I had thought a federal prohibition on online gambling wouldn’t pass. After all, it bestows liability on institutions like credit card companies, and their lobbying efforts are fierce. It turns out I may have been wrong.

Congress has passed a law that may do just that. H.R. 4954 is called the “SAFE Port Act.” You can look at the actual language of the bill as posted online. In the typical sausage-making that is our legislative process, gambling restrictions are being shoe-horned into a bill about homeland security.

For reasons unknown to me, the actual language of Section 802 of the bill, entitled “Prohibition on acceptance of any payment instrument for unlawful Internet gambling” and Section 803, entitled “Internet gambling in or through foreign jurisdictions” is not included in the online posting.

I have no idea what the bill actually proposes, if anything, that will affect e-gambling.

Many news organizations apparently assume that the new bill will be identical to the old H.R. 4411, forbidding U.S. financial institutions from profiting from online gambling.

As Christine Hurt of the Conglomerate Blog posts,

Of course, gamblers can wager through offshore financial institutions like Neteller, etc. Where there is a will, there’s a way. But our state lotteries and tribal casinos (which were excepted in the conference report) can sleep tight knowing that their family friendly gaming operations will not be cannibalized by evil offshore gambling.

I’ll let you know about any further developments.

Hanging Shingle is a solo practitioner in the State of Texas. He writes about the legality of arguments in daily events and cases through his blog, Hanging a Shingle.

Anyone who has driven from California to Nevada knows that different states have radically different regulations on gambling. It is believed, for example, that all wagers in the state of New York¹ that are not part of the state-sanctioned lottery are illegal. In Texas, however, it is a defense to a charge of gambling, a class C misdemeanor on par with a speeding ticket, if:

(1) the person engaged in gambling in a private place;

(2) nobody received any economic benefit other than personal winnings; and

(3) except for the advantage of skill or luck, the risks of losing and the chances of winning were the same for all participants.²

In other words, playing Texas Holdem in your friendly neighborhood poker game is probably legal. Assuming your neighborhood is in Austin. So, too, is the office pool for March Madness. Black Jack, on the other hand, is not because the “house” has a statistical advantage over the other players.

Internet gambling raises a series of questions that the law has not adequately addressed. If Texas residents use the Yahoo! Sports Tournament Pick’em for their private office pool, money is on the line, and Yahoo’s computers just happen to be in New York³, has a crime been committed in New York? I’d like to think a district attorney would never bother prosecuting the claim, but the cost of defending that charge would be high if he ever did.

What about federal law? Right now, federal statutes appear to address only gambling ships⁴ and the interstate transmission of wagering information.⁵

That may change. Introduced in the House of Representatives this past February, H.R. 4777, proposes to establish the Internet Gambling Prohibition Act. It is intended to prohibit certain activities by those in a gambling business in the jurisdiction of the United States or outside the jurisdiction of any nation.

It is worth noting that the term “bets or wagers” in this proposed statute requires an understanding that someone in on the bet will receive a greater value than the amount risked. Apparently, one-on-one bets of equal amounts by both parties would not be subject to this law.

I find it interesting that the law could empower governmental agencies to restrain or prevent any person communicating information assisting in the placement of certain illegal bets or wagers.⁶ That may mean that the Department of Justice could sue an otherwise legal website because it has a link to an illegal gambling site. That could make it harder for offshore gambling websites to advertise in the United States. It might also make it harder for websites that merely offer gambling tips⁷ from benefiting from that advertising revenue.

At this point, the proposed federal statute appears to be aimed mostly at people engaged in the business of gambling, not their customers. A brief perusal of case law also implies that criminal prosecutions tend to focus on the bookie. That does not mean, however, that their clientele are not criminally liable under state laws, or that federal statutes will eventually be created to go after the bettors. Tread carefully.

¹New York consolidated laws, section 5-401, as shown on http://www.gambling-law-us.com/State-Laws/New-York/. I have no independent verification of this website.
²TEX. PEN. CODE, Section 47.0.
³This is just an assumption. I don’t know where Yahoo’s computers are.
⁴18 U.S.C., Section 1082.
⁵Id. at, Section 1084.
⁶This is the proposed 18 U.S.C., Section 1084 (i).
⁷No such site comes to mind.

Hanging Shingle is a solo practitioner in the State of Texas. He writes about the legality of arguments in daily events and cases through his blog, Hanging a Shingle.