Online gambling default

On Oct. 20, one week after President Bush signed the Unlawful Internet Gambling Enforcement Act, the Australian company Betcorp announced sale of its online casino and sports betting operations in Antigua and Toronto. Because of the new law, the company said, “it is no longer possible” to serve U.S. residents, who represented 85 percent of its customers.

Yet the company that bought Betcorp’s business, the Costa Rica-based Bodog Entertainment Group, continues to offer Americans the opportunity to bet on sports, play poker or try their luck at various casino games. “It will likely take months to fully understand what, if any, ramifications there are from this new law,” says Bodog Chief Executive Officer Calvin Ayre. “Our customers may take comfort in knowing that Bodog.com is structured in such a way that we’re well situated to adapt to any changes in the online gaming environment.”

Contrary to early press reports, Congress has not banned online gambling. Instead, it has opted to maintain an uncertain legal environment in which businesses that cater to Americans’ taste for betting run the risk of harassment and prosecution by overzealous Justice Department officials who twist the law to fit their moral views.

The Unlawful Internet Gambling Enforcement Act, tacked onto a bill dealing with port security right before Congress adjourned for the elections, makes it a federal crime, punishable by up to five years in prison, to receive a payment in connection with “unlawful Internet gambling.” It also mandates regulations requiring financial institutions to block such payments.

But the act defines “unlawful Internet gambling” as online wagering that already is prohibited by state or federal law. It explicitly does not expand the category of forbidden gambling.

The new law therefore leaves untouched the Wire Act of 1961, which prohibits using a “wire communication facility” to help people place bets “on any sporting event or contest.” Although the Justice Department maintains that the Wire Act covers all online gambling, the law’s text and history indicate it applies only to sports betting, a reading the U.S. 5th Circuit Court of Appeals endorsed in 2002.

Perhaps recognizing that its broad interpretation of the Wire Act is legally shaky, the Justice Department has targeted online bookmakers, as opposed to casinos or poker parlors. This year, for instance, it indicted BetOnSports CEO David Carruthers and Sportingbet Chairman Peter Dicks. Even those arrests are questionable applications of the Wire Act, since they involve foreign companies with Web sites based in countries where online gambling is unambiguously legal.

Although the Unlawful Internet Gambling Enforcement Act did not change the legal status of online gambling, two of its main sponsors, Rep. Jim Leach of Iowa and Sen. John Kyl of Arizona, both Republicans, called it a “ban.”

Perhaps taking a cue from these misleading descriptions, Forbes reported “the new act now categorically outlaws online gambling,” while The Washington Post (in a story the Seattle Times ran under the headline “U.S. outlaws Internet gambling”) claimed “placing bets over the Internet was effectively criminalized.”

The Wire Act and the Unlawful Internet Gambling Enforcement Act do not apply to garden-variety gamblers “placing bets over the Internet” but only to people “engaged in the business of betting or wagering.” That business is no less legal now than it was before.

To be on the safe side, financial institutions regulated by the U.S. government probably will shun gambling sites (if they weren’t doing so already). But as a visit to any of the sites that continue to serve Americans confirms, there are several alternative payment methods the government will have a hard time blocking, including electronic checks, money orders, the U.K.-based Neteller system and credit card transactions processed in other countries.

As before, then, the government will pretend online gambling has been banned, and millions of Americans will give that position as much respect as it deserves.

Jacob Sullum is a nationally syndicated columnist.