The New York Internet Gambling Prosecutions - A Status Report

In March of 1998, the United States Attorney for the Southern District of New York filed criminal complaints against 21 persons affiliated with off-shore Internet and telephone sports books. Each of the criminal complaints alleges that the defendants conspired to violate the laws of the United States by using wire communication facilities to transmit wagers and information assisting in the placing of wagers in interstate and foreign commerce. The government's cases are predicated upon the theory that a person who is in the business of betting or wagering violates Title 18, Section 1084 of the United States Code when they transmit wagers or information assisting in the placing of bets or wagers over the telephone or the Internet.

The 21 defendants are the owners, operators and employees of nine different Internet sports books. Each was identified by undercover FBI agents who opened accounts and placed wagers at the sports books. Several of the defendants appear to be fairly low level employees who gave their names to the undercover FBI agents while speaking on the phone with them.

Nearly a year after the complaints were filed, the wheels of justice are still grinding. Seven defendants have pled guilty -- four to felonies and three to misdemeanors. The sentences for these defendants range from 18 months probation with 200 hours of community service to 3 years probation with 6 months of home detention. One of the defendants was fined $750,000. Of the remaining 14 defendants, two have been indicted on multiple felony charges and are awaiting trial. Seven of the defendants have not yet been arrested and are fugitives. The remaining defendants have not yet been indicted and most are likely seeking plea bargains with the government which will keep them out of jail. The government has agreed to drop all charges against one of the defendants. A magistrate judge has dismissed the criminal complaints with respect to two of the defendants, although it is likely that the government will still seek indictments against those two defendants if plea agreements or cooperation agreements cannot be reached. Of the nine sports books involved in the cases, four are still operating, with one of those refusing to take bets from the U.S.

Detailed information of the status of each of the these criminal cases can be viewed in the table below.

Before any of the pending cases go to trial, each of the defendants is likely to make a motion to dismiss the charges. There are a number of grounds for such motions including constitutional attacks on the application of the statute, challenges to the court's jurisdiction, and issues as to the applicability of an exemption contained in the statute. If these motions are unsuccessful, we can expect to see the first case come to trial in the next six to twelve months. Any defendant who is convicted after trial will face a sentence under the Federal Sentencing Guidelines ranging between one and two years imprisonment if he is the leader, organizer, manager or supervisor of the criminal activity. Low level employees convicted after trial would likely receive a sentences under the Guidelines of 10 months imprisonment, with the possibility of half of that sentence being served as home detention.

Paul Hugel is an attorney at the law firm of Clayman & Rosenberg in New York City. His firm represents one of the defendants in the Island Casino complaint. All charges against that individual have been dropped. The author can be reach at hugel@clayro.com.