Is the state of New Jersey ready to establish legal precedence or has it taken on a losing battle? That depends on whom you ask.
A spokesperson for the New Jersey Consumer Affairs division claims that Internet gambling sites engage in "unconscionable and deceptive commercial practices."
New Jersey Attorney General John Farmer agrees, and on that basis, he has taken three Internet gambling services (Alohacasino.com, Royalclubcasino.com, and 7sultans.com) to court. On top of that, says Farmer, online gambling is a risky form of entertainment. "New Jersey residents should understand that these sites are unregulated and unsafe," he said. "Quite simply, they're a bad bet."
On the other side of the debate, supporters of regulating online gambling say the suits only prove that unregulated, illegal Internet gambling will continue to grow despite efforts to stamp it out. Instead of pursuing these gambling sites, they say, the government would be better off trying to regulate online gaming.
This, in their minds, would protect the majority of consumers wanting to gamble online and who would then gravitate to those sites that were licensed and regulated. After all, even on the Internet, businesses are finding that a good reputation for reliability is key to long-term success.
A Little Background
When the state began its 15-month investigation into the three Internet gambling sites, it had a broad idea that Internet gambling was not permitted under language in the state's constitution which states:
No gambling of any kind shall be authorized by the Legislature unless the specific kind, restrictions and control thereof have been heretofore submitted to, and authorized by a majority of the votes cast by, the people at a special election or shall hereafter be submitted to, and authorized by a majority of the votes cast thereon by, the legally qualified voters of the State voting at a general election.... [N.J. Const., art. IV, ยง 7, 2.]
With this in mind, authorities pursued legal action after they began noticing billboards, prominently located in several New Jersey cities, advertising the defendants' online gambling services. The government wasted no time in snooping out the sites and catching them in illegal activities.
Or so it would seem.
New Jersey, in this case, is seeking a civil remedy through the court system, and hopes there will be several outcomes. Among them, the state is hoping to prevent the three named sites from advertising their services or taking bets from residents of New Jersey. Further, the government is asking that the defendants repay users from New Jersey who have gambled and lost on their sites as well as provide a list of all their customers from New Jersey.
Many experts don't see the case getting anywhere.
Former New Jersey gaming regulator Frank Catania called the suits "a waste of time."
Gaming law professor I. Nelson Rose added, "This case has a dozen weaknesses."
What are the problems?
"First, they (the state) have to get jurisdiction. How are they going to get jurisdiction? Sure, they can go in and get a temporary restraining order and all that, but it's all a matter of publicity and not really
anything enforceable," Catania argued. " As long as the companies don't come to the U.S., the law's not going to reach them. The judge can say and do everything they ask for, but how are they going to enforce it?"
Rose, likewise, is puzzled by the government's tactics. For one, he feels that the language in New Jersey's state constitution is too broad. Rose asked, "Was this law intended to apply to activities that take place outside the state?"
That's the crux of the matter, for there's been no determination by the government that Internet gambling takes place on a player's computer (as opposed to the site's servers), even though the state contends that this is the case. The judge presiding over the suits will have to determine that answer.
One place that the judge can turn to for help is a document published last December by the OECD. The document clarifies and establishes for taxation purposes that e-commerce transactions take place on the business's servers. Given that the United States is an active member of the OECD, it would seem that its stance regarding where Internet transactions actually take place would have some bearing on this case.
Lest anyone think that the three sites are completely aboveboard, it must be pointed out that two minors, under the supervision of Gaming Enforcement and Consumer Affairs investigators, were able to easily place bets on the sites. Officials for the three sites could not be reached for comment on this matter.
On the other hand, at least two of the sites warn their customers that they should verify whether it is legal to gamble in their locale and warn that underage gamblers are not permitted.
This latest battle signifies that online gambling operators need to be aware now more than ever that their activities are being scrutinized closely.
Like many other states, New Jersey is aware that many crimes have been extended through the borderless Internet. As a result, the state has created an Internet task force that will be comprised of members of the divisions within the Department of Law and Public Safety. The task force will track emerging high-tech and Internet crimes and to develop methods to investigate and prosecute those crimes. That means there could be more cases against Internet gaming sites in the near future.