INTERNET GAMBLING: Will Technological and Jurisdictional Concerns Prevent Government Prohibition of Online Gambling?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heather Brechbill

 

Spring Semester 2001

 

Santa Clara University School of Law

 

With the rapid growth of and the easy access to the Internet there has arisen a concern over gambling via the Internet.  Gambling which has heretofore been carefully regulated through licensing and in person inspections, could now exist free from all restrictions.  The government is on a mission to prohibit Internet gambling through reliance on pre-Internet federal legislation and creation of new anti-gambling legislation. While such legislation may arguably make certain Internet gambling sites illegal, the government will have an even greater challenge when it comes to enforcement, since various challenges concerning technology and jurisdiction arise in litigating this type of action.

 

A more feasible and realistic alternative to prohibition would be to control Internet gambling by licensing and regulation. My paper proposes creation of a Federal Internet Gambling Commission that would have the authority to license, regulate and sanction Internet gambling sites. By having a centralized Commission at the federal level accrediting Internet gambling sites and regulating those sites, the government will satisfy both practical and public policy concerns surrounding Internet gambling.

 

I.               The Business of Internet Gambling

 

A.    What is Internet Gambling

Within the last few years a new form of gambling has emerged: Internet gambling.  People can now easily place bets and wagers from their very own homes via the Internet. Internet Gambling sites fall into several different broad categories and subcategories based on their level of interactivity, the payment methods they employ, and the types of games that they offer.

 

Generally, sites that use remote server based software applications are the most interactive. These types of sites offer a real time playing experience over the Internet. Some sites require that a user download proprietary software applications on their own computer hard drives before Internet based play can begin.

 

B.    Payment methods

Generally, payment methods fit into two distinct subcategories. Some sites require each user to prepay with real money, either from a credit card or by electronic transfer mechanisms.  Other sites allow user to gamble with chips that they may or may not be redeemable for actually money. These types typically seek to derive their revenue from banner advertisements on their sites or periodic membership fees.

 

However, all sites require users to submit credit card information and create log-in names and passwords. In addition, in order to prevent players from canceling unprocessed credit card payments prior to their settlement date, many real money sites require that users wait several days between their initial submission of credit card information and the placing of their first bet.

 

However, in all cases a player will have to deposit money up front before he/she may gamble online for real. This deposit can be done by sending casinos money via Western Union, Moneygram, cashiers checks, money orders, wire transfers or credit cards. After receiving the player’s money, a personal account is set up. As the player gambles, the account is either debited or credited. Withdrawing a player’s money can be made by the player in the same manner that the money was deposited.

 

C.    Where are Internet Gambling sites located

Almost all gambling sites are located outside of the continental United States, primarily in places such as Antigua and Belize, where most forms of gambling are legal. One reason that small countries allow Internet gambling operators to set up in their country is because the business can help boost their economy via tax revenue and licensing fees.

 

D.   Who is Gambling online

It is hard to determine how many people actually participate in Internet gambling. The National Gambling Impact Study Commission estimated that 14.5 million gamblers waged $651,000,000 over the Internet in 1999[1]. This seems like a high number when compared with the number of gamblers who travel to Las Vegas each year, which is approximately 30,000,000[2]. In addition, the Interactive Gambling Council, a trade group representing web site operators and software vendors, estimates that ninety percent of all gamblers betting online are United States citizens. With the increase of Internet access and ease in United States, Internet gambling will likely only increase in the future.

 

 

E.    How safe are Internet casinos

Many jurisdictions where Internet gambling is legal require that the licensee post bonds of cash or insurance as part of the license requirements. A user’s personal security, including credit card details and other personal information, is also guaranteed under license agreements in most countries. Many sites use secure servers to conduct all of their transactions and all information about the user is held off line. In addition, many sites also take out insurance against fraud.

 

F.    How fair are Internet gambling sites

Online casinos are fairer than many people think. In fact, Internet casinos often give better gambling odds the traditional brick and mortar casinos because they do not have a high overhead to operate.

 

In some countries where Internet gambling is legal, gambling computer programs must be submitted to the local government for thorough checking of fairness toward the player, and the site must also be guaranteed by one of the big six international accounting firms.

 

Internet gambling sites use a specially designed program called the random number generator.  This program generates a sequence of numbers that corresponds to various card types, dice throws and such. A good random number generator is evenly distributed and not correlated, each number will be hit approximately the same number of times after a large number runs. If a random number generator is unpredictable, the user will not be able to predict the next number in a series no matter how many previously generated numbers the user has studied.

 

An Internet casino cannot benefit from a biased random number generator. If the random number generator is biased in any way, players may recognize it and use it to their advantage. Because of the wide availability, quickness and ease of the Internet, a player could discover the bias and spread this information via the Internet. This could eventually bankrupt the online site. Thus, it is in the Internet gambling site’s best interest to make the random number generator as unbiased as possible.

 

II.             Regulation

 

A.   The History of Gambling in the United States

Regulation of gambling in the United States has been marked with much government prohibition and promotion. Promotion of gambling activities has frequently been the result of local fiscal crisis. For example, as early as 1776, the Continental Congress authorized a national lottery to help fund the Revolutionary War.

 

However, by the twentieth century, in response to an increase in deceptive gambling practices, most states had outlawed any form of gambling.  In 1931, the state of Nevada legalized gambling and in so, provided the impetus of other states to reintroduce state lotteries and many other forms of gambling. Once states began to realize the enormous profits generated by legalized gambling, a variety of gambling casinos and new games began to develop. However, as in most other areas of trade and commerce, modern regulation of gambling in the United States is comprised of concurrent, and at times overlapping and unclear state and federal law.   

 

B.    State Law

Gambling legislation is largely a matter of state law, and as a result varies considerably from state to state. For example, the state of Utah allows its citizens absolutely no access to gambling with in the state[3]. In contrast, the state of Nevada is known for its wide acceptance of many different forms of gambling with in the state[4].

 

Internet gambling has also been regulated on a state to state basis. States have often tried to curb Internet gambling. Three states, Nevada, Louisiana and Illinois, have all passed laws against Internet gambling operations[5]. Nevada criminalized the making of an Internet bet and an operator who accepts a wager from a person within Nevada[6]. Louisiana made gambling by computer a misdemeanor punishable by a $500 fine and/or six-month prison sentence[7]. In addition, an operator/designer of Internet gambling is subject to a $20,000 fine and/or a five-year prison sentence[8]. An Illinois law criminalizes both the operation of an Internet gambling site and the wagerer who utilizes the Internet for gambling[9].

 

However, this type of prohibition legislation is not likely to be successful on a state level. State prohibition creates serious problems with forum shopping, may encourage litigation about permitting or excluding bettors from other states and may also violate the Commerce Clause of the United States Constitution.  This violation of the Commerce Clause may occur because by prohibiting Internet gambling the state is attempting to regulate activity which occurs outside its borders by regulating an entity, the Internet, that is international in scope, thus violating the Constitution.

 

In addition, Internet gambling provides a challenge to this state regulated system because many online gambling sites are located outside the United States, thus presenting a jurisdictional problem with enforcement. Recently, the federal government has stepped in and utilized past statutes and created new anti-gambling statutes in hopes of prohibiting Internet gambling. 

 

C.    Federal Law

Internet gambling’s phenomenal growth during the 1990s, and its potential for continued expansion, raise difficult issues about whether or how it should be regulated. The federal government has the authority under the Commerce Clause of the Constitution to regulate any gambling activity that affects the flow of interstate commerce[10]. 

 

Through the years, various federal statutes have been created by Congress to prohibit the transmission of gambling information in interstate or foreign commerce. Specifically, two Acts are consistently raised by opponents of Internet gambling: the Federal Interstate Wire Act (“Wire Act”) [11]; and the Interstate and Foreign Travel Act (“Travel Act”)[12]. Much litigation has surrounded these statutes when applied to Internet gambling since both were created before the Internet was invented. However, federal prosecution using these specific statutes have been successful in some cases, but the creation of new anti-gambling legislation and implementation of such pre-Internet anti-gambling legislation will likely not deter Internet gambling site operators from operating outside the United States or United States users from accessing these sites via the world wide web.

 

1.     The Wire Act

The Wire Act creates criminal penalties for the illegal transmission of wagering information.  More specifically, the Wire Act provides in part:

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate commerce of bets of wagers or information assisting in the placing of bets or wagers on any sporting event or contest, for the transmission of the wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets and wagers, shall be fined not more then $10,000 or imprisoned not more then two years, or both[13].

 

The Wire Act defines a communication facility as:

Any and all instrumentality’s, personnel, and services … used or useful in the transmission of writings. Signs, pictures, and sounds of all kinds by aid of wire, cable or other like connection between points of origin and reception of such transmission[14].

 

To find an Internet gambling site guilty of violating the Wire Act, the government needs to prove four elements. The government must establish: (1) the Intent site is in the business of betting; (2) the site must know that the bets are being transmitted through a wire communication facility; (3) the bets must be transmitted in interstate or foreign commerce; and (4) the site or players must be able to receive money or credit as a result of the bets[15].   

 

Opponents of Internet gambling argue that they can quite easily establish these four elements. First, Courts have defined “engaged in the business of betting” as any bookmaking operation that accepts bets[16].   The majority of Internet gambling sites will take bets from players on sporting events and/or casino games. Thus,  Internet sites seem to be engaged in the business of betting as defined by the Courts.

 

Second, gambling services are transmitted on the Internet, which uses telephone lines to transmit information. Opponents of Internet gambling argue this method of transmission violates the Wire Act because the Act prohibits gambling businesses from using the telephone for interstate gambling. Thus, Internet gambling sites arguably are knowingly using a wire communication facility to transmit bets and in violation of the Wire Act.

 

Third, it can be argued that Internet gambling sites transmitting bets are involved in interstate or foreign commerce when they operate across state lines or country borders. The Internet is a global system, which reaches past state lines and country borders. Therefore, when a player in the United States places a bet with an Internet gambling site in Greece, the bet is transmitted as a part of and is in foreign commerce.

 

Fourth, opponents of Internet gambling argue that Internet gambling sites and players generally receive information on the gambling available from the site and how to play and how to place bets.  It is important to note that not only does the Wire Act prohibit placing bets, it also prohibits the transmission of information assisting the placing of bets. Thus, even if an Internet gambling site does not actually take any money or credit from players it may still violate the Act[17].

 

Similarly, the Department of Justice has considered Internet communications to fall under the “wire communication” language of the Wire Act since Internet communications are transmitted over phone lines.  Further the Justice Department has successfully prosecuted several individuals engaged in an Internet sports gambling business under the Wire Act.

 

On February 28, 2000, a federal jury in the Southern District of New York convicted Jay Cohen of conspiracy to violate the Wire Act and seven counts of violating the Wire Act, in the first ever trial in the United States for running an Internet sports gambling site[18]. Several of the counts solely involved Internet based activity.  The evidence at Cohen’s trial demonstrated that Cohen, as president of the Antigua based World Sports Exchange, solicited United States customers to contact the World Sports Exchange by telephone or by the Internet, to open a sports betting account, to wire transfer money to fund the account, and then to bet on sporting events over the Internet[19].

 

Typically, full prosecution of Internet gambling cases is rare, since most defendants chose to plea bargain, are difficult to subject to the jurisdiction of United States Courts because they reside outside the United States, or when indited avoid trial by remaining fugitives outside United States borders.  In a case showing some of the difficulties, just two years before Cohen’s case was heard by a New York Court, 21 other owners, operators and managers of offshore sports books were charged in the Southern District of New York for their Internet activities.   Most of those indited chose to either plea bargain or remain fugitives. 

 

Recently, the Supreme Court reviewed the history of congressional antigambling legislation and challenges to it in United States v. Edge Broadcasting[20].  The statute at issue in this prohibited radio and television stations from broadcasting lottery advertising unless they were licensed in the state that runs the lottery being advertised[21].   While not directly addressing the issue of Internet gambling, the Edge Broadcasting case still sets the stage for and is good precedent for the conclusion that the Wire Act can be lawfully applied to Internet gambling prosecutions.

 

The Court began its analysis by emphasizing the breath of congressional authority under the Commerce Clause, using as an example the Louisiana Lottery’s, with which Congress seemed particularly concerned in the 1890s.[22]  The Court noted that when the Louisiana Lottery moved its operations to Latin America, Congress responded by outlawing the transportation of lottery tickets in interstate or foreign commerce. The Court concluded that this federal anti-lottery legislation should remain in effect by upholding the constitutionality of the Act against a claim that Congress had exceeded it’s power under the Commerce Clause of the Constitution.

 

More recent court challenges to federal gambling legislation have arisen in the context of criminal prosecutions under the Wire Act. These cases shed light on the applicability of the Wire Act to the arena of Internet gambling.

 

In Martin v. United States, the appellants were convicted for transmitting bets and betting information about football games by telephone from Houston to Las Vegas[23]. They challenged the constitutionality of the Wire Act on the theory that their conviction  based on transmitting wagers to Las Vegas, where such bets were legal, resulted in an unconstitutional application of the statute to defeat the policies of Nevada[24]. However, the Fifth circuit rejected this argument, noting that Congress’s power under the Commerce Clause to prohibit such communications was sufficiently broad to cover the interstate transmissions between states taking different approaches to gambling[25].  Thus, interstate transmission of wagers could be prohibited whether or not betting was allowed in the state where the bet was received.

Furthermore, in United States v. Blair the Court held that the Wire Act could be used to prosecute not only communication between different states, but also between the United States and offshore gambling from foreign jurisdictions where such gambling was legal[26]. The defendant, a United States citizen running a betting operation out of the Dominican Republic, was convicted of violating the Wire Act by accepting wagers on professional and college basketball games from residents of Oklahoma over the phone via a toll free number he had established. The Court held that it was sufficient for the government to have established the defendant’s knowing and willful establishment of a bookmaking operation in the Dominican Republic and the acceptance of bets over the telephone from United States locations was a violation of the Wire Act.  Thus, although not actual use of the Internet, this case is good precedent for the fact that the use of telephone wires as the transmission vehicle, as the Internet uses, even to foreign sites will make the Wire apply.

 

2.     The Travel Act

Another statute that has been associated with Internet litigation is the Interstate and Foreign Travel Act.[27] The primary purpose of the Travel Act was to prevent organized crime from traveling interstate for the purposes of furthering concerted illegal activity. The statute subjects to penalty persons using “any facility in interstate or foreign commerce…with the intent to…further any unlawful activity.”[28]  The statute defines unlawful activity as “any business enterprise involving gambling.”[29]

 

Although the use of a wire or wire communication facility is not expressly covered by the Travel Act, courts have consistently interpreted this statute to include a prohibition against the use of a wire or wire communication facility[30].

 

Although the purpose of the Travel Act was to prohibit illegal syndicated gambling, it is logical to argue that the scope of the Act may reach Internet gamblers who use interstate facilities, such as telephone lines, to access the Internet in furtherance of  activities which are illegal under the statute.  Since the Act applies to parties on both ends of an illegal transaction, in an action under the Travel Act both operators of online casinos and gamblers who use the site could be subject to liability.

 

In the past, courts have held that the scope of the unlawful activity includes the transportation of gambling activities via telephone lines. In United States v. Smith, the defendant claimed that the Travel Act only applied to transportation facilities and not to the use of telephone facilities[31]. However, the Court held that the term “facilities” as used in the Travel Act, means interstate facilities of every kind and is not limited to just the actual physical transportation of tangible material to interstate commerce[32]. Further, the Court noted that the Travel Act can be used to regulate interstate gambling because telephone voices are transported by wires across state lines to the same extent as materials are transported over state lines in moving vehicles[33]. Thus, opponents of Internet gambling argue that Internet gambling does violate the Travel Act.

 

Moreover, opponents of Internet gambling argue that past case law suggests a broad interpretation of both the Wire and Travel Acts is appropriate. The Court in United States v. Borgese held that the Wire Act and the Travel Act are clearly directed against unlawful activity involving the use of interstate commerce facilities[34]. Furthermore, in United States v. Smith, the court explained that the Travel Act should be read so as to effectuate the purpose of that statute especially when it can be, and has been, determined by the Act itself or its legislative history what it is that the Congress is trying to accomplish by the passage of the Act[35].

 

Similarly, in People v. World Interactive Gambling Corp., the Court held that both the Wire Act and the Travel Act applied to the Internet[36]. The Court stated that, like a prohibited call from a gambling facility, the Internet is accessed by using the telephone wire connect to a modem attached to the users computer[37]. The Court further added that hosting this casino and exchanging betting information with the user, an illegal communication, a violation of the Wire and Travel Acts has occurred[38]. Thus, federal statutes regulating traditional forms of gambling are applicable to gambling activities on the Internet. 

However, proponents of Internet gambling argue that the Internet was not created at the time Congress enacted the Wire and Travel Act, thus it is impossible to imply or infer what the intention of Congress was vis-ą-vis the Internet, which was not known when they created the specific legislation that is now being used to prosecute in the area of Internet gambling.

 

Even if the Travel Act is seen by courts to include Internet gambling, this legislation still does not solve the problem of curbing Internet gambling in the United States. Non-citizen Internet gambling site operators residing outside the United States can still reach United States citizens via the world wide web. Moreover, since most, if not all, Internet gambling operations run by non-United States residents, are located outside the United States, enforcement of these United States statutes, such as the Wire and Travel Acts, will still likely be a challenge for United States law enforcement. As further discussed in this paper, serious technological and jurisdictional issues may also arise when litigating this type of action.

 

3.     The Proposed Internet Gambling Prohibition Act and Similar Legislation

There is currently no federal law directed specifically at Internet gambling. However, in responding to the difficulties with which state law enforcement authorities have had in stopping Internet gambling and confusion in statutory construction, Senator Kyl introduced the Internet Gambling Prohibition Act (IGPA) in the Senate on March 19, 1997 in the 105th Congress[39]. A similar bill was also introduced in the House on September 3, 1997[40]. Both bills were designed to amend the Wire Act to clarify that Internet gambling is included as illegal communication actively, unless allowed by individual states[41]. Thus, wagers can only be accepted from the citizens of certain states.

 

There were two versions of the IGPA. Senator Kyl sponsored the Senate version, and Representative Goodlatte sponsored the House version. Both versions are substantially similar but differ in two main areas. First, the house version, unlike the Senate version, exempts fantasy football leagues from liability[42]. Second, the House version contains a provision absent from the Senate version that would impose liability on Internet Service Providers (“ISPs”) who publish gambling related advertisements[43]

 

Two primary policy reasons were provided for introducing the bills: (1) to prevent children from gambling; and (2) to make it more difficult for addicted gamblers to have access to gambling opportunities[44]. 

 

As Internet operators have previously argued, one of the Wire Act’s limitations is that it is limited to “sports wagering or bookmarking”. Both the Senate and the House bills addressed this limitation by adding a definition for the phrase “bet or wager” as the risking of anything of value, with the understanding that a person will receive something of value based on the outcome which is predominantly subject to pure chance[45]. The House bill goes one step further and prohibits a gambling facility from using the Internet to disseminate information that is necessary for the recipient to place a bet or wager using a communication device[46].

 

Under both of these bills, if a person in the business of betting or wagering engages in that business on the Internet, then he or she could be: (1) imprisoned for no more then four years; (2) fined no more then the amount received from the bets or wagers or $20,000; or (3) receive both punishments[47]. Similarly, a person who makes a wager or bet could be: (1) imprisoned for no more then six months; (2) fined no more then the amount wagered or $2,500; or receive both punishments[48].

 

After modifying the measure, the Senate passed the IGPA by a vote of 90-10 on July 23, 1998. In the House of Representatives, the bill containing virtually the same provisions passed the Judiciary Crime Committee. However, at the close of the 105th Congress, both the House and Senate measures awaited consideration by the full House Judiciary Committee, thus died[49].

 

In the first session of the 106th Congress, Senator Kyl introduced the Gambling Prohibition Act of 1999[50]. This version of Senator Kyl’s bill was substantially similar to the IGPA which he introduced in 1997, except that the bill had removed such language which would penalize individual bettors. The Senate passed this version of the IGPA upon unanimous consent on November 19, 1999[51]. Thus, the House Judiciary committee would consider both the Senate version as well as the house bill that the Subcommittee on Crime approved for full Committee action at the first session’s close. However, there was House opposition to the exception filled Senate version. Many legislators were concerned that an outright prohibition makes penalties against individual bettors a continued possibility and that the bill may infringe on Indian Reservation rights established by passed legislation[52]. At the conclusion of the second session of the 106th Congress neither bill was passed.

 

In addition, various other Internet gambling prohibition legislation was introduced in the 106th Congress. These proposed bills include, the Unlawful Internet Gambling Funding Prohibition Act[53] the Internet Gambling Funding Prohibition Act [54] and the Comprehensive Internet Gambling Prohibition Act of 2000.[55] While, each bill was ultimately not enacted in this particular session of Congress, it is clear that the government is becoming more concerned with the growing Internet gambling industry. Inevitably within the next few sessions of Congress, some form of Internet prohibition bill will be likely be enacted.

 

However, while this type legislation seems to have covered some of the loopholes of pre-Internet legislation, such as the Wire Act, it is still with out criticism. 

1.     Problems with IGPA and any similar proposed anti-gambling legislation

 

a.     Anonymity Technology

Many critics are skeptical of attempts by Congress to pass anti-gambling legislation. With the advanced technology of the Internet and other sophisticated computer technology, there are serious privacy and anonymity problems that may make it impractical, or impossible to determine whom exactly is placing the bet on a certain site.  This in turn would make prosecution extremely difficult and possibly unattainable. Internet users have the capability of concealing their identity or easily assuming the identity of a different person.  For example, an Internet user may have an alias on a server located in a state where Internet gambling is legal and thus not be traceable to a location where the activity is illegal.

 

Similarly, such modern technologies as encryption and anonymous electronic cash will inevitably make it difficult, if not impossible to track down and prosecute any persons violating these anti-Internet gambling statutes.

 

1.     Encryption

 Encryption is a technique by which one can hide certain data from another by changing words into numbers and then performing math on the numbers to create new numbers[56]. The key to encryption is that one needs to know the formula employed to make sense of the numbers[57].  It would be possible for casino operators can use encryption to hide their activity and protect the identity of their users for the authorities. The possible use of encryption raises significant problems in the enforcement of Internet anti-gambling legislation.

 

2.     Electronic Cash

Another significant barrier to the detection of Internet gambling is the use of new, undetectable, and undecipherable financial transactions.  Protection of electronic transactions is important because greater protection promotes electronic commerce. Electronic cash precludes identification because it also uses mathematical formulas[58]. Electronic cash allows each party and the amount transferred to be kept secret. Thus, casino operators and gamblers may use this technique to hide evidence from law enforcement that monies are being transferred between them.  Given the current issues around protection of Internet buyer credit card numbers and other credit information, it is quite likely that in the future these forms of anonymity will likely be even more advanced, thus clearly making it extremely difficult for the government to enforce Internet gambling legislation. 

 

b.     The First Amendment

Anti-gambling legislation aimed at prohibiting such acts, presents another challenge when analyzed in light of the freedoms protected under the First Amendment of the United States Constitution.  Past First Amendment challenges to the restrictions placed upon gambling have largely been unsuccessful.  State and federal governments have been free to regulate gambling in any manner they wished without the worry that their actions would be ruled unconstitutional violations of free speech by the Supreme Court but outright prohibitions have not received the same protections.   A recent Supreme Court decision does indicate that the Court might be willing to treat online gambling differently from traditional forms of gambling.

 

In Reno v. ACLU, the court rejected the government’s primary justification for the Communications Decency Act, that of the protection of minors[59].  Although the Court admitted that all indecent materials could not be kept away from minors with the current technology, they, never the less, struck down the law because of a refusal to reduce the adult population exposure to only that which is fit for children[60].  If the protection of minors was proffered as a justification for current or future Internet gambling restrictions, the Court could rule that this same rationale was also invalid in the context and that only what was fit for children was the lowest common denominator.

 

However, the arguments about unwanted or unintentional access by children in the area of pornography seem less relevant to Internet gambling.   It can be argued that because of the necessary use of a wire transfer or a credit card, Internet gambling has a built in method for insuring the limitation to access to adults. Thus, the basis for any restrictions would have to be the preservation of state laws that outlaw gambling rather than because of the need to restrict minors from the gambling sites.

 

Another First amendment issue is that of vagueness. In Reno, that Court noted that the term “indecent” was problematic because its vagueness could lead to discriminatory enforcement of the law and have an obvious chilling effect upon free speech[61].  The Court seemed to be afraid that individuals would be unsure whether particular material was indecent and, to avoid a potential prison sentence, would choose not to post materials.

 

The same argument can be made regarding Internet gambling restrictions. Both the Wire Act and the IGPA penalize individuals for the transmission of information assisting in the placement of bets and wagers. The courts may interpret this language as an attempt to regulate the content of the Internet. For example, an Oregon resident, a state where gambling is legal, may fear prosecution for mentioning the odds of a game in an e-mail or chat room, fearing that a Utah resident, a state where gambling is illegal, may view the information. Thus, the Oregon resident may refrain from posting the information at all. This could lead to the chilling effect discussed in Reno.

 

c.     Jurisdiction

Jurisdictional concerns present the largest challenge to the IGPA and other similar anti-gambling legislation passed in the United States.  Because of accessibility, ease and the non-existent boundary lines of the world wide web, this type of legislation is unlikely to be successful. Operators of online gambling sites can easily move their sites outside the United States in order to avoid United States laws, and via the world wide web still communicate with United States citizens. This raises the important questions of whether the United States can obtain jurisdiction in such situations.

 

III.           Jurisdiction

 

A.   Jurisdiction over the Internet

The ability of United States courts to exercise jurisdiction over Internet gambling sites in different countries is a key issue with regard to enforcing any prohibition or regulation of Internet gambling. Internet gambling raises two important jurisdictional concerns: (1) what contacts are necessary to establish personal jurisdiction; and (2) is extraterritorial jurisdiction possible where the laws of different countries conflict?

 

1.     Personal Jurisdiction

The Internet defies traditional geographic boundaries. The United States’ power to exercise personal jurisdiction over Internet gambling sites poses challenging questions on the limits of jurisdiction. Applying International Shoe v. Washington to Internet gambling sites invites the question of whether these sites have enough contacts with the forum state in which the federal court is located.

 

Minimum contacts in a specific jurisdiction may be acquired when the defendant has purposefully availed himself of the benefits of the Forum State[62].  Such contact must not be accidental or attenuated, but a substantial connection where the corporation or individual manifestly has availed himself of the privilege of conducting business there[63].

 

In addition, traditional notions of fair play and substantial justice require that the exercise of jurisdiction be reasonable[64].  This inquiry is phrased in terms of the foreseeability of being brought into the jurisdiction: is the defendant’s conduct and connection with the Forum State such that he should reasonably anticipate being haled into court there[65].  In addition the alleged injury must proximately relate to these contacts[66].

 

While Internet jurisdiction cases have been notoriously inconsistent, cases dealing with Internet jurisdiction can still be divided into three categories.  First, there are cases in which defendants actively do business on the Internet[67].  In these cases courts have generally found personal jurisdiction because defendants entered into contacts with residents of a foreign jurisdiction that involved the knowing and repeated transmission of computer files over the Internet[68].

 

The second category involves cases in which a user can exchange information with a host computer.  In this circumstance, the exercise of personal jurisdiction is generally determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the web site[69].  Courts generally require Internet site operators and users to actively transact business in the Forum State before finding jurisdiction proper[70].

 

The last category involves passive web sites. Passive sites are those that solely provide information or advertisements to Internet users[71].  These sites generally will not be found to possess the proper contacts and purposeful availment necessary to give the courts jurisdiction over them.

 

Presently most, if not all, gambling sites are located outside the United States. Thus, even if a person wanting to prosecute Internet gambling sites can prove that he or she has the sufficient contacts necessary to establish personal jurisdiction, a more important question to consider is if there is also extraterritorial jurisdiction where the laws of the two different countries may conflict.

 

2. Jurisdiction Internationally

Even if a United States citizen does obtain proper personal jurisdiction over a defendant located in a different country, there is still a practical concern of getting the defendant to appear physically in the courtroom. Thus, another aspect of extraterritorial jurisdiction that poses a challenge to persons wanting to prosecute foreign Internet gambling sites.

 

In some instances Congress has made it clear its intention to extend the reach of a particular act beyond United States borders[72].  However, in most cases this question is left up to the courts to decide.  Where congressional intent is not clear, the courts have traditionally employed a two part inquiry generally known as the “effects test” to determine whether a United States court has subject matter jurisdiction over extraterritorial conduct[73].

 

a.     Effects Test

In United States v. Aluminum Co. of America, the United States Second Circuit Court of Appeals addressed whether, in the absence of clear congressional intent concerning extraterritoriality, certain United States antitrust laws, namely the Sherman Act, could lawfully be applied to conduct abroad[74]. The Court held that the foreign entities not based in the United States could be liable under United States antitrust laws in circumstances in which, first, intentional foreign conduct affects United States commerce and second, that conduct results in a demonstrated actual or presumed effect in the United States[75].

 

After United States v. Aluminum Co. of America, several courts added an additional consideration to the effects test in an attempt to seek a balance between the interests of the United States and the interests of foreign nations. In Timberlane Lumber Co. v. Bank of America, the Court adopted what it called a “jurisdictional rule of reason”, in an attempt to define an attempt to define extraterritorial jurisdiction[76]. The Court held that when, through use of a balancing test, it is determined that the United States interests fail to outweigh the incentive for maintaining harmonious foreign relations, United States law will not be applied extraterritorially[77].

 

Finally, a true conflicts test was developed by the Supreme Court in Hartford Fire Insurance v. California[78]. The Court held that, absent a genuine contradiction between United States law and the law or policy of another nation, the assertion of extraterritorial subject matter jurisdiction by a United States court is valid[79]. The Court reasoned that the extraterritorial application of United States law is appropriate if there is a demonstrated effect within the United States resulting from the defendant foreign entity’s conduct. In undertaking that conduct, the foreign entity intended to affect the United States commerce, imports, or exports[80]. This jurisdictional connection is the effect of the intentional foreign conduct upon the United States[81]. However, it is unlikely that Internet gambling would meet such a test as these set out by the courts.

 

b.     Extraterritorial Jurisdiction and the IGPA

The House version of the IGPA states Congress’ belief that the federal government should have extraterritorial jurisdiction to ensure compliance with the Act. Congress does have the power to pass laws that apply extraterritorially. However, the power of the United States to enforce its laws outside the country is not unlimited.

 

There are generally four bases for the United States to obtain extraterritorial jurisdiction over defendants who have no physical presence with in our country. First, national jurisdiction exists when the defendant is a citizen of the country that seeks jurisdiction. Second, passive personal jurisdiction may exist if the effect of any activity that occurs outside of the country injures a person with in the country. Third, protective jurisdiction can be exercised when a national interest has been injured. Fourth, universal jurisdiction exists when a perpetrator has been physically restrained and the illegal actions are considered particularly heinous and harmful to humanity.

 

Protective and universal jurisdiction would likely not apply in Internet gambling cases where the defendant is outside the United States since gambling has become widely accepted in the United States. In addition, there is no evidence that Internet gambling poses any more threat to the country’s national interest then legalized gambling in states such as Nevada and Louisiana. Similarly, a national interest being harmed or gambling being harmful to humanity will likely be unpersuasive.  Furthermore, passive personal jurisdiction also should not extend jurisdiction since the victims of Internet gambling arguable voluntarily bring any injuries on themselves.  Thus, only national jurisdiction would apply to Internet gambling where the defendant is located outside the United States. 

 

However, national jurisdiction basis does not exist in obtaining jurisdiction over non-citizen, gambling operators. Thus, for the United States to obtain jurisdiction over foreign citizens is to request that the foreign country surrender those who are violating United States laws by offering gambling to United States citizens. However, a request such as this usually requires that the countries have an extradition treaty[82]. Presently, no such treaty that would require a foreign criminal be extradited for the crime of gambling exists.

 

However, the Senate version of the IGPA requires that in such situations, the Secretary of State negotiate with foreign countries and create international agreements that enable the United States to enforce the IGPA against those who are engaging in the illegal activity outside the country. In theory, this proposal appears to be a remedy to extraterritorial jurisdiction problems that may arise regarding enforcing illegal Internet gambling restrictions.

 

However, this proposal is likely to be unsuccessful. It is unlikely that all countries in the world would agree to a ban on Internet gambling or allow the United States to enforce its laws worldwide against non-citizens. Many countries, including Greece, Turkey, Antigua and Monte Carlo, have already legalized online gambling[83]. In addition, Australia has taken the lead in the online gambling market by becoming the first industrialized democracy to develop extensive regulations by enacting the Interactive Gambling Player Protection Act on March 18, 1998[84]. Thus, it is unlikely that such countries in where Internet gambling is legal would freely allow the United States to prosecute their own foreign citizens.

 

c.     Comity

Even if the United States does not have a treaty with a foreign country in which the person who is breaking United States law is located, the person could still be extradited through the doctrine of international comity. Comity is defined as the recognition which one nation allows with in its territory to the legislative, executive or judicial acts of another nation, having due regard both to international and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws[85]. 

 

Therefore, a foreign nation may voluntarily surrender a fugitive to the United States. This general acceptance of comity is balanced against a nation’s right to sovereignty, which requires that each country respect the independence of another country and not be a judge of the acts which take place with in the other country’s borders. However, since the executive branch of the United States has primary responsibility over foreign affairs, courts are reluctant to force a person in another country to comply with domestic laws[86].

 

This reluctance by the courts presents a problem for domestic law enforcement because countries that have legalized Internet gambling will likely not allow a licensed business in those countries to be prosecuted by the United States. Thus, if the United States attempted to prosecute foreign nationals under domestic law, even if allowed because of extraterritorial provisions in the IGPA, doing so could place serious threats to the freedoms that Americans enjoy. For Example, if the United States attempted to prosecute a French Internet casino operator who used an online service to conduct a gambling business which was transmitted to United States citizens, then presumably France would have the same right to prosecute an American citizen who posted an image on his or her web site which is deemed pornographic under French law, but not United States law.

 

Thus, enforcing the IGPA or other anti-Internet gambling legislation against foreign citizens would be virtually impossible. It is these practical problems with enforcement regarding extraterritorial jurisdiction that encourage the regulation of the Internet gambling industry in the United States.

 

IV . Why Prohibition?

 

Opponents of Internet gambling argue that there are serious public policy concerns which inevitably arise with the legalization or regulation of Internet gambling.

 

A.   Compulsive Gambling

Gambling online provides unprecedented access to gambling. Opponents of Internet gambling argue that addiction is a real possibility for many Internet gamblers because once you increase the availability of gambling activities, you increase the amount of people who become addicted to it. Similarly, it can be argued that addiction may also increase due to the detached nature of the Internet. This detachment occurs because there is no tangible representation of money for the user to see how much he has lost or won. Thus detachment can arguably cause the user to gamble beyond their means.

 

Similarly, proponents of Internet gambling argue that a domestic ban on online gambling will not prevent United States residents from gambling online at sites run by foreign operators outside the United States. Moreover, it is argued that gamblers who are currently gambling on off shore sites, are just as likely to become problem gamblers as user would be if they were to use sites run in the United States. Thus, gambling addition will not increase if online gambling is legalized in the United States.

 

However, one solution to counter the problem of compulsive gambling is to implement a data tracking technology of Internet casinos which makes spotting and screening out compulsive gamblers easier then even at brick and mortar casinos. Each electronic transfer creates an electronic record which can be compiled to identify patterns of addictive and compulsive behavior. Brick and mortar casinos rely on dealers or pit boss’ memory. Thus, tracking compulsive gamblers may be easier in cyberspace then real space.

 

B.    Minors

Another issue that is a serious concern of Internet gambling opponents is the potential access of minors to Internet casinos.

 

1.     Age Verification Mechanisms

Most Internet casinos have their own method for screening out child users. Most rely on credit card information to screen out underage minors because credit cards are not distributed under the age of 18. However, more sophisticated sites use credit reporting databases to match the credit card number with the taxpayer identification number to verify the true identity of the user[87]. Some sites require the prospective gambler to fax or send copies of identification information, like birth certificates, drivers licenses, or other identification documents before allowing the user to play games[88].

 

Proponents of Internet gambling argue that because Internet gambling requires the use of a credit card or even a more complex wire transfer of money, minors, for the most part can be effectively blocked from Internet gambling. Thus, the only way for minors to gamble on the Internet would be to steal a credit card, most likely belonging to their parents. Moreover, such an action only involves a level of deception incomparable to a child innocently stumbling upon indecent materials on the Internet, but would also certainly be noticed by the parents long before that child became addicted. Thus, there seem to be adequate safe guards in place on Internet gambling sites to deter minors from playing on them.

 

Proponents argue that another idea that may deter minors from accessing Internet gambling sites is to implement regulations in the industry that require the gambling site operator to verify the age of their players. A 48-hour waiting period prior to actually playing on the site seems like the most feasible way to ensure that players are screened properly. This two day waiting period will allow operators to investigate information collected, such as credit card numbers, social security card information, etc. Thus, minors will be likely not to be able to gamble on these sites easily.

 

2.     Filtering Software

A new technology that can be used to deter minors from accessing Internet gambling sites is that of filtering software. Parental control, or as commonly referred to as “content filtering software”, through which parents monitor and control the web sites to which their children have access, is the most prominent type of filtering software commercially available. Similarly, this type of filtering may be used at the Internet server level. Since virtually all Internet users in the United States access the Internet through a service provider with a local point of presence, these local points of presence represent junctures along the cyber highway where filtering software can be implemented[89]. These Internet access providers can thus set up proxy servers and block any traffic based on Internet addresses, such as one for an Internet gambling site. Countries such as China, Singapore and Saudi Arabia already have employed filtering and blocking devices to control the Internet content to which their citizens have access[90].

 

C.    Fraud

Fraud is another aspect of Internet gambling that is dangerous enough to warrant some type of governmental regulation. Internet gambling, unlike heavily regulated state lotteries and brick and mortar casinos, currently exists without any significant regulation. This lack of regulation means that Internet gamblers do not know whether the games that they are playing are legitimate and cannot be assured a pay out if they do win online.

 

The solution to such consumer protection is to implement a licensing regulation framework to manage Internet gambling. Such a system of regulation would allow Internet users to feel more confident in the reliability of Internet casinos since the industry was held to strict licensing requirements by the government. Thus, creating confidence and legitimacy in Internet gambling. Legitimizing Internet gambling is the best way of addressing consumer protection concerns associated with Internet gambling.

 

V.  Why Regulation ?

 

Opponents of Internet gambling’s prohibition argue that Internet gambling is inevitable and thus, the attempts to enforce a total ban in the United States will be unsuccessful[91]. Many opponents point to the Alcohol Prohibition during the 1920s, which illustrates the negative consequences of pursuing the policy option of a total prohibition.

 

1. Internet Gambling is Already Prevalent

In addition, opponents argue that a ban on Internet gambling is impractical because it is already in place. Thus, this type of ban will lead to the loss of consumer and producer benefits, inefficient allocation of resources, including enforcement and crime and corruption[92].

 

Australia is one of the first countries in the world to implement a regulation policy for Internet gambling. Recently, Australia has decided to license gambling operations. Australia’s formula provides Internet gambling casinos to be licensed by state and territorial governments who intend strong government monitoring[93]. The government investigates the software of online casinos just as they do with land based casinos.

 

Similarly, they investigate the personnel and financial background of the casino operators and do periodic spot-checks, verifying that the casinos odds were what they claim to be and that the games were not being manipulated. It is now legal for people anywhere in the world to play online, provided that they are over eighteen years old and have the necessary equipment to allow the down loading of the required software. This illustrates a possible workable modal for the United States to follow in lieu of a strict prohibition.

 

2. Tax Revenue

Proponents of Internet gambling argue that a major benefit of legalization and regulation of Internet gambling is the potential to generate tax revenue. Historically, in the United States legalized gambling spread as state recognized gambling’s potential to generate much wanted tax revenues.  The government can, if it desires, change current law to allow Internet gambling. This continuing need for the government to find new revenue resources suggests that the government may change the law to allow the licensing of Internet gambling. However, the only way that the government can ensure that it can collect revenues from Internet betting and wagering is to license the Internet gambling site operators.

 

This framework would allow the government to collect revenues from Internet betting and wagering from Internet operators in the form of tax revenues. States derive significant tax revenues from legalized sources of gambling. Americans who gambling online may reduce the amount they wager on legalized forms of state regulated gambling such as legalized casinos and lotteries. Any legalized wagering will result in a corresponding decrease in tax revenues. In theory, by prohibiting Internet gambling, the government could insure that United States citizens continue patronize legal gaming establishments, thus sustaining tax revenues. Prohibition of Internet gambling will not produce this goal.

 

States already impose taxes on receipts from various legalized forms of gambling. In the state of Illinois, the government has implemented a tax of twenty percent on the adjusted gross receipts received from authorized riverboat gambling[94]. In addition, some states have enacted Internet related taxes. To lure high tech-companies, the state of New York has eliminated some state sales tax[95]. A proposed New York Statute would grant a state sales tax exemption to Internet access servers and companies advertising through such New York based Internet service providers[96].

 

3. Organized Crime

It is possible that migration to Internet gambling will diminish the importance of organized crime in the arena of gambling. One of the factors contributing to organized crime’s influence on the gambling industry is the need for investment capital[97].  Conventional lenders traditionally shunned casinos, forcing many of them to turn to tainted sources to finance their expansion[98]. Given the reduced capital required to build an Internet casino compared to a brink and mortar one, Internet casinos’ financing needs will diminish the incentive to approach organized crime. In addition, the virtual nature of Internet gambling eliminates a casino’s need for services that have traditionally served to approach points for organized crime with large conventional casino-hotel, such as maid service and security.

 

Thus, a regulation framework would help the government generate tax revenue, protect consumers, deter organized crime and ease enforcement of Internet gambling.

 

VI. A Solution: The Creation of a Commission on Internet Gambling

 

Even with successful prosecutions of Internet gambling under certain federal statutes, Internet gambling has still rapidly increased over the years. A complete ban on Internet gambling is not feasible from a technological and jurisdictional standpoint. The government must move away from a prohibition stance on Internet gambling and implement a regulatory framework. One type of regulation that presents feasible and realistic solutions to the problems and concerns of Internet gambling is the creation of a federally run government commission to oversee the Internet gambling industry.

 

A.   The Commission

Like all other federal agencies, the commissioners of this commission will be appointed by the President and confirmed by the Senate. The staff under the commissioners will be composed of mainly accountants, auditors, investigators, system engineers, experienced gamblers, statisticians, and computer theorists.

 

The purpose of the commission would be to regulate and police the Internet gambling industry.  The commission would also provide an avenue for Internet gambling users to submit problems, comments, and concerns regarding various online gambling sites.

 

Each online casino site would have to respect and follow the regulations set forth by the commission. Any online casino operations that do not comply with these regulations will risk losing their license and most likely would be subject to substantial fines and penalties. Before a license is granted to a proposed gambling site, the commission would investigate the financial background of the applying site as well as perform background checks on all principals engaged in operation and/or ownership of the site.  Each online casino would register for licensing with this commission by filing the appropriate licensing forms and paying a $100,000 annual licensing fee. This fee will pay for the costs of running the commission.

 

In addition, a specified percentage of the profits from each site will be paid to the commission to cover remaining commission expenses with the remainder to be deposited in the U.S. Treasury general fund.  Funds so deposited in the general fund would be available for distribution to federal departments such as the Department of Health and Human Services and the Department of Education.   The funds would be used for gambling education programs/public service announcements and for treatment of gambling addiction.

 

Each licensed site must display the commission’s logo, thus verifying that the site is licensed. Licensees must also post a bond of a certain amount, which will be used as a reserve to remedy the situation where wronged players did not receive a full pay out and the site was unable to make the required payment.

 

The commission would have the authority to audit a gambling site at anytime and without advance notice. Additionally, each licensee would be required to maintain an audit trail of the transactions made by each customer. Moreover, all licensees would have to design and operate their services to afford customers maximum privacy and confidentiality.

 

Each licensee would be responsible for monitoring their site for to prevent minors from accessing the site and gambling. Licensees would be required to post a clearly visible warning on their site that states that minors are not allowed on their site.  Additionally, each site must implement an age verification system. It will be the burden of the Internet site operator to verify the age of its players. Each licensee will provide a 24-hour waiting period from the time of registration, to the time of the user actually being able to play on the site. A 24-hour waiting period prior to actually playing on the site is a feasible way to ensure that players are properly screened. This waiting period will allow operators to investigate information collected, such as credit card numbers, social security card information. However, for payments by means of wire transfers, money orders, and other cash forms, the waiting period will be 24 hours or until the funds are received and verified by the site.

 

Each licensee will be required to post on their site addresses or links to compulsive gambling support groups. This information will be in a clearly visible place on the site.  

 

Licenses will be renewed annually.  At the time a renewal of a license the particular site is coming up, the site would be required to post on its site a notice that its license is up for renewal and where comments could be sent. Accompanying this notice will be a link to the commission’s web page and address of the commission, so a player may address any problems or concerns regarding the site directly to the commission. The commission will also follow up on any comments or concerns from players and may consider them in the licensing process.

 

 

B.    Benefits Generated from a Commission

 

1.     A Commission Instills Confidence

Internet gambling site users will feel more confident in a reliable system of accreditation. Moreover, licensing fees will deter fraudulent users from attempting to receive accreditation from the commission. Thus, consumer protection issues will be addressed.  

 

2.     Tax Revenue

Licensing fees will pay for the costs of running the commission. In addition, a portion of the profits from each site will be given to the commission. These profits will be given to the federal government to distribute to the Department of Health Education & Welfare. These funds will go towards funding gambling support groups and educating children on the dangers of compulsive gambling.

 

3.     Problem Jurisdiction Curbed

With a regulated online gambling industry, it is likely more Internet gambling sites will open up in the United States instead of going out of the country to operate. Thus, the great challenge of hailing a foreign off-shore gambling site operator into a United States courtroom will be significantly reduced with such regulation.

 

4.     Job Creation

A regulation commission will also create jobs. If more gambling site operators move their operations to the United States or start up operations here, jobs will be created. In the wake of a looming economic downturn, any type of job creation should be greatly embraced.

 

VII. Conclusion

 

Even if desirable, prohibition of Internet gambling is unlikely to be successful. Technologically and jurisdictional concerns make it virtually impossible to enforce such a sweeping prohibition. It appears that technology is moving faster then the law in this area. Therefore, solutions that are practical and realistic must be sought and implemented.   Such a solution to this dilemma is to implement a carefully crafted regulatory framework. To deal with today’s issues there is clearly a need for some type of regulation to be implemented regarding Internet gambling. Without such a framework there is concern of fraud, as well as other criminal activities.

 

Some form of gambling is legal in 48 out of 50 states. Inevitably gambling is here to stay. Thus, the government needs to address the Internet gambling industry through a regulation scheme. Regulation headed by a federal commission would protect all United States consumers, while generating revenue that would filter back to United States citizens. Given the reality of the situation coupled with the multiple benefits that would be reaped from a regulated Internet gambling industry, it would seem the government’s move toward prohibition of Internet gambling will not be successful.



[1] Reported by Robert A. Rankin in Mercury News Washington Bureau in “Online Gambling Escapes Legal Net” May 2, 1999 at http://mercurycenter.com.

[2] Mike Johnson, Parlez-Vous Francais, Law Vegas Review Journal, August 29, 1999.

[3] See Utah Code Ann. §76-10-1102 (1953).

[4] See NEV. REV. STAT.ANN. §463.0129 (Michie 1997).

[5] See 1999 Ill.Laws 257; La.Rev.Stat.Ann §14:90.3 (West 1998); Nev.Rev.Stat.Ann §465.091 (Michie 1997).

[6] NEV. REV. STAT.ANN. §463.0129 (Michie 1997).

[7] La.Rev.Stat.Ann §14:90.3 (West 1998).

[8] Id.

[9] 1999 Ill.Laws 257.

[10] U.S. Const., art. I, §8 cl. 3.

[11] 18 U.S.C. §1084 (1998).

[12] 18 U.S.C. §1952 (1998).

[13] 18 U.S.C. §1084(a)(1998).

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] United States v. Cohen, No. 98 CR 434 (S.D.N.Y. 1998).

[19] Id.

[20] 509 U.S. 418 (1993).

[21] Id.

[22] Id.

[23] 389 F.2d 895 (5th Cir.1968).

[24] Id.

[25] Id.

[26] 54 F.3d 639 (10th Cir. 1995).

[27] 18 U.S.C. §1952 (1998)

[28] Id.

[29] Id.

[30] See United States v. Villano, 529 F.2d 1046, 1052 (10th Cir. 1976); United Sates v. Burke, 495 F.2d 1226, 1228 (5th Cir. 1974; United States v. Hanon, 428 F.2d 101, 108 (8th Cir.1970).

[31] 209 F.Supp. 907 (E.D. Ill. 1962).

[32] Id at 916.

[33] Id.

[34] 235 F.Supp. 286 (S.D.N.Y. 1964).

[35] 209 F.Supp. 907 (E.D. Ill. 1962).

[36] 1999 WL 591995 (N.Y. Sup. Ct. July 22, 1999).

[37] Id.

[38] Id.

[39] S. 474, 105th Cong., 143 CONG. REC., S2560 (1997).

[40] H.R. 2380, 105th Cong., 143 CONG. REC. E1633-02 (1997).

[41] See S. 474, 105th Cong., 143 CONG. REC., S2560 (1997)(remarks of Senator Kyl).

[42] See House IGPA §1085(a)(1)(D)(v).

[43] See House IGPA §1085(d)(4)(B).

[44] See S. 474, 105th Cong., 143 CONG. REC., S2560 (1997)(remarks of Senator Kyl).

[45] See IGPA (Senate) §2(2); IGPA (House) §2(3).

[46] IGPA (House) §2(3).

[47] See IGPA (Senate)§3(a).

[48] See Id.

[49] See 145 Cong. Rec. S14,863, S14,866 (daily ed. Nov. 19, 1999)

[50] S. 692, 106th Cong. (1999)

[51] See 145 Cong. Rec. S14,863, S14,870 (daily ed. Nov. 19, 1999.

[52] See Robert MacMillan, Judiciary Subcommittee OK’s Gambling Ban Bill, Newsbytes, Nov. 3, 1999, 1999 WL 20021880.

[53] H.R.4419.RH, 106th Cong. 1999.

[54] H.R.4419.IH, 106th Cong. 1999.

[55] H.R.5020.IH 106th Cong. 2000.

[56] D.C. Toedt, Encryption: An Inexpensive Alternative to Escrow?,. The Computer Law., Nov. (1994).

[57] Id.

[58] David K. Gifford et al., Payment Switches for Open Networks, First USENIX Workshop on Electronic Commerce 69 (1995).

[59] 117 S.Ct. 2329 (1997).

[60] Id.

[61] Id.

[62] See Burger King Corp. v. Rudzewics, 471 U.S. 186 (1977).

[63] Id.

[64] International Shoe v. Washington, 326 U.S. 310, 320 (1945).

[65] See World-Wide  Volkswagen Corp. v. Woodson, 444 U.S. 286 (1989).

[66] Id.

[67] See Weber v. Jolly Hotels, 977 F.Supp 327, 333 (D.N.J. 1997).

[68] Id.

[69] See Hasbro, Inc., v. Clue Computing, Inc., 994 F.Supp. 34 (D.Mass.1997).

[70] Id.

[71] See Weber, 977 F.Supp. at 333.

[72] See Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104-132, 110 Stat. 1214, 1292-93.

[73] See United States v. Aluminum Co. of America, (ALCOA) 148 F.2d 416 (2d Cir. 1945),

[74] Id.

[75] Id.

[76] 549 F.2d 597 (9th Cir. 1976).

[77] Id.

[78] 509 U.S. 764 (1993).

[79] Id.

[80] Id.

[81] Id.

[82] See John T Soma et al., Transactional Extradition for Computer Crimes: Are New Treaties and Laws Needed, 34 Harv.J.On Legis. 317 (1997).

[83] Richard Raysman & Peter Brown, Cyber Casinos: Gambling Meet The Internet, N.Y.L.J., Aug. 12

[84] See Interactive Gambling (Player Protection) Act on March 18, 1998(Queensl.).

[85] Hilton v. Guyot, 159 U.S. 113 (1895).

[86] See First Nat’l City Bank v. Bance Nacional de Cuba, 406 U.S. 759 (1972).

[87] See Mark Tratos, Gaming on the Internet, Stanford J.L., Bus & Fin,. Summer 1997 Volume 3.

[88] Id.

[89] See Jack Goldsmith, What Internet Gambling Legislation Teaches About Internet Regulation, 32 Int’l Law 1115, (1998).

[90] Id.

[91] Mark G. Tratos, Gaming on the Internet II, The Sequel: Will Greed Crete or Kill the Expansion of Virtual Casinos, 610 PLI/pat 2000).

[92] Id at 694.

[93] Id.

[94] See 230 Ill. Comp. Stat 10/13(a) (West 1996).

[95] Dietra Henderson, Internet Becomes a Target for Taxes, Seattle Times, Mar. 16, 1997, at E1.

[96] Id.

[97] I. Nelson Rose, The Legalization and Control of Casino Gambling,8 Fordham Law Journal 245.

[98] Id.