Using the Internet to gamble is a violation of both state and federal law. However, online gambling laws vary greatly from state to state. In some jurisdictions, such as Michigan, Nevada, New York, and Pennsylvania, the activity is completely legal. In other jurisdictions, such as New Jersey, betting exchanges are illegal. In Washington, advertising gambling is a crime.
There are several forms of gambling: horse racing betting, card games, and lotteries. Gambling is generally illegal without a license from the state in which it is played. Many countries, including Canada and the United Kingdom, allow some forms of online gambling. Online gambling may include sports betting, virtual poker, and casinos. Several nations in the Caribbean Sea also permit online gambling. A number of nations in Europe also permit some forms of online gambling.
The first online poker rooms were launched in 1998. In 1999, multiplayer online gambling was introduced. A report published by Frost & Sullivan indicated that online gambling revenues had reached $830 million. Online gambling is legal in most jurisdictions that belong to the European Union. Online poker rooms make money through “rake” and tournament fees. Many online poker rooms are licensed by the Kahnawake Gaming Commission. The Kahnawake Gaming Commission tries to keep the operations of licensed online gambling organizations fair. Many of these licensed sites are located in the Mohawk Territory of Kahnawake.
In 2007, a House bill called the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (HR 2046) was introduced by Rep. Barney Frank. This bill would require the director of the Financial Crimes Enforcement Network to license internet gambling facilities. The legislation is similar to the Unlawful Internet Gambling Enforcement Act. This bill would also add new language to the UIGEA that is intended to prevent the sale of financial instruments to individuals involved in illegal Internet gambling activities.
The UIGEA and its successor legislation have been challenged on both constitutional and legal grounds. There have been a number of attacks based on the Commerce Clause and First Amendment. These attacks have largely failed. However, the commercial nature of the gambling business has been deemed to be an acceptable defense to Commerce Clause doubts. The Lopez Amendment has also been used to defend the enforcement of federal gambling laws. The Lopez Amendment includes elements to “weed out” low-level gambling cases.
The most notable legal case involves the owners of three of the largest online poker companies. The founders of PokerStars, Full Tilt Poker, and Absolute Poker were charged with violating the UIGEA and other federal laws. They were also accused of bank fraud and money laundering.
The legal system deems online gambling illegal in many jurisdictions, but it remains legal in most countries that are members of the European Union. In France, there are new laws being considered that would tax online gambling. Other nations, such as India and Maharashtra, have banned online gambling. In addition to federal law, state officials have expressed concerns that the internet may be used to transport illegal gambling into their jurisdictions.