The Federal Government Takes Notice of Online Gambling
The U.S. government is taking notice of online gambling and the money flowing through it. In a recent case, marshals seized $3.2 million from Discovery Communications, which accepted ads for a Costa Rican casino operation. The company was warned by federal prosecutors that it may face prosecution if it continues to accept ads from companies that operate illegal online gambling.
Legalizing and regulating online gambling
Many argue that legalizing and regulating online gambling would boost economic activity and increase tax revenues. Some have even said that legalizing and regulating online gambling would allow consumers to choose how much money they wish to spend. However, these claims do not stand up to the facts. In fact, one recent study suggests that online gambling has harmful effects on consumers.
In the U.S., a national ban on online gambling would push online gamblers back into the black market. It would also be ineffective, not to mention unconstitutional. Congress has no authority to regulate Internet gambling, and regulation of such a business falls under the jurisdiction of the states.
While some countries are reluctant to legalize online gambling, the trend worldwide is moving in that direction. Five nations have made online gambling legal and have regulated it in one way or another. However, this trend is far from complete.
Constitutional objections to prosecuting illegal online gambling
The enforcement of federal laws prohibiting Internet gambling has been criticized on constitutional grounds. Specifically, constitutional objections have been raised regarding the Commerce Clause, the First Amendment’s guarantee of free speech, and the Due Process Clause. While the Commerce Clause objection is largely unsatisfying because gambling is a commercial activity, the First Amendment’s limited protection for crimes that facilitate speech has proven a more compelling argument. The Due Process Clause has also faced challenges when dealing with financial transactions occurring in the United States.
Federal criminal statutes also have a role in prosecuting illegal online gambling. While gambling is largely a state matter, federal law is sometimes a useful adjunct to state enforcement policies. For example, state officials have expressed concerns that the internet could be used to bring illegal gambling into their states.
Loopholes in federal law
The federal government has made it very difficult for online gambling to operate without violating state gambling laws. This is especially true for internet gambling platforms that use cryptocurrency instead of traditional money. In one recent case, a bitcoin poker site known as Seals with Clubs was found to be operating illegally on US soil. The site owner argued that the Bitcoin cryptocurrency was not recognized by the federal government as a form of currency and therefore, it was essentially social gambling, but he was convicted. He was given two years of probation and a fine of $25,000.
Although many Internet gambling operators claim they do not use geolocation technology, this practice is allowed in some states. For example, California law allows online sports betting on mobile devices and requires gaming operators to use geolocation technology to ensure that bets are placed in California. In addition, the state requires gaming operators to perform checks to ensure that children are not gambling.