The Law of Internet Gambling (Page 4)
28 October 1999
C. Regulation and prohibition of gambling is based on the state's
1. There may be few published appellate decisions on the
Internet gambling. But, the question of a government's ability, under its
police power, to control the transmission of gambling information and
was resolved years ago. See, e.g. People v. Milano, Cal.App.3d 153, 152
Cal.Rptr. 318 (1979) and the cases cited therein. "Not only does the
Legislature have the power to completely prohibit wagering on horse races,
but it may also limit such wagering to persons physically present within
enclosure," Advanced Delivery Service, Inc. v. Gates, 183 Cal.App.3d 967,
228 Cal.Rptr. 557 (1986).
2. The law of nations holds that every state has the right,
the obligation, to protect the health, safety and welfare of its
a. The police power is most commonly connected with
taken in emergency situations, especially where public health is
a s in an epidemic.
b. But gambling, licensed or illegal, even legal
lotteries, has always
been held to fall within a state's police power.
3. The police power has three interesting, and unusual,
a. A state's power is virtually unlimited.
(1) When a state is faced with a threat to the health,
safety and welfare of its citizens, particularly in an emergency, the
prevails, trumping constitutional and other legal rights. At its most
extreme, government can even take life without due process safeguards --
police do not conduct evidentiary hearings before shooting a madman firing
(2) Because gambling is treated as a police power
issue, governments can
act in ways that would be unthinkable in other commercial and social
settings. "The police power of the State to suppress gambling is
practically unrestrained," Mills v. Agnew, 286 F.Supp. 107
b. A state's police power is often tied to morality, and
gambling is a
morally suspect industry.
(1) Governments' response to the development of the
Internet is typical
o f strong moral views driving public policy. On July 1, 1997, President
Clinton and Vice President Gore issued "A Framework For Global Electronic
Commerce." The document is a model of viewing the Internet as a problem
(a) Under "Content" it reads, "The U.S.
government supports the
broadest possible free flow of information across international borders.
This includes most informational material now accessible and transmitted
through the Internet..."
(b) The report endorses the view that parents
and private industry,
through ratings systems, filtering devices and other technology, can take
care of potential problems, such as children's access to
(2) But the first concrete Internet law supported
by the Administration
was a ban on Internet pornography. Free speech is all right in theory, but
the urge to uphold society's moral norms is so great that the
first response to the new technology was to assume the role of
c. A state's police power is a local issue. We are,
after all, dealing
with state police power. See, e.g., Winshare Club of Canada v. Dept. of
Legal Affairs, 542 So.2d 974 (Fla. 1989) (upholding state's power to
foreign lottery tickets). Larger government organizations like
almost never become involved, unless the threat to society is beyond the
control of local government.
(1) During the formative stages of modern
governments the protection of
citizens' health and safety was best left to authorities on the scene.
Given the technology existing then, and perhaps even today, the major
threats of fire and disease were not controllable from distant national
(2) Morality also was and still is decided
primarily at the local level.
States tend to be small enough to appear homogeneous, or at least
by a single religion. In the American system states are encouraged to
experiment. New Jersey's experiment with using large land-based casinos
a tool of urban redevelopment failed, but Iowa's refinement of the idea --
putting the casinos on river boats -- has been copied by half-a-dozen
D. Police power as a requisite of state government cuts two
1. It is well established under international law that a
power within its own borders is virtually absolute. And a state may
exercise power over its owns citizens while they are abroad, so long as
there is no interference with the foreign country's sovereignty.
2. But states, even in the same federation, are not allowed
in the internal affairs of other states. Governments are not supposed to
impose their morality on citizens of another government residing in their
3. The Schindler case, reaffirmed this police power for
Her Majesty's Customs and Excise v. Gerhart Schindler and Joerg Schindler,
Reference for a Preliminary Ruling: High Court of Justice, Queen's Bench
Division - United Kingdom, Court of Justice of the European Communities,
Case C-275/92, Doc.Num. 692J0275, Reports of Cases 1994 I-1039 (Judgment
Mar. 24, 1994).
a. The Court of Justice of the European Communities had
to decide whether
the United Kingdom could keep out advertisements and tickets of legal
b. The Court held that lotteries are "services" within
the meaning of
article 60 of the EEC Treaty. Article 59 prohibits a Member State from
putting obstacles on cross-border services.
c. But, in a remarkable declaration of a state's power
to control all
forms of gambling within its borders, the Court declared that "given the
peculiar nature of lotteries," the U.K. could restrict or even prohibit
lotteries from other EEC Member States, provided those restrictions were
1. Is it truly legal in the foreign licensing
a. It is difficult to know if an Internet gambling
operator, who claims
to be licensed by a foreign government, is actually licensed. Operators
have claimed to be licensed by the following governments: Antigua and
Barbuda, Aruba (part of the Kingdom of the Netherlands), Belize, Cook
Islands, Costa Rica, Curacao in the Netherland Antilles (part of the
o f the Netherlands), Dominica, Dominican Republic, England in the United
Kingdom, Gibraltar (dependent territory of the United Kingdom), Grand Turk
in the Turks and Caicos (dependent territory of the United Kingdom),
Grenada, Monaco, New South Wales in Australia, Northern Territory in
Australia, the Solomon Islands, St. Kitts and Nevis, St. Vincent and the
Grenadines, Trinidad and Tobago, and Venezuela.
b. If the operator is licensed, does the license allow
over the Internet from Americans?
(1) The head of the biggest illegal telephone
sports betting ring in
history, Ron "The Cigar" Sacco, was arrested by police of the Dominican
Republic for violating local gambling laws, because the Dominican Republic
only allowed local betting, and Sacco was taking phone bets from the
(2) Sacco was then deported to the U.S. as an
c. Does the governmental body that issued the licensed
(1) For example, do Gibraltar and the Turks and
Caicos, both dependent
territories of the United Kingdom, have the power to authorize gambling in
contravention of laws of the U.K.?
(2) The Canadian Pari-Mutuel Agency's Executive
Massey, ruled that she lacked jurisdiction to allow a track to take bets
online, because it would violate Canada's federal Criminal Code. A
court in Toronto upheld her decision to deny an amendment to the Ontario
Jockey Club's wagering permit. Association of Racing Commissioners
International, Inc., "Canadian Court Denies Internet Application," 64
Bulletin No.3 at p.1 (Feb. 24, 1998).
2. Being legal in another jurisdiction is not necessarily
a. The federal government can exercise jurisdiction over
acting legally in their own country, if the statute is sufficiently
explicit, and the detrimental effects from defendant's activities are felt
in this country.
b. In United States v. Moncini, 882 F.2d 401 (9th Cir.
was convicted in the United States District Court for the Central District
of California, of mailing child pornography from Italy, where such
was legal. Prosecutors argued two possible bases for jurisdiction over
(1) Jurisdiction is proper if part of the offense
occurred within the
United States. See Rocha v. United States, 288 F.2d 545, 547 (9th
(2) Jurisdiction is proper even if no part of the
offense occurred in
t he United States, if grounds for exercising extraterritorial
are present. Id. at 548.
(3) Here, the 9th Circuit held under the specific
mailing of child pornography was a continuing offense, so that part of the
offense was committed in the United States as the letters traveled through
the mail and were delivered to their destination. The Court specifically
rejected defendant's argument that the crime was complete at the time the
letter was deposited in the mail in Italy.
c. Congress has power under the Commerce Clause and its
police power to
regulate or prohibit legal gambling that crosses state or national
(1) The United State Supreme Court upheld a
conviction under the
Wagering Paraphernalia Act for carrying legal New Hampshire Sweepstakes
acknowledgments across the state line into New York. United States v.
Fabrizio, 385 U.S. 263 (1966). The federal anti-lottery laws apply to
as well as illegal lotteries.
(2) In Martin v. United States, 389 F.2d 895 (5th
were upheld on a business that took bets in Texas, telephoned partners in
Nevada, and placed the bets with licensed Las Vegas sports books. The
federal law here was designed to help enforce anti-gambling policies of
3. Internet gambling operated by a foreign government is, in
theory if not
practice, also subject to U.S. federal and state laws. Liechtenstein
operates an Internet lottery that solicits American customers.
a. Foreign governments are, in general, immune under the
act of state
doctrine. Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C.
Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964).
b. Under established international law, states and
countries do not
execute the criminal laws of foreign countries. If a foreign law is
violated, prosecution must occur in that foreign forum, not in the United
c. But, "a foreign state shall not be immune from the
courts of the United States or of the States in any case... in which the
action is based upon a commercial activity carried on in the United States
by the foreign state; or upon an act performed in the United States in
connection with a commercial activity of the foreign state elsewhere; or
upon an act outside the territory of the United States in connection with
commercial activity of the foreign state elsewhere and that act causes a
direct effect in the United States." 28 U.S.C. ??1605.
d. "As to any claim for relief with respect to which a
foreign state is
not entitled to immunity under ?1605... the foreign state shall be liable
the same manner and to the same extent as a private individual under like
circumstances; but a foreign state except for an agency or instrumentality
thereof shall not be liable for punitive damages..."
e. "As the legislative history of the FSIA reveals,
contracts for the
purchase or sale of goods or services are presumptively 'commercial
activities,'" Rush-Presbyterian-St. Luke's Medical Center v. The Hellenic
Republic, a Foreign Country, 877 F.2d 574 (7th Cir. 1989).
4. But there have to be limits. Can the government of France
operators for using English?
F. Treaties -- Mutual Legal Assistance Treaties ("MLATs").
1. Comity, countries respecting the criminal law, in
particular, of other
countries, has been formalized in treaties.
2. There are a number of MLATs requiring a country to
and restraint before it attempts to unilaterally enforce its laws on
citizens in their home countries.
a. Under the MLAT between the U.S. and the U.K., S.
Treaty Doc. No.
104-2, 1994 WL 855115, the American government would be required to enter
into consultations with the government of England before U.S. officials
could subpoena the bank records of a U.K. Internet gambling
b. The MLAT calls for the offended government, in this
case the U.S., to
try civil means, non-criminal enforcement, before taking criminal-like
action, such as seizing assets.
G. Right to due process, be present at trial and confront
1. Civil suits -- due process, 5th and 14th Amendments;
a. The law of nations holds that governments are almost
never allowed to
impose their criminal laws on foreign citizens in foreign
b. Even U.S. citizens may be safe, if they refuse to
come voluntarily to
the U.S. for trial: The U.S. does not allow true trials in
(1) Criminal defendants have the right to be
present at trial.
(a) Sixth Amendment constitutional right to
(b) Common law right to be present at trial,
codified at F.R.Crim.P.
(c) However, right may be voluntarily waived, by
actions of defendant.
Diaz v. United States, 223 U.S. 442, 456-58 (1912); F.R.Crim.P. 43(b)
(continued presence not required).
(2) Extradition is difficult; extradition treaties
may cover criminal
fraud, but there are no extradition treaties for illegal gambling,
especially if it is licensed by the treaty partner and "illegal" only in
view of the U.S.
(3) Government sanctioned "kidnaping" is allowed
only for heinous and
major crimes. It takes an extraordinary situation for a country, like
United States, to invade another country -- say Panama -- to arrest a
citizen of that country, Manuel Noriega, for violating American drug laws.
United States v. Noriega, 746 F.Supp. 1506 (S.D. Fla. 1990) (seizure
American Bar Association-Center for Continuing Legal Education, Gaming
Enforcement II (1998).
- Anthony Cabot, The Internet Gambling Report (1997) and Internet
Report II (1998).
- Harley J. Goldstein, On-line Gambling: Down to the Wire?, 8 Marq.
L.J. 1 (Fall 1997).
Seth Gorman and Antony Loo, Blackjack or Bust: Can U.S. Law Stop Internet
Gambling?, 16 Loy.L.A.Ent.L.J. 667 (1996).
John Edmund Hogan, Comment: World Wide Wager: The Feasibility of Internet
Gambling Regulation, 8 Seton Hall Const. L.J. 815 (Summer 1998).
Internet Gaming International - Newsletter (A Liebert Publication:
Joseph Kelly, Internet Gaming: What are the odds for on-line betting sites
and casinos reaching their full potential?, 148 New Law J. 455 (Mar 27,
- Joseph Kelly, Internet Gaming Law, manuscript, to be published
Claire Ann Koegler, Here Come the Cybercops 3: Betting on the Net, 22 Nova
L.R. 545 (Winter, 1998).
Scott M. Montpas, Gambling On-line: For a Hundred Dollars, I Bet You
Government Regulation Will Not Stop the Newest Form of Gambling, 22 U.
Dayton L.R. 163 (Fall, 1996).
Nicholas Robbins, Baby Needs a New Pair of Cybershoes: The Legality of
Casino Gambling on the Internet, 2 B.U.J.Sci.&Tech.L. 7 (April 8,
- Symposium: "The Internet and the Sovereign State: The Role and
Cyberspace on National and Global Governance," 5 Ind.J.Global Legal Stud.
- Mark G. Tratos, Gaming on the Internet, 3 Stan.J.L.Bus.&Fin. 101
© Copyright 2015, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose.