Table of Contents
Abstract
Status of the Industry
Policy Implications of Virtual Casinos
State Governing Law
Federal Governing Law
Jurisdictional Issues
Non-Legal Obstacles to Internet Gambling
Conclusion
Footnotes
About the Author
Abstract
This paper explores the political and social implications of the emerging online gambling industry and the ability of the existing legal framework to halt the industry’s development. Making gambling more broadly available via the networks threatens heightened crime, an increased incidence of compulsive gambling, and cannibalized spending in other areas of the economy. Yet, U.S. state and federal laws are inadequate to deal with the onslaught of virtual gaming. States are unlikely to be able to prosecute out of state casino operators operating in cyberspace. Although they may be able to prosecute their own citizens for gambling on-line, enforcement will be difficult. Federal statutes may criminalize cyberspace casinos, but the U.S. government’s ability to prosecute foreign operators is questionable. As existing legal frameworks prove inadequate to deal with a global, intangible entity, new legal, technological, and political solutions will have to be crafted in order to protect Americans from the substantial externalities posed by on-line gambling.
Status of the Industry
The world’s first virtual online casino, Internet Casinos, Inc. (ICI) opened its doors on August 18, 1995 with 18 different casino games, online access to the National Indian Lottery, and plans to launch an Internet sports book [ 1 ] . A second gambling site is also currently operating, with an active sports book and plans to launch an online casino in the spring of 1996; Interactive Gaming & Communications Corp. (SBET) is a publicly traded company listed on the NASDAQ Bulletin Board that also accepts bettors’ sports wagers phoned in to Antigua on a toll free line via satellite [ 2 ] . The government of Liechtenstein is operating an online international lottery in six different languages, including Chinese, [ 3 ] and several other Internet companies have announced plans to launch their own online casinos in the coming months.[ 4 ] .In all, according to Rolling Good Times Online gambling magazine, there are 452 gambling-related sites on the net[ 5 ] .
Most of these companies are located offshore to thwart government prosecution; For example, ICI operates out of the Turks and Caicos Islands and WagerNet out of Belize. Bettors can either send cash through one of the companies offering secure payment systems for the Internet or open an offshore account, a requirement for Americans at ICI’s site [ 6 ] . Bets can be as low as a nickel for certain slot machines and go into the thousands of dollars.
The economics are excellent. Whereas it might cost $300 million to build a new resort casino which employs thousands, ICI’s virtual casino was developed for only $1.5 million and employs only 17 individuals [ 7 ] . Warren B. Eugene, ICI’s colorful founder, has said that his «house» cut averages about 24%, versus the typical U.S. casino house take, which ranges between 8% to 16% of each dollar wagered [ 8 ] . Interactive Gaming & Communications’ Sports International handled $48 million dollars in its first year of 800 telephone line operations and managed to make a profit of almost $250,0000.[ 9 ]
The financial allure is enormous. An estimated twenty million people are currently on line [ 10 ] with a projected 160 million online by the year 2020 [ 11 ] . ICI has received over 40,000 registrations for its service since its inception [ 12 ] and records over 7,000,000 visits per month at its site [ 13 ] . With over $500 billion spent on legal and illegal gambling in the U.S. alone in 1993, where over 90% of adults participate in some form of gambling, [ 14 ] the market for in-home gambling is estimated to be $49 billion worldwide by 1998. [ 15 ]
Policy Implications: Is this a development the law should try to arrest?
In evaluating the impact of online gambling, governments need to consider not only the loss of revenue to out-of-state organizations, but also the ancillary costs and benefits posed by cyberspace casinos. One way to evaluate the potential impact of online gaming is to examine the experience of communities in which gambling has recently been legalized for its direct and indirect effects. This should not be difficult to achieve, given recent national trends toward increased legalization of gambling. Largely driven by state government pursuit of new revenue sources and changes in Federal Indian policy, legalized gambling in some form now exists in 48 states [ 16 ] (only Utah and Hawaii are completely free of gambling). Casino gambling, specifically, is legal in more than 20 states [ 17 ] .
Yet, few objective studies of the industry exist [ 18 ] . Most of the studies have been sponsored by the industry and carry inflated claims of the industry’s value [ 19 ] . The House of Representatives overwhelmingly approved a bill on March 5, 1996 to create a commission to study the effects of gambling, including Internet gambling, and to recommend appropriate measures to Congress [ 20 ] . The Senate is currently considering a similar bill [ 21 ] . However, to date, no such comprehensive study exists [ 22 ] .
A number of the studies that do exist have concluded that the proliferation of legalized gambling has had a detrimental impact on society. Aside from the moral issues involved, these studies point to the human cost of compulsive gambling, the spread of crime, particularly organized crime, cannibalization of other consumer spending, and increases in illegal gambling as costs of legalizing betting [ 23 ] . As the industry moves online, many of these problems will be exacerbated due to the ease of accessing and the difficulties involved in regulating online betting.
Specifically, data has shown that after gambling is legalized, communities experience a 100-550% increase in the number of addicted gamblers [ 24 ] . More people simply become addicted as more people are exposed; according to psychiatrists, this is because a substantial part of the population has a latent susceptibility to compulsive gambling and different individuals get hooked by different gambling opportunities [ 25 ] . Making gambling widely available to everyone with a computer and modem, and making it available in people’s living rooms, will clearly draw out much of this latent addiction. Moreover, video gambling, because of its instant feedback mechanism, is known to addict gamblers faster than other forms of gambling; hence, sociologists and psychiatrists widely refer to it as the «crack-cocaine of gambling addiction.»[ 26 ]
According to John Warren Kindt, Professor of Law at the University of Illinois at Urbana-Champaign, an increase in the population of compulsive gamblers can be devastating [ 27 ] . Every compulsive gambler impacts between seven and seventeen other people [ 28 ] . Compulsive gamblers are a drain on society in a number of respects. The mean gambling debt of compulsive gamblers is $52,000 to $92,000[ 29 ] . A study by Gambler’s Anonymous found that 47% of compulsive gamblers had engaged in insurance related fraud or thefts where insurance companies had to pay the victims [ 30 ] . In fact, 40% of white collar crime is thought to be caused by those with serious gambling problems. [ 31 ] . Crime in general seems to go hand-in-hand with gambling. Within three years after gambling was introduced to Atlantic City, the city experienced a tripling of total crime, rocketing from 50th to 1st in crime rate per capita [ 32 ] . Similarly, the state attorney’s office in Deadwood, South Dakota indicated that within two years after legalizing casino gambling, child abuse cases increased approximately 42%, domestic violence increased 80%, and burglaries and the writing of bad checks increased; overall, the town experienced a 50% increase in felonies and an 80-100% increase in law enforcement and police costs. Health care costs may also be affected by an increase in compulsive gambling, since compulsive gamblers are likely to have alcohol problems [ 33 ] , and have a suicide rate 5-10 times higher than other Americans[ 34 ] . The costs to society of rehabilitating compulsive gamblers, if it so chose, would amount to $17,000 to $42,000 per person [ 35 ] . In all, the national price tag for compulsive gambling is currently estimated at $56 billion per year [ 36 ] .
Not only does online gambling threaten to increase the number of compulsive gamblers overall, it threatens to change the demographics of this group. Despite state efforts to control access to gaming through strict age or income restrictions [ 37 ] , gambling addiction in the U.S. today is growing fastest among high school and college youths. [ 38 ] In an online environment of anonymous identity, the ease with which teenagers and children can access Internet gambling, coupled with their proclivity for gambling addiction, will exacerbate this worrisome trend. Moreover, today’s Internet users, who are predominantly young affluent males, make up a demographic segment that is particularly at risk to gambling addiction.[ 39 ]
Pervasive online gambling will probably increase other forms of gambling, including illegal gaming activities. Data has shown that where gambling is legalized , the number of dollars spent by compulsive gamblers on total gambling activities doubles. Rather than diverting funds from other forms of gaming, it simply draws new players into the market [ 40 ] . Kindt explains that once a form of gambling is legalized, the «thrill» is generally lost, and the illegal gamblers must then move their dollars into harder forms of gambling, Potentially, the same might occur once basic casino games become ubiquitous online.
Making gambling available in people’s homes also threatens to cannibalize consumer spending. Kindt notes that it is extremely difficult for businesses to compete for consumer dollars with gambling enterprises that advertise a well-recognized addictive activity [ 41 ] . After it legalized gambling, Atlantic City experienced a 40% decline in the number of restaurants and a 33% decline in retail establishments [ 42 ] . Widespread gambling threatens consumer saving as well, which, economists argue, can hurt the national economy.
Finally, Internet gambling poses a challenge not only as a result of its universality, but also as a result of its «virtual» nature, particularly when coupled with an offshore location. Although computer mediated gambling may be more random and less vulnerable to cheating than traditional forms of gambling, it is important that the software be secure from alteration since it can easily be manipulated to cheat the consumer.[ 43 ] . Today’s free standing video gambling devices are regulated by restricting access to the devices, maintaining the accounting and collection of revenues, and regulating machine specifications [ 44 ] . Nevada, for example, instituted a certification requirement for video gambling device service persons and investigates each technician license applicant [ 45 ] . In Montana, the state places a security seal on the logic board. [ 46 ] . These states also police for ghost programs and Near Miss Programs though regulation and continuous, random device testing [ 47 ] . In some respects, policing centralized systems will be easier than policing thousands of dispersed terminals; however, located off shore, online casinos will be difficult to regulate effectively. Recognizing this, Warren Eugene has instituted a form of self-policing to reassure customers. He has offered to make his algorithms available for consumer inspection [ 48 ] and is negotiating with an accounting firm to certify the legitimacy of his games and his bankroll [ 49 ] . However, these self-imposed controls do not approach the security of government supervision.
Moreover, Internet security continues to be a problem. Hackers who gain access to the casinos’ systems can alter the algorithm to increase payouts in their favor, or potentially steal other customers’ credit card numbers. Some sites, like WWW Casinos’ World Gaming warn users to be wary of hackers and guard their passwords; «remember that your password is the one thing we at WWW Casinos depend on to make sure you are who you claim to be. If a hacker figures out your password, WWW Casinos will not be held responsible.» [ 50 ] . Most of ICI’s investment so far, has been spent on erecting fire walls in the casino’s computer system and developing protocols to maintain the security of consumers’ financial transactions.[ 51 ]
There may be some offsetting societal benefits peculiar to online betting. For instance, it is possible that migration to online gaming will diminish the importance of organized crime [ 52 ] . According to I. Nelson Rose in his article The Legalization and Control of Casino Gambling, one of the factors contributing to organized crime’s influence on the industry is the need for investment capital.[ 53 ] . Conventional lenders traditionally shunned casinos, forcing many of them to turn to tainted sources to finance their expansion [ 54 ] . Given the reduced capital required to build an online casino compared to the «bricks-and-mortar» of more traditional outfits, casinos’ financing needs will diminish the incentive to approach organized crime. Moreover, the virtual nature of online gambling eliminates casinos’ need for services which have traditionally served as leverage points for organized crime with large conventional casino-hotel, such as rubbish removal, laundry services and security.
Moreover, a great many people in the online services industry support the advent of virtual casinos as a potent driver of Internet market penetration. Michael Schrage, a writer, consultant and research associate at the Massachusetts Institute of Technology argued in a Washington Post column that states should move their lotteries online as a way to simultaneously raise revenues and promote the rapid deployment of interactive media technology :[ 55 ]
If we really care about policies that will promote universal service and make new technologies more accessible and affordable, shouldn’t states be encouraged to explore online gambling? With rigorous monitoring, it would provide one of the least expensive, most creative ways for a state to help define the networks of tomorrow.
The potential for gaming to drive penetration of the Internet has been likened to pornography’s role in popularizing home ownership of video cassette recorders. Data shows that gaming attracts those in lower incomes more than it does the wealthy, so gaming may be the application to drive online usage from the economic and academic elite to all levels of society [ 56 ] . Online gaming may be one of the few services, according to some experts, that can directly generate the billions of dollars in revenue that will be needed to finance the cost of developing the information super-highway infrastructure. [ 57 ]
Still, given the costs associated with gambling discussed above, it may be significantly cheaper for society to directly subsidize the information super-highway and the penetration of universal service than to risk the negative societal implications of increased gambling. Even Warren Eugene, the self-styled Bugsy Siegel of the Internet says that he is «somewhat ashamed» to be pioneering gambling on the Internet, «When I gotta go to my maker some day, and they’re going to ask me such a thing as, ‘What did you do down there?’ I’m not entirely comfortable with saying, ‘I’m the cyberspace casino operator.'»[ 58 ]
The real problem, however, is that even if might be desirable to halt the development of online gaming, it is unlikely that any government can do so. Gaming entrepreneurs appear divided on the legality of cyberspace casinos. At one extreme are the major casino resorts who fear the consequences of moving online, and at the other are companies like ICI and Interactive Gaming who are pioneering the movement.[ 59 ] . With billions of dollars invested in the U.S. based resorts, the major casino operators are clearly subject to Federal U.S. jurisdiction and face possible seizure of assets if they are convicted of violating Federal law [ 60 ] . Similarly, Virtual Vegas, a California based company, has announced that it will probably license its software to an overseas company which will not be subject to U.S. laws.[ 61 ]
On the other hand, Interactive Gaming says it has had a team of attorneys evaluate its legal position and remains confident of its immunity. Before launching its Internet site, Interactive Gaming’s Sports International subsidiary was accepting Americans’ sports wagers phoned in toll free line via satellite and had not yet been prosecuted. Its attorneys concluded that «Sports International [was] not violating any laws about betting over state lines. As an international company [based in Antigua], [it is] not subject to American law and [does not] use any agents the U.S. Everything is on an international basis.»[ 62 ] . This April, however, in an apparent show of confidence in its legal position, the parent company opened a U.S. headquarters in Blue Bell, Pennsylvania.
Funscape also invested a great deal in legal fees, its biggest budget item to date, and has presumably devised a means of offering gaming that is claimed to be perfectly legal. Applicable state and federal contest laws were carefully researched prior to setting up the site to comply with those regulations.[ 63 ]
Warren Eugene, as a Canadian citizen operating out of the Caribbean, claims he feels secure from U.S. prosecution. Yet his site warns Americans:
At this time you may not be legally able to gamble at this casino site. Call your local authorities and check to see if you can enjoy our casino. If not, call and complain to your senators, congressmen, and attorney generals! Democracy does exist in America. Do not let your first amendmant [sic] and constitutional rights be taken away from you! Act Now!
The notice is followed by a series of images evocative of American democratic ideals and further exhortations to change U.S. law. ICI will only accept bets from Americans if they set up an offshore account at which point, to Eugene and his lawyers, «they are no longer Americans.» [ 64 ]
WagerNet, an Internet sports betting service under development in Las Vegas is currently being prosecuted for its own promotional claims that its service is legal as law enforcement officials try to test that claim. WagerNet is holding firm. The action is currently pending in a Minnesota court; a decision on the question of personal jurisdiction is expected by the end of April. The outcome of the case is uncertain and a matter of considerable controversy.
The U.S. Department of Justice has officially stated that Internet gambling is illegal, but unofficially is not so sure [ 65 ] . The department has also stated that it considers Internet gambling a low priority. [ 66 ] .On the other hand, Congress is well on its way to establishing a commission to study gambling and is considering a bill that would render Internet gambling illegal for all Americans. State attorney generals have also taken a proactive role; several have published opinion letters on Internet gaming or begun to prosecute online fraud. Internet gambling is scheduled to be on the agenda at this summer’s meeting of the National Association of Attorneys General [ 67 ] and state legislators whose public policy responsibilities include gaming have formed The National Council of Legislators from Gaming States (NCLGS) to discuss Internet gaming and other issues. [ 68 ] .The various issues are highly complex and will probably not be resolved overnight.
State Governing Law
Most states forbid operating gambling operations or devices, excepting certain legalized operations such as lotteries, horse racing, or riverboat gaming, that vary state- by-state. For example, Tennessee law states that «a person commits an offense who knowingly engages in gambling,» [ 69 ] defined as «risking anything of value for a profit whose return is to any degree contingent on chance,» not including a lawful business transaction [ 70 ] . The phrase «for a profit» emphasizes that only gambling conducted as a business will be prosecuted in Tennessee [ 71 ] .
It is difficult to see how virtual gambling can be prosecuted under this type of provision. ICI’s casino is being operated in the Turks & Caicos islands, not in Tennessee. The actual transaction (i.e. the computerized taking of a bet), and the exchange of funds both occur in the Caribbean.
However, Tennessee law also prohibits the promotion of gambling (i.e. inducing or aiding another to gamble for a fee)[ 72 ] . Under this provision, the jurisdictional questions are more complex. On the one hand, it is arguable that a company that launches a web site accessible in Tennessee knowing that it will induce another to engage in gambling, is guilty of violating Tennessee law. This argument is analogous to Judge Gibbons’ reasoning holding Robert and Carleen Thomas guilty of sending obscene material to Memphis through a computer network. The Thomases operated their «Amateur Action» bulletin board service out of Milpitas, California and had 3,500 members from all around the country. Judge Gibbons reasoned that because the bulletin board could be accessed from Tennessee and Tennessee members could, and did, request that pornographic images be sent to their desktop computers, that the Thomases had violated Tennessee Code 39-17- 902. This argument is disturbing in that an entity on the Internet can be held to the standard of the jurisdiction with the most stringent laws worldwide. Regardless of whether one approves or disapproves of ICI’s operations, it seems unfair to hold an international operation criminally liable under Tennessee law because its web site happens to be accessible in Tennessee. It is arguable that unless ICI actively promotes its games to Tennessee residents, via a newspaper ad or even a hypertext link to a web site for Tennessee residents, the existence of its ad in cyberspace, accessible to any who seek it out, should not be enough to violate Tennessee law on the promotion of gambling.
Yet on July 18, 1995, the first state action was filed against an Internet gambling operator for its promotion of a gambling operation. Minnesota attorney general, Hubert H. Humphrey, III, filed an action against Granite Gate Resorts, Inc. of Nevada and its president, Kerry Rogers, operators of WagerNet alleging that WagerNet’s representation that its service was legal constituted a deceptive trade practice, false advertising, and consumer fraud under Minnesota law. An injunction, a declaratory judgment, and damages were sought.[ 73 ] A memo published by the attorney general’s office sets out the jurisdictional basis for prosecuting WagerNet and other entities like it. [ 74 ] .Minnesota’s general criminal jurisdiction statute, section 609.025, provides that a person may be convicted and sentenced if the person «being without the state, intentionally causes a result within the state prohibited by the criminal laws of this state.» [ 75 ] . This has been interpreted by the court to find that an Indian tribe who placed a political advertisement in a newspaper circulated in the state had to register under state ethical practices laws, because «what they did caused something to occur beyond the reservation boundaries, namely, the dissemination of a political message, which is the activity sought to be regulated.»[ 76 ] . The memo concludes from this that «individuals and organizations outside of Minnesota who disseminate information in Minnesota via the Internet and thereby cause a result to occur in Minnesota are subject to state criminal and civil laws.»[ 77 ] .
Humphrey’s conclusion is far from obvious, however. There is a clear distinction between the Red Lake Indians’ placement of an advertisement in the Bemidji Pioneer, a publication with circulation of 7,400 households in Minnesota, addressed specifically to «Minnesota Indian voters», and WagerNet’s Internet posting, with a global reach of an estimated 20 million users.[ 78 ] . The requisite intent under Minnesota Statute ¤ 609.025(3) seems tenuous.
Indeed Florida’s attorney general, Robert A. Butterworth, has declined to prosecute Internet gambling [ 79 ] , even though Florida’s criminal jurisdiction statute on its face presents a lower jurisdictional threshold, requiring only that the «conduct» or the «result» that is an element of the offense occurs in Florida, without a showing of intent.[ 80 ] . Butterworth concluded that regulation and policing of the Internet is better addressed at the national or even international level and declined to prosecute even in-state electronic bettors.[ 81 ]
Illinois, apparently, is staking the middle ground. Though the state is taking no action directly against Internet gambling, Illinois has filed nine separate suits alleging Internet fraud. In each case, however, the defendant mailed information directly to Illinois residents so that the state is not relying exclusively on the company’s web site to assert its jurisdiction.[ 82 ]
In-state electronic bettors appear to be much easier targets from a personal jurisdiction standpoint. Many states prohibit the making of bets as well as the taking of bets. California, for example, holds criminally liable any person who «lays, makes, offers or accepts any bet…punishable by imprisonment» for up to one year [ 83 ] . Massachusetts actually outlaws placing a bet by telephone specifically. Since most users make local calls to gain access to the Internet, the statute appears to embrace online gambling.
However, a jurisdictional question remains where the bookie is located out of state. It is arguable that a bet with ICI is being placed in the Caribbean, where the wager is actually being recorded and financially transacted. However, a more plausible statutory construction is that the act of placing the bet is initiated, and therefore conducted, in the U.S. The result in any case should be analogous to that which applies when a state resident places a bet via telephone with an out-of-state bookie [ 84 ] . If the state resident in that case would be found guilty for placing a bet by phone in another jurisdiction, he should also be found guilty if he does so via modem. Maryland attorney general Stephen Sachs issued an opinion on this issue in March, 1986, concluding that Maryland residents would violate the prohibition of Maryland Statute Article 27, @240 [ 85 ] if they placed a bet via telephone with a New Jersey racetrack.[ 86 ]
Therefore, under one likely statutory interpretation, online gamblers could be convicted of violating state law and imprisoned for up to two years [ 87 ] . As one attorney put it, for players in the same game, «one might be a criminal and the other just a winner.» [ 88 ] .WagerNet approaches this problem by warning users to «consult (their) local, county and state authorities regarding restrictions on off-shore sports betting via telephone before registering.»[ 89 ] . However, it volunteers no information on state law and offers no guidance on how to contact state authorities. More interestingly, ICI has decided to continue to accept play-money bets after its service is launched. Eugene’s aim is to confound U.S. wiretappers so that they cannot tell which players are actually gambling – and will lack probable cause for a warrant to search further.[ 90 ]
Importantly, to date, states have not stopped residents from using the telephone to gamble in foreign countries [ 91 ] . Australian and Canadian lotteries have been telemarketing to U.S. customers for over a decade [ 92 ] and bookmakers in Mexico take online bets for nearly any horse race run in the U.S. and world-wide.[ 93 ] . The client sets up an account in Mexico or passes along a credit card number, and starts to bet. The question, however, is whether the states could prosecute such activity if they so chose; and it is being brought to a head in the current controversy over the national Indian lottery. An Idaho Coeur d’Alene tribe plans to establish a national lottery, allowing residents of the thirty six states with legal state run lotteries to order tickets using their credit cards over an 800 number.[ 94 ] The tribe’s plan has been approved by the National Indian Gaming Commission and the State of Idaho and appear to meet the requirements of federal gaming law discussed below [ 95 ] . However, the National Association of Attorneys General has issued a statement opposing the plan and several states, who fear losing crucial state lottery revenue, plan to contest the lottery.[ 96 ]
In general, Indian tribes are considered dependent sovereigns of the United States with powers at least as great, and sometimes greater, than the states in which they live [ 97 ] . In Barona Group of Capital Grande Band of Mission Indians v. Duffy, the Ninth Circuit Court of Appeals held that since Indians are subject only to a state’s criminal, and not civil, jurisdiction; once a state legalized a particular gambling activity, the Indian tribes were not subject to the regulations governing that activity[ 98 ] . For example, when California legalized bingo subject to a $250 maximum jackpot, to protect churches from police raids on their basement bingo games, Indian tribes were able to set up games with $50,000 jackpots. [ 99 ]
Now, however, the Coeur d’Alene tribe is reaching beyond the borders of its’ reservation. A number of states contend that a national lottery will run afoul of state provisions disallowing betting by telephone or credit card [ 100 ] . The tribe, on the other hand, argues that the Federal Indian Gaming Regulatory Act preempts any law that might otherwise bar the lottery [ 101 ] . The states’ willingness and ability to prosecute citizens for wagering on the national lottery will set the stage for a new round of battles regarding online gambling.
A final issue under state law concerns the very definition of gambling. Gambling is traditionally said to consist of three elements» consideration, chance, and reward.[ 102 ] . A game that is considered a game of skill, rather than chance, will not be labeled gambling [ 103 ] . Since the definition of chance is often blurry [ 104 ] , the law creates a loophole for games of skill that feel like gambling. Tournaments, even slot machine tournaments, for example, have been excluded from the definition of games of chance by the FCC.[ 105 ] John Bates of Virtual Vegas has already announced that he is «looking very seriously into incorporating such games into Virtual Vegas.»[ 106 ]
Federal Governing Law
Federal law prohibits those in the business of betting or wagering from «knowingly us[ing] a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers, or information assisting in the placing of bets or wagers, on any sporting event or contest.» [ 107 ] .The penalty for doing so is a fine or imprisonment for up to two years [ 108 ] .and potential asset seizure under racketeering statutes.[ 109 ] . Additionally, the common carrier transmitting the signals can be ordered by the government to refuse further services to the operator [ 110 ] . In all likelihood, Sports International set up its 800-number via satellite rather than wire-line transmission to sidestep ¤1084 in operating its phone-in sports wagering operation.
Interstate transmission of bets or gambling information can qualify as legal only if both the state of origination and the state in which the bet is placed allow such wagering [ 111 ] . Therefore, an Antigua company’s taking of bets via telephone from a Massachusetts resident is a criminal act under ¤1084, despite the fact that it is legal to take bets in Antigua. Also, note that only the party «in the business of wagering or betting» (e.g. the virtual casino, not the user) can be convicted under 1084(a) [ 112 ] . WagerNet’s registration agreement therefore requires the user to warrant that he is using WagerNet «for [his] own personal use and [is] not ‘engaged in the business of betting or wagering'» in an effort to avoid violating U.S. Federal law. Senator Jon Kyl, R-Arizona, has introduced a measure that would render placing bets on the Internet illegal, punishable by up to $5,000 in fines or a year in jail or both [ 113 ] . In the meantime, however, only the virtual casino can be prosecuted not the bettor; hence the jurisdictional issues discussed in the next section are extremely important.
It can be argued that ¤1084’s use of the phrase «wire communication facility» was intended to refer only to telephone communication since ¤1084(d) the «common carrier» transmitting the signals could be ordered to desist. On the other hand, Congress, unlike the Massachusetts legislature for example, specifically chose to substitute a broader term than «telephone communication». Also, 18 U.S.C. ¤1081 defines «wire communication facility» very broadly as «any and all instrumentality, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) 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 the points of origin and reception of such transmission.»
A more difficult question is whether creating a home page on the worldwide web constitutes «transmission» under ¤1084. «Transmission» has been construed to mean only sending, not receiving [ 114 ] . Yet, in Sagansky v. U.S., the court held that when a person holds himself out as being willing to make a bet or wager over interstate telephone facilities and does in fact accept offer of bets or wagers over the telephone as part of his business, he has «used» the facility against the contention that the offense is committed by one who initially sends in the bet and not by one who receives it, that is, that «transmission» does not embrace the act of receiving [ 115 ] . Moreover, the Thomas case, which found that the Thomases had «sent» pornography into Tennessee would seem to suggest that creating a web-page accessible to far-away jurisdictions does constitute transmission. Yet technically, ICI is not «transmitting» but posting, and the court in U.S. v. Bergland emphasized that as a criminal statute, ¤1084(a) must be strictly construed [ 116 ] . Resolving the Thomas case will go a long way toward clarifying the legality of Internet gambling.
If ¤1084 is found not to govern Internet gaming, ¤1952 might [ 117 ] . Section 1952 imposes a fine or up to five years imprisonment for «travel[ing] in interstate or foreign commerce or us[ing] the mail or any facility in interstate or foreign commerce , (emphasis added) with intent to (1) distribute the proceeds of any unlawful activity; … or (3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity.[ 118 ]
Jurisdictional Issues
Even if the cyberspace casinos can be found to violate U.S. state or federal law, the U.S. government’s ability to prosecute a foreign organization operating entirely outside the U.S. is questionable. Under international law, a state is subject to limitations on its jurisdiction to prescribe (i.e. to make its law applicable); its jurisdiction to adjudicate, (i.e. to subject persons or things to the process of its courts, whether in civil or in criminal proceedings); and its jurisdiction to enforce (i.e. to compel compliance or to punish noncompliance with its laws).[ 119 ]
Section 1084 of the Code clearly falls under the state’s territorial jurisdiction to prescribe or, more specifically ¤402(1)(a) of the Restatement, since it governs conduct that occurs in the U.S., namely the transmission of signals over U.S. interstate wires [ 120 ] . Interpreting ¤1084 to include Internet gambling, however, would call this jurisdiction into question. The Internet is a global network. Allowing any country to regulate it because some portion of the network resides in its territory seems patently unreasonable under ¤403(1), given the minimal links to the U.S., the host country’s interest in regulating the casino, and differing international views of gambling [ 121 ] . Jurisdiction under ¤402(1)(c) over conduct outside the U.S. that has or is intended to have substantial effect within its territory, may be a more reasonable basis for jurisdiction, since public statements by the casino operators evidence an intent to target the U.S. market. However, under the reasoning of a German court upholding only so much of an order as would have a significant effect on the German market, any U.S. action to shutter the casinos would probably be found to overreach its jurisdictional bounds [ 122 ] . On the other hand, more limited legislation, perhaps requiring the virtual casinos to warn American consumers that their conduct might be illegal, should receive little opposition.
U.S. authority to adjudicate conduct by an offshore company with no presence in the U.S. could fall under its general jurisdiction under Restatement ¤421(2)(h) if taking bets from Americans using offshore accounts on an offshore system could be considered «regularly carrying on business in the state,»[ 123 ] recalling issues similar to those discussed above regarding state governing law. Authority to adjudicate might also be depend upon the state’s subject matter jurisdiction under Restatement ¤421(2)(i), if Internet gambling can be found to occur in the U.S., or under ¤421(2)(j), since accepting bets from U.S. citizens abroad can certainly be thought to have «substantial, direct, and foreseeable effect within the state.»[ 124 ]
In order to adjudicate a criminal statute, however, the defendant must be present at trial [ 125 ] . The U.S. will probably seek extradition; however, even if the defendant is located within a state with whom the U.S. has signed a treaty of extradition, the state may refuse to extradite the defendant if «the offense with which he is charged or of which he has been convicted is not punishable as a serious crime in … the requested state.»[ 126 ] . In other words, since transmitting gambling information is not a crime in the Turks and Caicos islands, extradition of the offenders is unlikely to be granted.
If the U.S. can be found to have jurisdiction to prescribe and is able to adjudicate the case, the U.S. will have jurisdiction to enforce its judgment abroad if it can gain the foreign state’s consent and acts in compliance with its own and the foreign state’s laws. [ 127. ]
Non-Legal Obstacles to Internet Gambling
Perhaps the greatest obstacle to online casino gambling is the ease with which players can cheat by using their computers to count cards [ 128 ] . Even today players occasionally sneak elaborate devices into casinos [ 129 ] . Player cheating undermines the integrity of the game and can be extremely expensive to the casino; one major casino cheating operation in Nevada grossed $600,000 a day [ 130 ] . It will be difficult, if not impossible, however, to monitor a player’s behavior in his own home. (This does not pose a problem in betting on real world events, such as sporting events, but only on casino-type games like blackjack.)
A second potential obstacle or, at least, limit on the cyberspace casinos activities is Internet self policing. As noted by Dean Hopkins, president of Toronto based CyberPlex Interactive Media, which helps organizations market via the Internet, «[Eugene] is going to face some concern on behalf of the Internet community at large. They’re very good at self-policing and there could be a backlash.» [ 131 ] Though 51% of those surveyed by Casino Journal approved of casinos in general, 80% opposed Internet casinos. [ 132 ] .Additionally, a family-values backlash, signaled by the Republican takeover of Congress, could spur a new round of legislation and or international negotiations to block the virtual casinos, bolstered by state and tribal fear of competition for gaming revenues. In all, gambling interests, on all sides of the issue, have poured $3.1 million into political campaigns since 1993, ranking them just behind the National Rifle Association.[ 133 ]
Finally, gambling debts are generally not enforceable in the U.S.[ 134 ] ; hence, the online casinos generally require players to forward cash to an offshore account or take a cash advance on their credit cards before they are able to play. While this will not deter the online casinos, it will at least limit the degree to which players can accumulate gambling debts online.
Conclusion
Internet gaming, like other activities on the Net, threatens to be ungovernable under current legal regimes and territorially-based jurisdictional rules. Entrepreneurs are acting quickly to utilize technology and gaps in the law to their advantage.
As the Department of Justice’s Chief of the Computer Crime unit admitted to the press, «we clearly need new laws [for dealing with computer crime]. Most of the laws on the books were written to deal with corporeal problems, not problems with intangible cyberspace.»[ 135 ] .Even to the extent that new laws can be written to criminalize offshore gambling activities, however, jurisdictional issues will continue to block their prosecution and or create tension in the international community.
If the government or private citizens hope to protect Americans from gaming’s deleterious societal effects, new technological as well as legal solutions will have to be conceived and implemented to both limit access to virtual casinos and to counteract the externalities created by increased gambling such as reduced productivity, increased crime, and heightened health care costs.
Footnotes
Internet address https://www.casino.org
Internet address https://www.gamblenet.com/bet/; company name changed from Sports International Ltd. on April 3, 1996 according to a company press release posted on its web site.
Internet address https://www.interlotto.li
Internet addresses: https://www.funscape.com; https://www.netcasino.com; http:www.vegas.com/wagernet (Wagernet’s service, though advertised on the World Wide Web, will actually require dedicated hardware and software to access their server, located in Belize).
Internet address https://www.RGTonline.com
Rick Alm, And Today, Gambling Online Could Take Off, THE KANSAS CITY STAR, February 12, 1996.
Dave Mayfield, First Virtual Casino Plans Spring Opening, THE VIRGINIAN-PILOT, March 26, 1995.
Alm, supra note 6.
Sports International, LTD. Form 10K, Dec. 31, 1994, at 10.
Jeanne Dugan Cooper, Cyberspace Casino Planning to Accept Real Bets: Offshore Location Makes it Legal, Operator Claims, NEWSDAY, March 17, 1995; Internet Casino’s business plan claims 30 million people are currently online, see https://www.casino.org.
Leiby, The Home Gambling Network: It’s Illegal, Maybe Immoral, but is the Cyberspace Casino a Good Bet?, WASHINGTON POST, February 24, 2995.
Dennis Camire and Keith White, Reality May Soon Catch Up Hype of Internet’s Virtual Casinos, GANNETT NEWS SERVICE, March 2, 1996.
Business Plan, Internet Casinos, see supra note 5.
Rolling Good Times Online, see supra note 5.
Interactive Gambling Flourishes Beyond the U.S., INTERACTIVE VIDEO NEWS, March 4, 1996 (citing figures provided by Venturetech, Inc. – $22 billion in the U.S. and $27.38 billion in Europe and Asia).
John J. LaFalce, Study Gambling’s Impact: Policy makers Haven’t Kept Pace with the Industry’s Explosive Growth, Christian Science Monitor, February 2, 1995. LaFalce (D) is a representative from New York. LaFalce also notes that gambling in Indian owned casinos accounts for 15% of the industry and that Americans made 93 million visits to casinos in 1993.
Id.
Id.
See John Warren Kindt, The Economic Impacts of Legalized Gambling Activities, 43 Drake L. Rev. 51, at 51-53. An internal memo urged sponsors of a proposed Chicago casino that «it probably won’t be enough for Arthur Anderson and Northwestern University to develop numbers that are ‘credible’, although that is the essential first step to take» and that «we must also use these studies to make a compelling and convincing case for the kind of jobs that will be created, with an emphasis on their ‘quality’ and ‘career’ potential’. Moreover, during the eight-month time frame for consideration of the proposal, publicized job estimates ranged from 15,000 to 100,000; the alleged range of new tourists fluctuated between an initial estimate of 2.9 million to an estimate of 10.2 million; and estimated tax revenues increased from $327 million to $644 million; see also Robin Widgery, Warning: Legal Gambling is a Costly Game, CHRISTIAN SCIENCE MONITOR, May 23, 1994. Widgery is president of the Social Systems Research Institute in Flint, Michigan.
104 Bill Tracking H.R. 497
104 Bill Tracking S.704
LaFalce, supra note 16.
See generally Kindt, supra note 19.
Kindt, supra note 19, at 56. The «problem economic gambler,» (a broader definition than the American Psychaitric Society’s «pathological gambler» which probably represents 3-4% of the gaming public) represents only 10% of the public, but spends over 65% of legalized gambling dollars; see Kindt notes 74-77.
Newsline: Internet Casinos Launches On-line Gambling Service, MULTIMEDIA & VIDEODISC MONITOR, April 1, 1995 quoting psychiatrist James Hillard, Chairman of the Department of Psychiatry at the University of Cincinatti.
Kindt, supra note 19, at 67; see also Newsline, supra note 25.
See generally, Kindt, supra note 19.
Ibid., at 56.
Widgery, supra note 19.
Kindt, supra note 19, citing Henry Lesieur & Kenneth Puig, Insurance Problems and Pathological Gambling, 3 J. Gambling Behav. 123 (1987).
Widgery, supra note 19.
Widgery, supra note 21.
Kindt, supra note 21, at 57, citing a study by Gamblers Anonymous which revealed that 48% of gamblers in its sample met the criteria for alcohol abuse or dependancy.
Widgery, supra note 21.
Kindt, supra note 21, at 58, based on a study of treatment programs conductd in Maryland.
Widgery, supra note 19.
See generally, I Nelson Rose, The Legalization and Control of Casino Gambling, 8 Fordham Law J. 245, 267-299 [hereinafter, Legalization].
Widgery, supra note 19, quoting Howard Shaffer, Director of the Harvard Medical School Center for Addiction Studies. See also Sue Fisher, Measuring Pathological Gambling in Children: The Case of Fruit Machines in the U.K., 8 J. Gambling Stud. 273, 270 (1992), reporting that 9% of the children in one test scored as «probable pathological gamblers»).
William M. Bulkeley, New On-Line Casinos May Thwart U.S. Laws, Wall St. J., May 10, 1995, at B1, citing Rachael Volberg, President of Gemini Research, who studies problem gambling; see also Kindt, supra note 19, at 59. Type A personalities, as aggressive achievers, are most susceptible to becoming compulsive gamblers.
Kindt, supra note 19, at 57.
Kindt, supra note 19, at 66.
Widgery, supra note 19.
Cory Arnovitz, To Start, Press the Flashing Button: The Legalization of Video Gambling Devices, 5 Software Law J. 770, 779.
Ibid., at 780.
Ibid., at 781.
Id.
Ibid., at 783-784. Ghost programs are similar to computer viruses known as «Trojan Horses.» They are hidden to the user but create trap doors that allow someone to later tamper or access the computer software. A typical ghost program is activated by pushing a complex combination of buttons on the exterior of the machine and would lower the required minimum payout percentage of the device, so the player no longer has a «fair» chance of payback. Near Miss Programs are designed to display an «almost» winning combination (near win) when the player has lost that game. The player is thus led to believe he or she almost won and that a winning combination may soon appear.
Newsline: Internet Casinos Launches On-line Gambling Service, MULTIMEDIA & VIDEODISC Monitor, April 1, 1995, quoting psychiatrist James Hillard, Chairman of the Department of Psychiatry at the University of Cincinnatti.
Bulkeley, supra note 39.
Internet Address https://www.netcasino.com
Mayfield, supra note 7. Note, a number of firms, including CyberCash, First Virtual, and Open Market have already developed technological prototypes to solve the latter problem; see, for example, John Byczkowski, On-line Internet to Try Credit-Card Security System, CINCINNATI ENQUIRER, March 28, 1995.
On the other hand, investigative journalist Stephen Azzo has published an allegation that two individuals with close ties to two prominent Internet casino sites have prior criminal convictions: Interactive Gaming’s «consultant» Louis Mayo having been convicted of a $5.4 million stock fraud scam and sentenced to five years in prison and founder Kerry Rogers having been convicted in New Jersey as an accessory in a $22 million bank fraud. See, «Web Review Linked to Organized Crime, Offshore Virtual Casino Scheme to Earn Billions,» PR Newswire, October 27, 1995.
Rose, Legalization, supra note 37 at 258.
Id.
Michael Schrage, On-Line Betting Might Be a Way to Put Innovative States in the Chips, WASHINGTON POST, June 10, 1994.
Rose, Legalization, supra note 37, at 261.
Diane Mermigas, Media Companies Turning to Gaming for New Revenues, ELECTRONIC MEDIA, May 8, 1995, quoting Harold Vogel, an entertainment and gaming analyst with Cowen and Co.
Mayfield, supra note 7.
Bertrand Marotte, Net Bet a Dicey Proposal, SOUTHERN NEWS, March 30, 1995. Eugene said he already made business overtures to half a dozen companies but without any luck. A New York investment executive who follows gambling stocks said gaming companies won’t really be interested until the legal and regulatory ramifications are settled.
18 U.S.C. ¤1964 (1995).
Ken Armstrong, Gamblers Could Make Themselves Right at Home; Computers May Put Casino in Living Room, CHICAGO TRIBUNE, May 10, 1995.
Dave Botempo, Sports Betting at Your Fingertips, CASINO PLAYER, July 1994.
Funscape Unveiled, ROLLING GOOD TIMES ONLINE, supra note ?.
Alm, supra note 6.
Id.
Pat Doyle, New World of ‘Virtual Casinos’ Faces Real Opposition, STAR TRIBUNE, Nov. 27, 1995, at A1.
Telephone conversation with Jon C. Audette, Assistant Attorney General for Minnesota.
Gaming Legislators Organization to Hold Its First Meeting in June, BUSINESS WIRE, March 7, 1996.
Tenn. Code Ann. at 39-18-502 (1994).
Tenn. Code Ann. at 39-17-501 (1994).
Stroup v. State, 552 S.W. 2d 418 (Tenn. Crim. App.), cert. denied, 434 U.S. 955 (1977).
Tenn. Code Ann. at 39-17-503 (1994).
Complaint, State of Minnesota v. Granite Gate Resorts……. filed July 18, 1995. https://www.state.mn.us/ebranch/ag. On the same day, Humphrey charged five other companies and individuals with operating scams and illegal business activities on the Internet and on the nation’s online services, including a pyramid scheme and a promotion for a «miracle drug» for cancer and AIDs patients. Press Release, Office of the Attorney General of Minnesota, Minnesota A.G. Files Legal Action Against Individuals Involved in Computer Online Scams, July 18, 1995.
Warning to All Internet Users and Providers, https://www.state.mn.us/ebranch/ag/
Minnesota Statute Section 609.025(3) (1994).
State v. Red Lake DFL Committee, 303 N.W.2d 54, 56 (Minn. 1981).
Warning, supra note 74.
See Cooper, supra note 10.
Opinion number 95-70, Florida Attorney General, October 18, 1995.
Fla. Stat. ¤910.005 (1995)
Opinion number 95-70, supra note 79. Florida law makes betting «any money or other thing of value upon the result of any trial or contest» a misdemeanor of the second degree. Florida Statutes ¤849.14.
Mark Eckenwiler, States Get Entangled in the Web, LEGAL TIMES, Jan. 22, 1996.
Cal. Penal Code at ¤337(a)(6) (1995).
An extensive search of published case law was inconclusive on this issue. Unfortunately, I believe partly because prosecutors are more likely to prosecute the bookies, and partly because so few trial court opinions are published.
MD. Ann. Code. Art. 27, @ 240 (1995) (making it unlawful for any person to bet, wager or gamble in any manner, or by any means or device whatsoever upon the result of any race).
Opinion No. 86-020, Office of the Attorney General of the State of Maryland, March 28, 1986.
Though it is beyond the scope of this paper, Texas state law includes some specific exceptions that might allow online betting between two individuals. Attorney general Dan Morales recently issued an opinion regarding a bet between 2 players on a card game played via modem in light of Texas exemptions for gambling in a private place, where no person receives economic benefit beyond personal winnings, and where the risks of losing and the chances of winning are the same for all participants. Morales opined that such activity was not subject to the «private place» exemption available in Texas law unless there was no public access to the games and no one, even a bulletin board operator, benefited economically other than by personal winnings. Opinion No. DM-344
Armstrong, supra note 61, quoting John Crigley, member of Haley, Bader and Potts.
World wide web address https://WWW.Vegas.com
Bulkeley, supra note 39.
Associated Press, States Arm to Disconnect Indian Lottery Phone Firms Pressured Not to Offer 800 Service to Idaho Tribe, CHICAGO TRIBUNE, April 12, 1995.
John S. Day, Idaho Indian Tribe Pitches Plan for National Lottery, BANGOR DAILY NEWS, March 24, 1995.
John C. Dvorak, Gambling on a PC Near You, PC MAGAZINE, May 16, 1995.
Jyl Hoyt in an interview with Dave Matheson, Gaming Manager for the Coeur d’Alene, Coeur d’Alene Tribe Wants to Start Telephone Lottery, National Public Radio, May 9, 1995.
Stephen Keating, National Lottery Riles Establishment, DENVER POST, May 1, 1995. See also Ken Miller, Idaho Tribe Offers to Share Lotto Receipts with States, GANNETT NEWS SERVICE, March 23, 1995 (citing legal experts who say the national lottery appears to meet federal laws governing interstate transmission of gambling information).
Keating, see supra note 95.
Rose, Current Issues in Gambling Law, 8 Whittier Law Rev. 245, at 250 [hereinafter, Issues].
694 F2d 1185.
Id.
Associated Press, States Aim to Disconnect Indian Lottery, CHICAGO TRIBUNE, April 12, 1995. For example, Texas wants to exclude the tribe’s lottery under a provision prohibiting other states from selling lottery tickets within its borders, but maybe precluded from doing so by the tribes’ use of an «800-number» which is technically not within Texas borders. The Texas House of Representatives just passed a bill to close this loophole; the bill now must pass the State Senate. Terrence Stutz, Texas Legislators, Fearing for Profits, Fight American Indian Phone-in Lottery, DALLAS MORNING NEWS, April 20, 1995.
Armstrong, supra note 61.
Ronald J. Rychlark, Video Gambling Devices, 37 UCLA Law R. 555.
Id.
See generally Rychlark, supra note 103.
Rose, Issues, see supra note 98 at 247. Note the FCC regulates advertising of gambling in the broadcast media.
Dennis Michael interviewing John Bates of Virtual Vegas, Showbiz Today, Cable News Network, Segment no. 5, Show Number 709, January 10, 1995.
18 U.S.C. 1084(a) (1995); This provision also prohibits «the transmission of a wire communication which entitles (emphasis added) the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers.»
18 U.S.C. ¤1084(a) (1995).
18 U.S.C. ¤1964 (1995); see 18 U.S.C. ¤1961 for a definition of «racketeering».
18 U.S.C. ¤1084(d) (1995).
18 U.S.C. ¤1084(b) (1995); see also US. v. McDonough, C.A.5 (Tex.) (1988), 835 F.2d 1103.
See U.S. v. Baborian, 528 F. Supp. 324 (subsection (a) does not include a social better even when they bet large sums of money with a great deal of sophistication).
S. 1495, 104th Cong., 1st Sess. (1995).
U.S. v. Stonehouse, 452 F.2d 455; see also Telephone News System, Inc. v. Illinois Bell Tel. Co., 220 F.Supp. 621, affirmed 376 U.S. 782.
358 F.2d 195, certiorari denied 385 U.S. 816 (1966).
209 F. Supp. 547, reversed on other grounds 318 F.2d 159, certiorari denied 375 U.S. 861; decision also referred to 18 U.S.C. ¤1952, discussed below, as a criminal statute that must be strictly construed; ¤1084(d) on the other hand, is regulatory in nature and need not be construed strictly, Tollin v. Diamond State Tel. Co., D.C. Del. 1968, 286 F.Supp. 86.
18 U.S.C. ¤1952 (1995).
18 U.S.C. ¤1952(a) (1995).
ALI, Restatement of the Law (Third) of Foreign Relations Law of the United States, ¤401.
See Restatement ¤402, Bases of Jurisdiction to Prescribe: Subject to @ 403, a state has jurisdiction to prescribe law with respect to (1) (a) conduct that, wholly or in substantial part, takes place within its territory; (b) the status of persons, or interests in things, present within its territory; (c) conduct outside its territory that has or is intended to have substantial effect within its territory; (2) the activities, interests, status, or relations of its nationals outside as well as within its territory; and (3) certain conduct outside its territory by persons not its nationals that is directed against the security of the state or against a limited class of other state interests.
Restatement ¤403, Limitations on Jurisdiction to Prescribe:
(1) Even when one of the bases for jurisdiction under @ 402 is present, a state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable.
(2) Whether exercise of jurisdiction over a person or activity is unreasonable is determined by evaluating all relevant factors, including, where appropriate:
(a) the link of the activity to the territory of the regulating state, i.e., the extent to which the activity takes place within the territory, or has substantial, direct, and foreseeable effect upon or in the territory;
(b) the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the activity to be regulated, or between that state and those whom the regulation is designed to protect;
(c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted;
(d) the existence of justified expectations that might be protected or hurt by the regulation;
(e) the importance of the regulation to the international political, legal, or economic system;
(f) the extent to which the regulation is consistent with the traditions of the international system;
(g) the extent to which another state may have an interest in regulating the activity; and
(h) the likelihood of conflict with regulation by another state.
(3) When it would not be unreasonable for each of two states to exercise jurisdiction over a person or activity, but the prescriptions by the two states are in conflict, each state has an obligation to evaluate its own as well as the other state’s interest in exercising jurisdiction, in light of all the relevant factors, Subsection (2); a state should defer to the other state if that state’s interest is clearly greater.
Dec. of Kammergericht of July 1, 1983 (Philip Morris/Rothmans), Kart 16/82, summarized in English in 4 CCH Comm.Mkt.Rptr. para. 40,571 (Doing Bus. in Europe).
See Restatement ¤421, Jurisdiction to Adjudicate: (1) A state may exercise jurisdiction through its courts to adjudicate with respect to a person or thing if the relationship of the state to the person or thing is such as to make the exercise of jurisdiction reasonable. (2) In general, a state’s exercise of jurisdiction to adjudicate with respect to a person or thing is reasonable if, at the time jurisdiction is asserted: …. (h) the person, whether natural or juridical, regularly carries on business in the state;….
See Restatement ¤421(2) In general, a state’s exercise of jurisdiction to adjudicate with respect to a person or thing is reasonable if, at the time jurisdiction is asserted: …. (i) the person, whether natural or juridical, had carried on activity in the state, but only in respect of such activity; (j) the person, whether natural or juridical, has carried on outside the state an activity having a substantial, direct, and foreseeable effect within the state, but only in respect of such activity ….
See Restatement ¤422.
See Restatement ¤476(1)(c).
See Restatement ¤433(1).
See generally, Rose, Issues, supra note 37, at 257- 261.
Ibid., at 258. One such device has keys which can be played by wiggling the toes to feed information into a computer as the cards are dealt – the computer then answers with minute electric shocks which suggest the appropriate betting strategy. Rose also explains that he was unable to find legal authority in Nevada prohibiting use of hidden computers in casinos, but cited a New Jersey regulation prohibiting the use of computers to count cards.
Ibid., at 259.
Marotte, supra note 59.
Phil Roura, «Right Stuff? Survey Says Fewer Are Game,» New York Daily News, Dec. 10, 1995, at 35.
«Gambling Raises Serious Questions,» CNN News, 6:27am EST, Transcript #40-1.
Ibid., at 256; see also, for example, Mass. Ann. Laws. Ch. 137, at 1 (1994) or Tenn. Code Ann., at 29-19-102 (1994).
Internet Casino Gears for its May 15 Lauch: Online Gambling Braces for Foes, INFORMATION & INTERACTIVE SERVICES REPORT, May 5, 1995.
About the Author
Cynthia Janower, Harvard Law School, June 1996, received her undergraduate education from the University of Pennsylvania where she graduated Phi Beta Kappa and magna cum laude with a B.A.in English and a B.S.E. from the Wharton School. Prior to law school, Ms. Janower spent two years in management consulting with Corporate Decisions, Inc. Over the past two years, she has interned with the Corporate Development department of MCI Communications, Inc. as well as the law firm of Testa, Hurwitz and Thibeault. She is currently with Boston Consulting Group
