Gambling Law Update

December, 2002

By: Lawrence G. Walters, Esq.

www.GameAttorneys.com

Victory for Internet Gambling

This past month marked a key legal victory for the Internet gambling community. A federal appeals court in Louisiana upheld an earlier dismissal of a class-action lawsuit brought forth by credit card holders who have lost money gambling in Internet casinos. A three judge panel of the 5^th Circuit Court of Appeals in New Orleans upheld the dismissal saying that the credit card holders, who brought suit against the credit card companies and issuing banks alleging they violated the Racketeer Influenced and Corrupt Organization Act (RICO) by providing credit which the card holders used to gamble at internet casinos, failed to establish an unlawful act based on federal mail or wire fraud statutes. The court further went on to say that the credit card companies could not have fraudulently represented the card holder’s related debt as legal, because it was¹. Gambling supporters hope that this case helps to further their efforts to legalize Internet wagering nationwide. This ruling may leave open the possibility of legalizing non-sports internet betting in states that approve, such as traditional casino-style games of chance². But this decision may also trigger a backlash by anti-gambling forces intent on banning internet gambling in Congress.

Introduction of a New I-Gaming Bill

Congressman John Conyers, Jr., D-Mich., introduced legislation this past month to create a commission that would recommend ways federal and state governments might regulate internet gambling. The proposed bill, HR 5760, is aimed primarily at preventing underage gambling and gambling by problematic gamblers. The bill was introduced on the last day of congress and will more than likely be reintroduced at the start of the 108^th term, early next year. There was no indication from the Congressman that he personally had any particular recommendations to make at this time as to how internet gambling by minors and problematic gamblers would be prevented³. The makeup of the commission will largely dictate the direction it will take.

California Looks to Outlaw Internet Gambling

AB 1229, a bill to outlaw Internet gambling and make it a crime for a citizen of the state to gamble on the Internet, was passed by a vote of 61-2 by the California Assembly. The bill provides stiff penalties and jail terms for gambling site operators who direct their marketing to Californians. In addition to penalties, the bill also provides that anyone “aiding or abetting”

Internet gambling is guilty of a crime. This implies that anyone suggesting or promoting gambling on the Internet is subject to criminal prosecution!⁴ The measure still has to be passed by the California Senate and must be signed by Governor Davis before it becomes law.

Online Gambling Halted as Future Looms

One of the most aggressive advocates of Internet gambling, Las Vegas neighborhood casino operator Station Casinos Inc., has put its online wagering initiatives on hold due their uncertain legal status. The initiatives were undertaken to develop live casino games customers could play from televisions in their hotel rooms or from wireless devices and home computers. Instead of betting on software simulations, players would see actual images of video poker machines and other games⁵. This year a letter that addressed to Nevada regulators from the U.S. Department of Justice stated that Internet gambling over interstate telephone lines is illegal under federal law. That interpretation of the Wire Act of 1961, enacted to stop illegal sports betting, has nearly killed efforts by major casino companies and technology entrepreneurs to launch Internet gambling sites in the U.S. experts say⁶.

Leach Bill Fails to Pass in Senate

The “Leach Bill”-H.R. 556, which would have outlawed payments to Internet Casinos in hopes of choking offshore gambling sites who draw billions of dollars from U.S. based customers, has failed to pass in the Senate. The Senate reconvened briefly in November, and despite urging from the White House to schedule a vote on a version of the anti- Internet gambling bill recently passed in the House of Representatives, the measure never made it to the Senate floor.

Sports Betting Ban Efforts to be Resumed

Senator John McCain, R-Ariz., stated this past month that he will once again resume efforts next year to prohibit Nevada sports books from taking bets on amateur athletic events. Since the betting ban legislation did not pass this session of Congress, McCain will have to start over next year. But this time he has a considerable advantage. With the Republicans winning control over the Senate, he will be in a greater position to push the ban. He will also regain the chairmanship of the Senate Commerce Committee, which has jurisdiction over the proposed legislation⁷.

Florida Looks to Consider Gambling

Florida’s Governor Jeb Bush and Republican leaders have struggled with a tight budget before, but new approved spending on proposed issues have left Republican’s contemplating new means of funding. One possible alternative method that has left the Legislature divided is an expansion of legalized gambling. The state’s existing pari-mutuel industry is suffering as gamblers go to offshore boats, Indian casinos and the internet⁸. An expansion of legalized gambling could help to boost Florida’s economy while providing the funds for some much needed programs. Senate President Jim King, R-Jacksonville, who was not available for comment, has said new taxes and expanded gambling must be considered as the state faces a staggering financial crunch⁹.

Lawrence G. Walters, Esq., is a partner in the national law firm of Weston Garrou & DeWitt, with offices in Orlando, Los Angeles, and San Diego. Mr. Walters represents clients involved in all aspects of online gaming operations. Nothing in this article constitutes legal advice. Please contact your personal attorney with specific legal questions. Mr. Walters can be reached at Larry@LawrenceWalters.com, through his website: www.GameAttorneys.com, or via AOL Screen Name: “Webattorney.”