign commerce, or 18 U.S.C. 1955, which makes it illegal to finance, own, manage or operate an illegal gaming enterprise."
In closing, Cabot posed some interesting questions in this debate: "I said earlier that whether gaming on the Internet is legal is not the right question. Then, what is? There are two right questions to ask: What will the law be tomorrow? And does it make any difference what the law is? Just as Senators Hatch and Kyl are looking to tackle the loopholes in the federal law, look for other governments, both state and foreign, to begin their own assault on gambling and pornography on the Net. But, the toughest laws in the world may be unenforceable."
Cabot invites your comments on the subject. He says, "If you have any thoughts on the enforceability of federal law on those using the Internet, or on privacy issues, you can e-mail him at acabot@ix.netcom.com." We know that IGN readers have strong opinions on the subject.
Anthony Cabot is a partner in the law firm of Lionel Sawyer & Collins and coordinator of the firm's International Gaming Law division. He is lead editor of International Casino Law, published by the Institute for the Study of Gambling and Commercial Gaming.