The legality of online gambling depends very much on where you live. Gambling laws are very different for residents of the United States, the United Kingdom, and Australia. In the United States, the confusion is further compounded by the overlapping of federal and state jurisdictions. As an example in Nevada, while if you are an adult you can legally wager in any of hundreds of licensed casinos, the state has passed a law that forbids online casinos from accepting wagers from Nevada residences. I think hypocrisy is rather evident.
I will cover some of the high points of the legality of gambling online in this section. A critical aspect for you as a player to remember is that in general, the anti-gambling laws for online play do not target you as a player and that I know of no cases of online players even being prosecuted for playing online.
Anti-gambling forces would have you believe otherwise and often use deliberate scare tactics to play on people ís fears of breaking the law. In November, 2003, Indianaís WNDU ran a story with the headline “Online Gambling Leads One Woman to Prison” If you saw a headline like that you may have thought “Wow, they threw her in prison for gambling online”. Frankly, that ís the false impression some in law enforcement, the strange bedfellows of antigambling religious groups and entrenched gambling interests, want to give the public.
The media often plays along in sensationalizing peopleís fears. Take another look at the story under the headline “Online Gambling Leads One Woman to Prison”. Did she run a foul of the law playing online? Nope. The story explains that she went to jail for embezzlement and she stole from her employer to and blew that playing online.
The truth is that current federal gambling law doesnít criminalize the act of playing online games for Americans. In fact, Americans place the majority of world’s online wagers, yet the government has never charged a single one of them with a crime for doing so.
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Traditionally, gambling regulation in the U.S. has been reserved for state governments. Despite state sovereignty, the Wire Act supersedes state law and has been adopted on a federal level. The Department of Justice (DOJ) maintains the belief that the Wire Act prohibits all forms of online gambling in all U.S. states.
The Wire Act was enacted in 1961 to prevent bookmakers from accepting sports bets over the telephone. Accusations of Wire Act violations are usually accompanied by other charges, including conspiracy, money laundering, and violations of the RICO Act, Travel Act, and Illegal Gambling Business Act.
Enforcement of the Wire Act is directed at the gambling operator, and there is no language making it illegal for a consumer to place a wager.
The wire act was written in 1961 and its language is limited to communication systems using wires; the types of betting it describes are fixed-odds propositions such as those offered on sporting and other events. It was impossible to have foreseen the issues surrounding remote casino and poker games when the act was written in 1961, and when taken literally, the language of the Wire Act does not adequately apply to casino gaming and poker over the Internet.
In a case involving online casino gamblers who tried to get their credit card debts ruled unenforceable because their online casino gambling had been illegal, the U.S. Court of Appeals for the Fifth Circuit (Louisiana) declared in 2002 that gambling losses were indeed enforceable because “the Wire Act does not prohibit non-sports Internet gambling.”
The DOJ disagrees with the Fifth Circuit Court of Appeals decision, and the Wire Act serves as the foundation for all of the DOJ’s arguments against the legality of Internet gambling for both sports wagering and non-sports wagering. DOJ officials have asserted this belief in advising the U.S. Virgin Islands and the states of Nevada and North Dakota against regulating online gaming and is threatening to prosecute media companies who advertised for online gambling companies with aiding and abetting an illegal activity in 2002.
The DOJ was successful in convicting Jay Cohen, president of the World Sports Exchange for Wire Act violations in 2000.
In the fall of 2006, the United States enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), which makes it illegal for financial institutions to facilitate payment transactions between offshore gambling operations and American customers.
The law says nothing about it being illegal for a person located in the U.S. to gamble on an Internet site, however. The Federal Reserve and Treasury are now in the midst of drafting the regulations under which this new law will be enforced. There is speculation that the regulations may exempt banks from the use of paper checks, electronic checks, and ACH deposits because of the vast burden monitoring these payment forms would impose on them. The UIGEA resulted in the withdrawal of publicly listed companies from the American online gambling market, but most of the private companies continue to serve it. These private companies are betting that the UIGEA will prove ineffective in blocking payments, and they continue to operate in jurisdictions outside the reach of the U.S. authorities.
Federal gambling law does not address games of skill, and skill gaming sites function legally in the United States.
Florida congressman Robert Wexler introduced the Skill Game Protection Act following the enactment of the UIGEA in an effort to exempt online poker from the ban. The Skill Game Protection Act has gathered support but has not been passed as of August 2007.
Internet gambling on horseracing is permitted by the Interstate Horse Racing Act in states that have chosen to regulate such wagering. Although the DOJ insists that the act is not consistent with the Wire Act, it has never filed charges against any of the many domestic remote horse-wagering operators. Internet horserace wagering has been specifically legalized in the states of California, Nevada, Oregon, and South Dakota.
The states of Illinois, Michigan, Indiana, Nevada, Oregon, South Dakota, Washington, and Louisiana have all passed legislation that specifically prohibits unauthorized forms of Internet gambling. All forms of gambling are illegal in Hawaii and Utah. Nevada legislators have passed a law permitting intrastate Internet wagering but have taken few steps to introduce a system. Such a system would require technology that can sufficiently verify a player’s age and location. The DOJ has also said such a system would violate federal law.
In April 2007, Rep. Barney Frank (D-MA) introduced the Internet Gambling Regulation and Enforcement Act of 2007, which would allow Americans to lawfully bet online. The Act establishes a framework to license companies to accept bets and wagers from individuals in the US, as permitted by individual states. The Financial Services Committee, chaired by Frank, held a hearing on June 2007 in which the issue was favorably received. The Congressional Subcommittee on Commerce, Trade, and Consumer Protection plan to schedule hearings on the bill when Congress resumes on September 2007.
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The UK Gambling Act 2005 modernizes regulation for both terrestrial and remote casinos, bingo, gaming machines, lotteries, and betting. Among other things, the act created the UK’s Gambling Commission, a new body with the authority to license and regulate all of the permitted forms of gambling.
The Gambling Commission was established in September of 2005 in the first of several phases of implementations ushered in by the act. The Gambling Commission assumed the responsibilities that had previously been performed by the Gaming Board of Great Britain, as well as others. The Gambling Commission is a fully independent body operating at arm’s length from the government that will receive funding primarily through income generated by license fees. Its self-stated core objectives are to limit crime, to ensure that gambling is conducted fairly and properly, and to protect children and vulnerable people. To that end, the commission will have the legal power to levy fines or revoke licenses and to investigate and prosecute illegal gambling. Other new powers granted to the Gambling Commission but previously unavailable to the Gaming Board are the ability to investigate and prosecute cheating and the ability to enforce gambling debts.
The Gambling Commission will regulate gambling in the UK by way of casino licenses, bingo licenses, general betting licenses, poll betting licenses, betting intermediary licenses and lottery licenses. All of these licenses may be issued for terrestrial or remote gambling or both. Remote licenses will remain in effect indefinitely unless declared otherwise by the Gambling Commission. Key individuals within applicant companies will also require personal licenses.
The Gambling Commission began accepting applications for all sorts of licenses on January 2, 2006, but the first wave of licenses will not be awarded until September 2007, at which point the Gambling Commission will have become fully operational. As of March 2007, the Remote Online Gaming Tax is set at 15%. The Gambling Act will also have significant implications on gambling advertising. Gaming and betting companies that do not hold a UK license will not be permitted to advertise their services in the UK.
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Australia’s online gambling policies are dictated by the Interactive Gambling Act (IGA) of 2001. The act prohibits an operator from offering online casino gaming and poker to people located in Australia. It is also illegal to advertise online casino and poker services in Australia. Online lotteries and the sale of lottery tickets over the Internet, as well as sports wagering and race wagering, are viewed as extensions of land-based offerings and are licensed and regulated by the individual states and territories of Australia. Wagering on keno-style games, scratch tickets, or instant lotteries is not permitted. Most Australian states and territories have licensing regimes for sports wagering and lotteries, but many of them permit only the state-authorized totalizator to offer sports betting. Tasmania licenses peer-to-peer betting exchanges.
The Northern Territory licenses online casinos, sportsbooks, and racebooks. Licenses are issued for five-year periods. Initial and ongoing audits are required. Racing bets are taxed at 1.55% when they are from Australia, and 0.5% otherwise. Sportsbook bets are taxed at 0.5% when they are from Australia or New Zealand, and 0.25% otherwise. Online gaming is taxed at 4%, and there is no licensing fee beyond this tax. Betting exchanges can legally operate in the Northern Territory.
Online racebooks are currently the only form of online gambling licensed in Western Australia. Land-based racebooks may be authorized to operate online for an additional onetime fee of AUS $265. If operating online only, there is an annual licensing fee of AUS $290 for operations earning under AUS $250,000, an AUS $580 fee for operations earning between AUS $250,000 and AUS $1,000,000, and an AUS $875 fee for operations earning over AUS $1,000,000. There is no renewal or relicensing process, as licenses are granted permanently provided the annual fee is paid.
Licensed bookmakers are permitted to offer to bet on Internet sites in New South Wales.
New Zealand’s Gambling Act 2003 authorizes New Zealand’s TAB and the New Zealand Lotteries Commission to operate over the Internet, but both companies are restricted to selling only products that are normally sold through their retail networks. The Lotteries Commission can sell only lottery products and the TAB can offer only wagering on sports, horses, and dogs. The companies are not permitted to offer casino gaming over the Internet, and new companies are not permitted to enter the online market. New Zealanders are not prohibited from wagering with offshore providers.
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