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Is Online Sports Betting Legal?


The addiction of online gambling
Peter Dazeley/ Photographer's Choice/Getty Images

Is Online Sports Betting Legal?

The legality of Internet gambling can appear to be a complex issue for residents of the United States and for good reason. It is. There are disagreements regarding what the law actually says and until those are cleared up, the picture is always going to be a bit cloudy. To better understand the legality question, it's best to look back at some history of anti-gambling legislation.

The Interstate Wire Act of 1961

For a number of years the United States argued against the legality of Internet gambling by citing the Interstate Wire Act, which was passed to prohibit sports gambling between states by using the telephone or other wire-containing devices. As the Internet had yet to be invented, a number of legal experts questioned if the law pertained to the Internet or not.

The other question that arose from the Wire Act was if it pertained to all forms of gambling or just wagering on sporting events. In 2002, the 5th U.S. Circuit Court of Appeals upheld a ruling in Louisiana that dismissed a lawsuit brought by two Internet gamblers against credit card companies after running up debts by placing bets on casino games. In the dismissal, the court ruled the Wire Act was only pertinent to sporting events.

The United States Justice Department saw things differently, however, and claimed the Wire Act related to all forms of Internet gambling. The U.S. District Court for the Middle District of Louisiana agreed. In dismissing a 2004 case against the Justice Department brought by the operators of Casino City, a website that serves as a portal to gambling sites, the court stated, "The government's interest is specifically directed towards the advertising of illegal activity, namely Internet gambling..." The 5th Circuit U.S. Court of Appeals upheld the dismissal.

The Department of Justice reversed itself in 2011 and issued a ruling that said "interstate transmissions of wire communications that do not relate to a "sporting event or contest fall outside of the reach of the Wire Act."

The Unlawful Internet Gambling Enforcement Act of 2006

Just before taking recess in 2006, Congress passed the SAFE Port Act, which was written to increase security of U.S. ports, but attached to the SAFE Port Act was the Unlawful Internet Gambling Enforcement Act, which prohibits Americans from using credit cards, electronic funds transfers, or checks to finance Internet gambling activity.

It's important to note, the act deals only with how Internet gambling accounts are funded, not the actual betting. After passage of the Unlawful Internet Gambling Enforcement Act, Lawrence Walters, an Internet gambling law attorney, appeared on PBS' NewsHour show and stated, "The bill has no impact on the individual player's activity. The bill is centered on restricting certain financial transactions, requiring that banks identify and block transactions going through their servers and their systems, and requiring that the actual sites, the Internet gambling sites, stop and block these transactions."

Keith Whyte, the executive director of the National Council of Problem Gambling, appeared on the same show as Walters and agreed with his statement, saying "The bill is interesting, in that it doesn't make gambling on the Internet illegal. It makes funding your wager on the Internet illegal. The financial transaction is what is criminalized here, not necessarily the state of play."

More Legislative Action

In 2007, Rep. Barney Frank introduced the Internet Gambling Regulation and Enforcement Act, seeking to legalize Internet gambling, and Rep. James McDermott introduced the Internet Gambling Regulation and Tax Enforcement Act, which some called a companion bill to the one introduced by Rep. Frank. Rep. McDermott's bill deals with how to regulate online betting sites and how to collect a tax on all wagers made.

In November, 2007, McDermott announced that an independent account firm had estimated the United States could take in $3.1 billion to $15.2 billion in revenue by regulating Internet gambling in the first five years, and between $8.7 billion and $42.8 billion in the first 10 years. McDermott gave those figures in submitted testimony to the House Committee on the Judiciary.

The World Trade Organization

In 2003, the country of Antigua and Barbuda filed a complaint with the World Trade Organization against the United States on the basis that the government's ban on Internet gambling violated their rights as W.T.O. members and the organization ruled in favor of Antigua and Barbuda. The United States appealed the ruling and the World Trade Organization has upheld the original ruling on more than one occasion, most recently on March 30, 2007.

On June 19, 2007, the country filed a claim against the United States with the WTO seeking $3.4 billion USD in trade sanctions, as well as a request for authorization to ignore U.S. patent and copyright laws.

On December 21, 2007, the WTO awarded Antigua and Barbuda $21 million in trade sanctions, which will allow the country of 80,000 the right to penalize U. S. trademark and copyright laws.

The United States admitted that its stand on Internet gambling was in violation of the WTO, but claimed Antigua should receive less than $1 million.

Further complicating things, at least as far as the WTO was concerned, was that the U.S. allows Internet betting on horse racing within the country, and Antigua's trade sanctions will be allowed to continue until the U.S. allows Americans to bet with foreign gaming operators, or eliminates off-track wagering on the Internet.

The U.S. has also made some minor trade concessions to some countries, as well as the European Union, to exclude gambling services from a previously signed agreement in 1994 by revising the original agreement.

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