The Wire Act and Other Federal Laws Apply to Online Gambling
During the late 1990s, the Internet began to take off as a source for gambling. In fact, a Frost & Sullivan report showed that online gambling revenues exceeded $830 million in 1998. However, many state officials were concerned that the Internet could become a means for gambling activities that violated their states’ laws. In response, lawmakers began to draft legislation to protect the public from illegal gambling. The legislation eventually became known as the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, or HR 2046.
HR 2046 was introduced in the House in April 2007 by Rep. Barney Frank and in the Senate by Senator Bob Goodlatte. It would change the existing UIGEA by requiring that all internet gambling facilities be licensed by the director of the Financial Crimes Enforcement Network. It also would require that such facilities be monitored by federal law enforcement agencies.
The United States Department of Justice recently announced that it would enforce the Wire Act as it applies to online gambling. The Wire Act makes it unlawful to use the Internet to place bets on sports, contests, and other events. It also prohibits the acceptance of financial instruments used in illegal Internet bets. In addition, it prohibits abetting and aiding in the operation of an illegal gambling business.
In addition to the Wire Act, seven federal criminal statutes are implicated by illegal gambling on the Internet. These statutes include: the Racketeer Influenced and Corrupt Organizations Act (RICO), the Illegal Gambling Business Act (IGBA), the Federal Wire Act, the Unlawful Internet Gambling Enforcement Act (UIGEA), and the Federal Wire Act (FWA).
According to the United States Department of Justice, the Wire Act applies to all forms of Internet gambling. In addition, Section 1956 creates several unique crimes, including laundering for international purposes, concealing and promoting illicit activity, and laundering with intent to promote illicit activity. These crimes are specifically intended to target activities that evade taxes, disguise, and promote unlawful activity. Despite objections raised on First Amendment grounds, attacks based on the Commerce Clause have not been successful.
The United States has been challenged in court on constitutional grounds in connection with the enforcement of federal gambling laws. In 2007, the United States v. Scheinberg case was brought against the founders of three of the largest poker online companies, claiming violations of the UIGEA. It also alleged bank fraud. In addition, it charges the owners of Seals with Clubs, a US-based bitcoin poker website, with violating the UIGEA. The owner of Seals with Clubs was fined $25,000 and placed on two years’ probation.
In addition to these federal criminal statutes, the state of Washington prohibits the advertising of online gambling. It also prohibits the operation of websites that advertise gambling.
The United States Department of Justice announced that it will prosecute Internet poker operators for violations of the UIGEA. Several states have also sued Internet poker companies for violations of the UIGEA. The owners of these online poker companies have been charged with violating the UIGEA, money laundering, and other federal crimes.