During the late 1990s, online gambling started to take off. A Frost & Sullivan report showed that in 1998, online gambling revenues had reached $830 million. At the time, there were approximately 200 gambling websites. These websites offered online casinos, sports betting and virtual poker to the general public. However, the legality of online gambling remained a question. It was not until 1999 that the Internet Gambling Prohibition Act was introduced into the US Senate.
The act would have prohibited online gambling from U.S. citizens, but several countries in the Caribbean and Canada had already legalized online gambling. The law was ultimately defeated. There are still several states that allow online gambling. However, the laws have been challenged on constitutional grounds. A federal criminal case is now underway against the founders of three of the largest online poker companies.
The federal criminal case involves allegations that the three companies violated 18 U.S.C. 1955, which prohibits money laundering. The company, Sporting News, has agreed to pay a fine of $4.2 million. It also agreed to launch a $3 million public service campaign to fight illegal gambling.
The Unlawful Internet Gambling Enforcement Act (UIGEA) defines unlawful internet gambling as receiving bets or wagers or placing bets or wagers on the Internet. Section 5362(10) defines unlawful internet gambling as “using at least part of the Internet to transmit or receive bets, wagers, or wagers on the outcome of a contest of chance, or on the occurrence of an event.” Section 1956 creates several crimes, including laundering with the intent to promote illicit activity and laundering to conceal. In addition, Section 1956 creates laundering to evade taxes.
Other federal statutes related to illegal online gambling include the Wire Act and the Gambling Act. In addition, the Federal Information Technology Rules may be used to block illegal activities. The Federal Communications Commission has jurisdiction over common carriers and has the power to ban the leasing or furnishing of facilities. There are also other federal agencies that may act to stop illegal gambling.
In April 2007, Representative Barney Frank introduced HR 2046, a bill that would modify the UIGEA. It would require internet gambling facilities to be licensed by the director of the Financial Crimes Enforcement Network. It would also require online gambling service providers to get a license to advertise. This bill was eventually defeated, but several similar bills have been introduced since 2007.
There have also been challenges based on the First Amendment’s guarantee of free speech. However, these attacks have had little success. Some of the arguments have focused on the Commerce Clause, which states that Congress has the power to regulate interstate commerce. However, it has been noted that the commercial nature of the gambling business may satisfy the Commerce Clause’s requirements.
In addition, the Commerce Clause has been the subject of a constitutional challenge. A case called United States v. K23 Group Financial Services has been brought against the company, which is accused of money laundering and violations of the UIGEA.