{1} Over the last two decades, society has gradually accepted gambling as a legitimate form of entertainment. [1] This is evidenced by the $550 billion spent on legalized gambling in the United States in 1996. [2] These revenues come from many different types of gambling, including lotteries, casinos, pull tabs, sports wagering, and bingo. Only two states -- Utah [3] and Hawaii [4] -- ban all forms of gambling. At least 56 percent of all Americans gambled in some form in 1996. [5]
{2} Within the last two years, however, a new form of gambling has emerged: Internet gambling. People no longer have to leave the comfort of their homes to place bets or wagers. [6] Instead, they can sit comfortably in the privacy of their homes and gamble using the computer. Because of the Internet's widespread availability and international scope, this emerging form of gambling presents new legal and policy concerns since there are arguably few, if any, regulations that govern Internet gambling.
{3} Historically, states have been the only regulators of gambling within their own territories. [7] However, because the Internet has made it much easier to conduct gambling across state and national borders, the authority of states to control gambling within their borders has been undermined. [8] Consequently, Congress has recently introduced bills which are designed to provide states with the authority to enforce their own gambling laws by making it illegal either to receive or place bets or wagers on the Internet. [9] The character of the Internet, however, means that such a law will be virtually ineffective.
{4} Part II of this article discusses the recent development of Internet gambling and how such sites operate. Part III describes both the methods that states have used to prohibit Internet gambling and the federal statutes which may be applicable, including the recently introduced Congressional legislation commonly known as the Internet Gambling Prohibition Act. Part IV articulates the numerous reasons why neither state nor federal attempts to control on-line gambling will be effective. Finally, Part V argues that, instead of ineffectually prohibiting Internet gambling, the state and federal governments should accept it as a new form of entertainment and regulate it much like current, legalized forms of gambling.
II. DEVELOPMENT OF INTERNET GAMBLING
{5} Internet gambling has grown rapidly over the last four years. In 1994, there were no gambling sites on the Internet; by 1998, that number had increased to about 120. [10] Almost any type of betting or wagering which can be done by physically going to a gambling establishment can now be done on-line. This includes sports betting, [11] betting on horses, [12] casinos, [13] bingo, [14] blackjack, [15] and lotteries. [16] In 1997, it was estimated that $1 billion was spent on Internet gambling worldwide, [17] with nearly 60 percent of those bets and wagers being placed by United States citizens. [18] The total amount of on-line gambling has been projected to increase to $10 billion by 2000. [19]
{6} With such a large potential for revenues, [20] the rapidly increasing number of businesses which offer gambling entertainment on the Internet should not be a surprising development. Furthermore, because the entry barriers are so low for on-line gambling businesses, almost anyone has the ability to establish such a business on the Internet. About all that is necessary are several computers on which to host the web site and a small office in which to place them. These low barriers to entry and the relatively small amount of money needed to start an on-line gambling business [21] provides the primary reason why many people are reluctant to wager their money on-line. To help prevent unscrupulous operators from getting started in the hotbed area of casino gambling, Antigua, for example, charges casino operators up to $100,000 per year to obtain an operating license. [22]
{7} The Caribbean is one of the most popular locations for on-line gambling businesses. [23] Specifically, Antigua, despite its very stringent regulations, has at least twenty-one on-line gambling sites. [24] These businesses help the island's local economy since the regulations require that operators hire local residents and pay education and social security taxes. [25]
{8} Some sites have even made Internet gambling virtually identical to the environment experienced at a casino by offering a graphics-rich, interactive, three-dimensional playing environment. [26] About the only difference between Internet gambling and casino gambling is that a person cannot physically put coins into the machine.
{9} Nonetheless, placing a bet or wager on-line is very easy. The exact procedure varies based on the individual business, but generally, a user must first register on-line with the gambling site to receive a password. [27] A bettor then deposits money into an account by providing a credit card number from which bets can be debited, [28] making a wire deposit directly to the gambling business, [29] mailing the business a check or money order, [30] or paying with a newly emerging form of third-party payment such as DigiCash. [31] Once the money has been deposited, then the bettor can start playing immediately by accessing the Internet through the bettor's local internet service provider. If a person wins anything, then the winnings are credited to the individual's account from which the proceeds can either be mailed by check, transferred by wire, or credited to a third-party electronic cash account. [32] Some sites limit the amount which an individual can spend during a given week or month [33] and the potential jackpots which a person can win on-line are usually limited to $100,000, [34] although some reach $1.5 million. [35]
{10} Some people are reluctant to gamble on the Internet because of the risk of an unscrupulous operator on the other end who is unknown and, oftentimes, unreachable by United States law. However, the number of such reported incidents has been minimal. [36] This risk is partially mitigated by the ability to make a widespread disclosure about the scam, particularly through Usenet groups. [37] Thus, a very good public watch group exists on the Internet because, if one person is duped by a gambling operator, word spreads quickly across the Internet about the scam. [38]
{11} For those who still fear unscrupulous operators, there are some well-known and reputable organizations that have established on-line gambling sites. For example, the Red Cross operates a lottery called Plus Lotto [39] in Liechtenstein to raise money for the humanitarian missions which it carries out around the world. [40] In addition, other humanitarian organizations in Norway have also been trying to get permission to run Internet gambling sites. [41] The fact that such reputable and society-oriented organizations have established Internet gambling businesses adds to the confusion and ambiguity which society has toward gambling.
III. STATE AND FEDERAL REGULATIONS
{12} Despite the use of Internet gambling sites by some reputable organizations to raise money that benefits society, some have called for an end to Internet gambling or, at least, that some regulations be imposed. In response to this pressure, the state and federal governments have been attempting to regulate Internet gambling. This section discusses the attempts that have been made by the states and the new Internet Gambling Prohibition Act that has been introduced into Congress.
A. State Attempts to Regulate Internet Gambling
{13} Recently, several states have been attempting to regulate Internet gambling. [42] Six states have introduced laws which specifically make Internet gambling illegal: Nebraska, [43] Arizona, [44] New York, [45] Illinois, [46] Pennsylvania, [47] and Indiana. [48] The state legislature of Hawaii, which currently prohibits all forms of gambling, has passed a bill urging Congress to enact legislation prohibiting all forms of Internet gambling. [49] In addition, the attorney generals in Kansas, [50] Texas, [51] and Utah [52] have issued opinions stating that Internet gambling is illegal in those states. Consequently, in response to these hostile state actions, some Internet sites have explicitly stated that people in those states should refrain from participating in on-line gambling on their sites, [53] likely in an attempt to limit their own personal liability. (Of course, as discussed in Part IV.F.2, an Internet user can anonymously sign onto a site and claim that he or she is from a state where on-line gambling has not been declared unlawful.)
{14} The State of Minnesota instituted the first court action against an Internet gambling business. In 1997, the attorney general filed charges for deceptive trade practices, false advertising, and consumer fraud against Granite Gate Resorts, a Nevada corporation which did business as On Ramp Internet Computer Services, and Kerry Rogers. [54] Rogers, president of Granite Gate, designed an on-line wagering site called WagerNet. [55] WagerNet was operated by a corporation located in Belize and advertised on On Ramp. [56] The site invited users to join a mailing list, provided On Ramp's telephone number to contact for more information, advised consumers to consult local authorities about the legality of offshore wagering, and stated that WagerNet could file a lawsuit against a bettor in the bettor's own state. [57]
{15} The defendants filed a motion to dismiss the charges for lack of personal jurisdiction. [58] After going through the minimum contacts test required by International Shoe Co. v. Washington [59] for personal jurisdiction, [60] the court held that the defendants' advertising fulfilled the test and that advertising in Minnesota on the Internet constituted purposeful availment of Minnesota laws. [61] The court found: (1) sufficient quantity of contacts existed because a significant number of people in Minnesota had contacted the defendants' web site, [62] (2) comparing Internet advertising to television broadcasts, the quality of contacts was sufficient because the defendants made an effort to contact Minnesota consumers since they intended to solicit consumers from all jurisdictions, [63] (3) the unlawful or misleading advertising contacts provided a connection between the cause of action and the contacts, [64] (4) the state had a compelling interest in providing a forum to enforce its consumer protection laws which regulate gambling, [65] and (5) the defendants could not argue the inconvenience of being subjected to Minnesota law since the gambling business reserved the right to sue in Minnesota. [66]
{16} Although the court in the Granite Gate case has not (yet) decided whether Minnesota can prohibit Internet gambling sites from reaching the state's citizens, the court's holding that Minnesota could exercise personal jurisdiction over the defendants was a significant hurdle to overcome. Both Wisconsin and Missouri have also filed suit against three on-line casinos alleging that the gambling activities being offered either constitute a public nuisance or are simply illegal under state law. [67]
{17} However, not all states have exhibited the same amount of aggressiveness as Minnesota, Missouri, and Wisconsin in trying to stop Internet gambling. One state, Florida, claims that it is unable to regulate Internet gambling because of the wide-reaching nature of the Internet. [68] Thus, the Florida attorney general stated in an opinion that "any effort to regulate use of the Internet is better suited to federal regulation than to patchwork attention by the individual states." [69]
{18} The federal statute which is commonly cited by opponents of Internet gambling as prohibiting such activity is the Wire Act. [70] The Wire Act prohibits anyone "engaged in the business of betting or wagering" from using "a wire communication facility" [71] to place "bets or wagers on any sporting event or contest." [72] Thus, the very language of the statute limits its application to bets or wagers which pertain to sporting events, not to general bets or wagers such as casinos or lotteries. This conclusion is supported by not only the plain language of the first section of the statute, but also by the statute's next section which excepts from prosecution the use of a wire communication facility to transmit information "for use in news reporting of sporting events or contests." [73] In addition, legislative history states almost conclusively that the purpose of the section was to prohibit bookmaking on sports. [74] Since a majority of Internet gambling sites do not offer sports betting, businesses that engage in other forms of on-line gambling likely would not be held liable under the Wire Act. Furthermore, an individual bettor could not be charged under the Wire Act because an individual would not be considered "engaged in the business of betting or wagering, even if the person made substantial wagers or bets each day." [75] Thus, the Wire Act likely would not be effective at stopping most forms of Internet gambling, at least those that are not involved in sports betting. [76]
{19} Nonetheless, other federal statutes arguably could prohibit Internet gambling. [77] These include the Travel Act, [78] the Interstate Transportation of Wagering Paraphernalia Act, [79] the Professional and Amateur Sports Protection Act, [80] the Crime Control Act, [81] and the federal aiding and abetting statute. [82] Until recently, no causes of action had been brought under these statutes against either businesses engaged in on-line gambling or individuals who participate in Internet gambling. However, in March 1998, the FBI brought the first conspiracy charges against twenty-one Caribbean and Central American Internet gambling businesses and owners who conducted sports betting. [83] While such activity likely would be prohibited by the Wire Act, which explicitly makes it illegal to use a communications facility for sports betting or wagering, other non-sporting forms of Internet gambling likely would not be prohibited.
C. Internet Gambling Prohibition Act
{20} Responding to the difficulties which state law enforcement authorities have had in stopping Internet gambling, Senator Kyl introduced the Internet Gambling Prohibition Act of 1997 (IGPA) in the Senate on March 19, 1997 [84] and a similar bill was also introduced in the House on September 3, 1997. [85] Both bills were designed to amend the Wire Act to clarify that Internet gambling is included as an illegal communication activity, unless allowed by individual states. [86] Two primary policy reasons were provided for introducing the bills: (1) to prevent children from gambling, and (2) to make it more difficult for addicted gamblers to have access to gambling opportunities. [87]
{21} As discussed previously, one of the Wire Act's limitations is that it is limited to sports wagering or bookmaking. [88] Both the Senate and House bills rectify this limitation by adding a definition for the phrase "bet or wager" as the risking of anything of value (besides a de minimis amount), with the understanding that a person will receive something of value based on an outcome which is predominantly subject to pure chance. [89] However, the definition excepts securities transactions, contracts of indemnity, and health, life, or accident insurance contracts. [90] Although not included in the Senate bill, the House bill goes one step further and prohibits a gambling facility from using the Internet to disseminate information which is necessary for the recipient to place a bet or wager using a communications device. [91]
{22} The substance of both bills makes it illegal for either a person who is "engaged in the business of betting or wagering" or a person who places a bet or wager to use the Internet to conduct such activity. [92] If a person in the business of betting or wagering engages in that business on the Internet, then he or she could be (1) imprisoned for no more than four years, (2) fined no more than the greater of the amount received from bets or wagers or $20,000, or (3) receive both punishments. [93] A person who places a bet or wager could be (1) imprisoned for no more than six months, (2) fined no more than the greater of the amount wagered or $2,500, or (3) receive both punishments. [94]
{23} However, the probability that an individual who places a bet or wager will be charged is unlikely for several reasons. First, the privacy and anonymity problems discussed infra in Part IV.F may make it impractical, if not impossible, to determine who is placing a bet or wager on the Internet. Second, the Department of Justice has "express[ed] concern about the proposed expansion of federal law to make small or first-time Internet bettors guilty of a federal crime." [95] Thus, whether there can or will be vigorous enforcement of the law is uncertain, especially against individual bettors.
{24} Nonetheless, the House bill also allows federal or state law enforcement agencies to obtain an injunction to prevent an Internet service provider (ISP) located within its jurisdiction from transmitting or receiving gambling information which is in violation of state law. [96] The ISP would not be responsible until having been notified by a law enforcement agency that a court-ordered injunction had been obtained against the on-line gambling business. [97] Thus, the House bill provides each state with significant authority to prevent Internet gambling from occurring within its own borders. A state could obtain an injunction against an ISP which hosts an Internet gambling web page and prevent transmission of that information out of the state. Moreover, the state has the authority to obtain an injunction which prevents an ISP located within the state from receiving gambling information from out-of-state businesses and also from transmitting a person's bet or wager.
{25} Despite the House bill's grant of injunctive authority to the states against ISPs, two practical problems remain. First, to prevent its own residents from receiving gambling information, a state would have to obtain injunctions against all ISPs within the state since each of them may receive an out-of-state transmission of gambling information. In practical terms, it may not be realistic to obtain the many injunctions needed for each ISP within the state. Second, even if the injunctions can be obtained, it still will not prevent all of the state's citizens from receiving gambling information because many people subscribe to national ISPs such as America Online or Compuserve which may be beyond the state's jurisdiction. [98] Thus, in theory, the House bill provides states with a significant amount of authority to regulate ISPs, but in practical terms, much of that authority may be meaningless.
{26} The Senate bill does not have a specific provision pertaining to the duties of ISPs. Instead, the bill provides the United States and state attorney generals with the authority to obtain general injunctive relief against the transmission of gambling information in the state in which the federal court is located. [99] However, as further discussed in the next section, prohibiting Internet gambling -- either with or without passage of the IGPA -- will be difficult.
IV. STATE AND FEDERAL PROHIBITIONS OF INTERNET GAMBLING WILL NOT BE SUCCESSFUL
{27} This section discusses some of the reasons why state and federal attempts to prohibit Internet gambling likely will be ineffective. The first subsection, Part A, discusses whether states even have the authority to prohibit Internet gambling because the resulting restrictions on interstate commerce may be a violation of the Dormant Commerce Clause. Part B describes the problems which states may have trying to obtain jurisdiction and injunctive enforcement over an out-of-state Internet gambling business. Part C discusses whether the federal government would be able to enforce the Internet Gambling Prohibition Act against international defendants through the doctrine of comity. Part D discusses whether the IGPA's prohibition on the transmission of gambling information would be an unconstitutional violation of free speech. In Part E, the issue of Indian gaming is discussed and whether Indian Tribes would still be able to offer Internet gambling despite the IGPA. Finally, Part F describes some of the problems that law enforcement agencies will have trying to enforce the IGPA, if it becomes law.
{28} Because of the national and international scope of the Internet, state regulation may not be constitutional under the Dormant Commerce Clause. [100] The clause delegates to the federal government all powers that regulate commerce between the states. [101] Thus, "Congress has exclusive domain over those aspects of interstate commerce that are so national in character to demand uniform treatment." [102] Since any display of web pages and flow of finances, including those related to on-line gambling, cannot feasibly be limited to citizens of one state, the Internet is national and indeed, even international, in scope. Although the Supreme Court has acknowledged that states have the right to regulate gambling, the state laws are still subject to constitutional scrutiny. [103]
{29} A court case has been filed in Wisconsin where a casino has sued the state for declaratory and injunctive relief after the state barred an on-line gambling company from starting a business in Wisconsin. [104] The company had no intention of offering Internet gambling to Wisconsin residents or any other jurisdiction where such activity might be illegal, but merely wanted to set up the servers from a location in Wisconsin. [105] Since the state wanted to ban the practice, the company filed suit stating that the State of Wisconsin was interfering with interstate commerce by preventing the company from operating on a national level. [106]
{30} Before analyzing whether the activity being regulated violates the Commerce Clause, it must first be determined that such activity concerns interstate commerce. [107] Three aggregate reasons support the conclusion that Internet gambling would be considered interstate commerce. First, the state statutes which prohibit businesses from offering gambling services to in-state citizens are broad enough that they would permit prosecution of out-of-state defendants. [108] Second, the nature of the Internet does not allow a business which creates a web site to close itself off to users from another state. [109] Finally, the Internet has consistently been referred to as the "information superhighway" [110] which transports digitized goods, thereby making it analogous to highways and railroads which have historically been considered a conduit for the interstate transportation of services. [111] Thus, regulating the Internet does have an affect on interstate commerce.
{31} One case which has extensively discussed whether states' regulation of the Internet violates the Commerce Clause is American Libraries Association v. Pataki. [112] In that case, New York passed a statute which made it unlawful to use a computer to examine or look at a sexually-related communications which were harmful to minors. [113] Several organizations, including the American Library Association, filed for injunctive relief, claiming that the law "unduly burden[ed] interstate commerce in violation of the Commerce Clause" [114] since the statute was not limited to purely intrastate communications. [115] The court in Pataki held that the New York law which prohibited indecent material from being disseminated on the Internet was unconstitutional as violating the Commerce Clause. [116] It found that the law would "regulate communications occurring wholly outside New York, impose[] a burden on interstate commerce that is disproportionate to the local benefits it is likely to engender, and subject[] . . . Internet users[] to inconsistent state obligations." [117] This case provides a useful framework for determining whether states have the right to regulate Internet gambling without violating the Commerce Clause.
{32} Most courts (including the court in Pataki) generally use three tests to determine whether the enforcement action by an individual state violates the Commerce Clause, any one of which would be sufficient to make the state regulation unconstitutional. The first test considers whether enforcement of the state regulation would have the "practical effect" of encroaching upon the law of another state. [118] Using this test, the court in Pataki easily found that the New York law violated the Commerce Clause since the legislature
deliberately imposed its legislation on the Internet and, by doing so, projected its law into other states whose citizens use the Net. . . . This encroachment upon the authority which the Constitution specifically confers upon the federal government and upon the sovereignty of New York's sister states is per se violative of the Commerce Clause.[119]
{33} Similarly, any state which prohibits Internet gambling would be imposing its law on other states. For example, a proposed bill in Nebraska would make it unlawful for any Internet business to offer its citizens the opportunity to gamble. [120] This effectively would deny a Nevada casino which operates an on-line gambling business (in a state where such activity may not be prohibited) from conducting any business due to the stifling effect resulting from the company's inability to block Nebraskans from accessing its web site. [121] The business would simultaneously incur the risk that a person in Nebraska accesses the site, thereby subjecting the business to prosecution in the state. [122] Thus, Nebraska's proposed prohibition against Internet gambling results in an imposition of its law on businesses in other states where Internet gambling may be legal.
{34} The second test, commonly referred to as the burden or Pike test, presumes that the state law does not violate the Commerce Clause. [123] This test accepts some incidental burden on interstate commerce as long as the law does not discriminate against out-of-state defendants, unless that burden is clearly excessive in relation to the local benefits to be achieved by the law. [124] Using this test, the court in Pataki first accepted that protecting minors from indecent material was a legitimate state interest. [125] However, the court then determined that, because of the unique character of the Internet, the law was not likely to prevent minors from accessing obscene materials, whereas the burden on interstate commerce was significant. [126]
{35} Applying this test to state regulation of Internet gambling, a court in a state which prohibits all forms of gambling may find that limiting the availability of on-line gambling is a legitimate state interest. [127] Granted, if a state such as Nebraska prohibits all forms of Internet gambling by both in-state and out-of-state businesses, then the law does not discriminate unfairly against out-of state businesses, [128] thereby creating the presumption that the law is constitutional. However, because of the worldwide communications on the Internet, the state law would be unenforceable against about one-half of the Internet gambling sites which currently exist outside of the United States. [129] In addition, the likelihood that Nebraska would "drag [Internet gambling businesses] from the other 49 states into [Nebraska] is not consistent with traditional concepts of comity." [130] The local benefits to be achieved by the law, therefore, are not significant in comparison to the great burden that would be placed on interstate commerce. Consequently, any state law which prohibited Internet gambling likely would violate the second Commerce Clause test.
{36} Finally, the last test looks at whether the activity being regulated is so national in scope that it requires uniform application among the states which only Congress can regulate. [131] In Pataki, the court stated:
The courts have long recognized that certain types of commerce demand consistent treatment and are therefore susceptible to regulation only on a national level. The Internet represents one of those areas; effective regulation will require national, and more likely global, cooperation. Regulation by any single state can only result in chaos, because at least some states will likely enact laws subjecting Internet users to conflicting obligations. Without the limitations imposed by the Commerce Clause, these inconsistent regulatory schemes could paralyze the development of the Internet altogether. [132]
{37} Thus, the court held that this third test prevented New York from enacting the statute since the Internet requires uniform, national regulation. [133]
{38} This third test is probably the most important test in interstate commerce analysis. Although states have the right to regulate those activities which are so local in nature that varied regulations are necessary, Congress has the exclusive right to regulate those activities which are so national in character that they require uniform treatment. [134] For example, in Wabash, St. Louis & Pacific Railway Co. v. Illinois, [135] the Supreme Court prevented one state from assessing railroad access fees on trains entering or leaving the state. [136] The Court found that if every state was allowed to impose such fees, it would inhibit interstate commerce and prevent railroad development. [137]
{39} An argument could be advanced that, since gambling has generally been regulated by the states, Internet gambling is an activity which is not so national in scope that it requires uniform treatment. For example, the indecency statute analyzed in Pataki may have regulated a significantly greater number of communications on the Internet and may have affected a greater number of users across the country than does the more narrow activity of Internet gambling. However, in finding that the New York statute subjected interstate use of the Internet to inconsistent regulations, the court in Pataki recognized that each state regulates decency standards, [138] thereby "leav[ing] users lost in a welter of inconsistent laws, imposed by different states with different priorities." [139] The consequence of such inconsistent laws is that Internet users must conform their activities to the state which has imposed the most stringent standards. [140] In effect, this would prevent the establishment of an Internet gambling business in a state where such activity might be legal since the laws of other states may only allow certain types of Internet gambling or prohibit it altogether. Such a prohibition resulting from inconsistent state laws is the precise result which the dormant Commerce Clause is designed to prevent.
{40} Furthermore, each state's imposition of anti-gambling regulations, and eventually, other non-gambling related regulations which affect commerce on the Internet, would inhibit the development of the Internet as an effective means of interstate commerce. [141] This was the reason that the Framers of the Constitution included the Commerce Clause: to prevent states from regulating the national infrastructure. [142] Since the Supreme Court broadly interprets what activities affect interstate commerce, [143] it is doubtful that state attempts to regulate any activities on the Internet, including gambling, would survive a Commerce Clause challenge.
{41} As the Ninth Circuit has stated in relation to broadcast signals: "We cannot ignore the fact that broadcast signals cannot be contained within state borders and individual states cannot control interstate broadcasts." [144] The same can be said about the Internet. Therefore, although the IGPA is not the best method by which to regulate Internet gambling, without the IGPA or other federal legislation, individual states may be powerless to exercise control over gambling conducted within their borders because of the dormant Commerce Clause.
{42} For any court to be a forum in which a case can be heard, it must obtain personal jurisdiction over the defendant who must be afforded due process under the Fourteenth Amendment. [145] Under the well-established principle articulated in International Shoe Co. v. Washington, [146] a court has specific, personal jurisdiction over an out-of-state defendant only if the defendant has had minimum contacts with the state. [147] A state has the power to enforce its laws against an out-of-state defendant by using the state's long-arm statute. [148] The Senate's version of the Internet Gambling Prohibition Act also permits a state to enforce its own anti-gambling laws in federal court. [149]
{43} The issue of jurisdiction over Internet communications has been actively discussed by commentators [150] and, recently, by the courts. [151] As discussed above in Part III.A, the Minnesota Court of Appeals in Minnesota v. Granite Gate Resorts Co., [152] held that the state had jurisdiction over a Nevada on-line gambling business because it purposefully availed itself of the forum by directing an advertisement into the state through the Internet. [153] However, many courts have been more reluctant to exert jurisdiction over an entity which conducts business on the Internet.
{44} Whether personal jurisdiction exists over on-line communications "is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet." [154] Courts have generally divided jurisdictional issues involving the Internet into three categories. First, if a site is merely passive and only provides information or advertises a product or service, then personal jurisdiction does not exist. [155] Otherwise, there "would be nationwide (indeed, worldwide) personal jurisdiction over anyone and everyone who establishes an Internet web site. Such nationwide jurisdiction is not consistent with traditional personal jurisdiction case law. . . ." [156]
{45} The second set of cases concerns situations where there is interactivity between the user and the host computer. In such cases, whether jurisdiction exists is "determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site." [157] Finally, the third category finds personal jurisdiction when a defendant actively conducts business activity on the Internet by "enter[ing] into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet." [158]
{46} Applying the above categories to Internet gambling, availability of jurisdiction would depend on the amount of activity in which the on-line gambling business engaged. If the site is merely providing information about how to place a bet or wager, then such activity would be more like an advertisement. Since Internet advertisements have generally not been deemed sufficient contacts, [159] personal jurisdiction likely would not exist outside of the advertiser's home state. For example, in Hearst Corp. v. Goldberger, [160] the court held that merely advertising on the Internet was the same as advertising in a national magazine, neither of which would provide sufficient minimum contacts in a state where the advertisement is merely seen. [161]
{47} Consequently, a court would likely hold that the section of the IGPA which makes it illegal to provide "information assisting in the placing of bets or wagers" [162] violates the Fourteenth Amendment's Due Process Clause. [163] This phrase would presumably inhibit a passive site located in a state where Internet gambling is legal from posting a phone number which a person can call to place a bet or wager since it "assist[s] in the placing of bets or wagers." Otherwise, the on-line business could be subjected to personal jurisdiction in any state in which its advertisement transmission was received. [164] This result was rejected in Bensusan Restaurant Corp. v. King, [165] where the court held that a business which posted an advertisement on its web site that provided a phone number for people to call and purchase theater tickets was not subject to personal jurisdiction outside of the state because the business did not purposely avail itself of the foreign jurisdiction's laws. [166]
{48} Admittedly, on-line gambling sites which actually transmit wagers or bets would likely be subject to personal jurisdiction because the nature of the contacts would be sufficient because of the interactivity of the on-line transmissions. For example, in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., [167] the court held that a business which operated a web site and sold passwords to subscribers in Pennsylvania was subject to personal jurisdiction in Pennsylvania. [168] The defendant attempted to argue that it only provided information and that Pennsylvanians initiated the contact when they visited its web site. [169] However, the court rejected the argument and found that, through the registration process, the web site operator "knew that the result of these contracts [with the Pennsylvania residents] would be the transmission of electronic messages into Pennsylvania." [170] Consequently, the court held that the web site operator had clear notice of being subject to suit in the state since it chose to conduct business in the forum state. [171] Similarly, almost all Internet gambling sites require that bettors fill out an application and register before they can start using the on-line gambling area. Thus, many Internet gambling businesses also would have the requisite knowledge that they may be subjected to a lawsuit in a foreign jurisdiction. [172]
{49} Even if a state could obtain jurisdiction over an Internet gambling business, its ability to block access to such activity would be limited. As previously mentioned, the Senate bill authorizes states to obtain an injunction in federal district court to prevent further violations of the Internet Gambling Prohibition Act. [173] The Act would allow a district court to issue an injunction and stop the on-line gambling business from transmitting bets, wagers, or gambling information. [174] However, the injunction cannot affect "the transmission of bets, wagers, or related gambling information in, into, or through any State other than the State in which the court is situated." [175]
{50} This restriction significantly limits a state's ability to control Internet gambling under the IGPA. For example, in the Granite Gate case previously discussed, a federal court in Minnesota could issue an injunction against the Internet gambling business which prohibits the Nevada company from transmitting gambling information into only Minnesota. However, since the server (located in Nevada) on which the company's web page is being hosted cannot discern into which state the information is being transmitted, the effect of the injunction would be to prohibit the Internet gambling business from transmitting gambling information to any state -- including those where it may be legal to participate in on-line gambling. This effect would be directly contrary to the explicit prohibition in the Act that the injunction not prevent the transmission of information into any state other than the one where the court is situated (in this case, Minnesota). Consequently, the ability of an individual state to obtain an injunction against a non-resident Internet gambling site is virtually nonexistent. [176]
C. International Jurisdiction & Comity
{51} Even if a state or the federal government could obtain jurisdiction over an Internet gambling business which is located in the United States, a significant problem still remains: many of the Internet gambling businesses are physically located outside of the United States. The House version of the IGPA states Congress' belief that the federal government should have extraterritorial jurisdiction to ensure compliance with the Act. [177] Congress does have the power to pass laws which apply extraterritorially. [178] However, the power of the United States to enforce its laws outside of the country is not unlimited.
{52} There are four generally recognized bases for the United States to obtain extraterritorial jurisdiction over defendants who have no physical presence within the country. [179] First, "national jurisdiction" exists when the offender is a citizen of the country which seeks jurisdiction. [180] Second, "passive personal jurisdiction" can exist if the effect of an activity which occurs outside of the country injures a person within the country. [181] Third, "protective jurisdiction" can be exercised when a national interest has been injured. [182] Finally, "universal jurisdiction" exists when a perpetrator has been physically restrained and the illegal actions are considered "particularly heinous and harmful to humanity." [183]
{53} Examining the bases for jurisdiction results in the conclusion that only the first one would justify the United States' exercise of jurisdiction over an Internet gambling business which is not physically located in the United States. The last two bases, protective and universal jurisdiction, probably would not be sufficient justifications to exert jurisdiction over on-line gambling since gambling, in general, has become widely accepted in the United States [184] and there has been no proof that Internet gambling poses any more of a threat to the country's national interest than Nevada-style casino gambling. Consequently, arguing that the national interest has been injured or that gambling is harmful to humanity likely would not succeed.
{54} Furthermore, the second basis, passive personal jurisdiction, also should not extend jurisdiction since the victims of on-line gambling (i.e., those who place bets or wagers) arguably bring the alleged injuries upon themselves by voluntarily participating in an activity which is not considered a universally condemned crime. Thus, only the first basis, national jurisdiction, would allow the federal government to exert extraterritorial jurisdiction since it has been widely recognized that the United States can exert jurisdiction over its own citizens anywhere in the world. [185]
{55} However, the national jurisdiction basis does not assist in obtaining jurisdiction over non-citizen, on-line gambling operators. For the United States to obtain jurisdiction over foreign citizens, about the only effective method available for the government to enforce its laws is to demand that the foreign country surrender those who are violating United States law by offering gambling to United States citizens. However, the right to make such a demand generally requires that the United States have an extradition treaty with the foreign country. [186] This presents a problem since, for a foreign criminal to be extradited, the crime being committed, in this case, gambling, must be specifically enumerated in the treaty. [187]
{56} The Senate version of the IGPA requires that the Secretary of State negotiate with foreign countries and create international agreements that enable the United States to enforce the IGPA against those who are engaging in the activity outside of the country. [188] The international community has recognized the potential problems that could arise from Internet gambling. In December 1997, more than twenty-five countries sent representatives to the First International Symposium on Internet Gambling Law and Management. [189] The purpose of the symposium was not to discuss the prohibition of Internet gambling, but instead, how countries can work together to create a regulatory structure which solves the problems surrounding on-line gambling. [190]
{57} However, the likelihood that all countries in the world would agree to ban Internet gambling or allow the United States to enforce its laws worldwide against non-citizens is almost nonexistent. Many countries, including Greece, Turkey, Antigua, and Monte Carlo, have already legalized on-line gambling. [191] In addition, Australia has taken the lead in the on-line gambling market by becoming the first industrialized democracy to develop extensive regulations by enacting the Interactive Gambling (Player Protection) Act on March 18, 1998. [192] Therefore, the likelihood that such countries would freely allow the United States to prosecute their foreign citizens is quite minimal, especially if the activity is legal in the national's home country.
{58} Nonetheless, even if the United States does not have a treaty with a foreign country in which a person who is breaking United States law is located, the person could still be extradited through the international doctrine of comity. Comity is defined as "the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws." [193] Thus, a foreign nation may voluntarily surrender a fugitive to the United States. [194] This general acceptance of comity, however, is balanced against a nation's right to sovereignty, which requires that each country respect the independence of another country and not be a judge of the acts which take place within the other country's borders. [195] Since the executive branch of the United States has primary responsibility over foreign affairs, [196] courts are reluctant to force a person in another nation to comply with domestic laws. [197]
{59} This presents a problem for domestic law enforcement because countries which have embraced Internet gambling likely will not allow a licensed business in those countries to be prosecuted by the United States. An interactive gambling consultant to Antigua has stated that each licensee in the country is responsible for complying with the laws of other countries, but as long as the licensee complies with Antiguan law, other nations cannot legislate and infringe upon the laws of Antigua. [198] Furthermore, an Australian member of the Queensland Parliament clearly reinforced this principle by stating that "acceptance of bets from residents of another country which prohibits Internet gambling will not in it's own right be considered as grounds for actions against the Queensland license of the provider." [199]
{60} Practically, if the United States attempted to prosecute foreign nationals under domestic law, even if allowed because of extraterritorial provisions in the IGPA, doing so could pose serious threats to the freedoms which Americans enjoy. For example, if the United States attempted to prosecute a German casino operator who used an on-line service to conduct a gambling business which was transmitted to United States citizens, then presumably Germany would have the same right to prosecute an American citizen who posted an image on his or her web site which is deemed pornographic under German, but not United States, law. [200] Thus, enforcing the IGPA against foreign citizens would be almost impossible.
{61} One particularly problematic provision of the IGPA prohibits a business engaged in gambling from "transmitting information about bets or wagers placed on the Internet." [201] The House bill explicitly exempts from liability advertising or other communication done by licensed gambling businesses in states where they are allowed to operate and which require the recipient of the information to be physically present at the business's location to place a bet or wager. [202] However, the Senate bill does not contain such an exception, thereby posing the potential problem of violating the Constitution's First Amendment right to free speech. [203]
{62} Generally, "[a]dvertisements for legal casinos, and how-to information for persons participating in legal gambling, are not illegal in most cases." [204] Nonetheless, the effect of the Senate bill would prohibit the MGM Grand in Las Vegas, Nevada, for example, from operating a web site [205] which advertises its room and casino services. This would be a direct violation of the Act since the MGM Grand uses a wire communication facility (i.e., the Internet) to transmit information that would assist a person (by advertising a toll-free number to make reservations) in placing a bet or wager at one of its casinos.
{63} In the recent decision of Valley Broadcasting Company v. United States, [206] the Ninth Circuit held that the federal government's prohibition on radio broadcast advertising by legalized Nevada casinos was an unconstitutional restraint on free speech. [207] The statute at issue in the case prohibited the radio or television broadcasting of any gambling advertisements, [208] presumably within a state where such activity was legal. However, the Supreme Court has recognized that commercial speech is protected by the First Amendment, [209] although the amount of protection is less than other forms of protected speech. [210] The Court articulated a test in Central Hudson Gas & Electric Corp. v. Public Service Commission, [211] to determine whether commercial speech should be afforded First Amendment protection:
At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.[212]
{64} Using this test, the Ninth Circuit in Valley Broadcasting concluded that the government could not prohibit radio and television stations from broadcasting gambling advertisements. [213] First, both parties agreed that the activity being advertised, gambling, was neither unlawful nor misleading [214] since it originated in Nevada where gambling was legal. Thus, as long as the state where an Internet gambling business is established allows such activity, then the first prong of the Central Hudson test would be satisfied.
{65} Next, the court in Valley Broadcasting analyzed the government's proffered interests in prohibiting gambling advertisements and whether those interests were substantial. The government asserted two interests: (1) its interest in reducing the amount of public participation in gambling, and (2) its interest in providing protection for those states which have not legalized gambling within the state. [215] The court found that the first interest was substantial to protect the health, welfare, and safety of citizens. [216] The second interest proffered by the government was also found to be substantial to provide states with an effective means of ensuring their anti-gambling polices are fulfilled. [217] These same conclusions likely would be reached in relation to Internet gambling.
{66} Under the third prong of the Central Hudson test, however, the government likely could not prohibit the Internet transmission of information which relates to gambling. This part of the test requires a court to determine whether the imposed regulation directly advances the government's proffered interests. [218] In Valley Broadcasting, the Ninth Circuit found that the regulation prohibiting gambling advertisements over the airwaves did not advance the government's interest in discouraging people from gambling. [219] The court found significant that the statute excepted from the general ban advertisements for state-run lotteries, non-profit lotteries, and any gambling conducted by Indian Tribes. [220] Thus, the court found that the widespread advertising permitted by the statute made it impossible for the government to discourage participation in commercial lotteries and that the exception which allows Indian Tribes to advertise in any state undermined the government's proffered interest in protecting those states which have not legalized gambling. [221] Thus, the court struck down the prohibition on television and radio gambling advertisements as unconstitutional. [222]
{67} Similarly, a court would likely conclude that prohibiting the transmission of gambling information on the Internet by a legalized gambling business would be unconstitutional for several reasons. First, as in Valley Broadcasting, the government's interest in discouraging gambling would not be achieved by prohibiting Internet advertisements since such advertisements are permitted by state-run lotteries, Indian Tribes, and (according to the Ninth Circuit) any gambling business. Since all but two states allow some form of legalized gambling, [223] gambling advertisements could exist everywhere around the country. Thus, a legalized Internet gambling business in California, for example, should be able to advertise on the Internet to citizens in the other forty-nine states just as a West Virginia state-run lottery can advertise in Pennsylvania.
{68} Second, the House version of the IGPA would further undermine the government's own argument. The House version allows legalized gambling businesses to advertise on the Internet if the bettor has to be physically present at the location to place a wager or bet. [224] This exception would allow many gambling businesses such as riverboats in New Orleans, casinos in Nevada and New Jersey, and horse tracks in West Virginia to transmit information on the Internet which assists a person in placing a bet or wager. Such advertisements would also be permitted to cross state boundaries since a person has to be physically present to place a bet or wager. The government's argument that it must assist states which prohibit gambling from being subjected to out-of-state advertisements therefore fails since the IGPA would permit such advertisements by some gambling businesses. Consequently, because neither of the government's likely proffered interests would be advanced by the law, the portion of the Act which prohibits the transmission of gambling information would be deemed an unconstitutional abridgement of free speech.
{69} There has been a dramatic increase in the number of Indian casinos over the last decade, [225] thereby bringing much needed revenue to the reservations. [226] This rapid rise of Indian gaming resulted from the passage of the Indian Gaming Regulatory Act of 1988 (IGRA). [227] The Act allows Indian Tribes to establish gaming opportunities on tribal lands. [228] Although the laws described above may be applicable to non-Indian gambling sites, a significant issue arises when Indian Tribes offer gambling opportunities on the Internet. Several Indian Tribes, including the Coeur d'Alene Tribe in Idaho, have set up gambling sites on the Internet. [229] However, states have been unable to stop the Tribes from offering Internet gaming. [230]
{70} The IGRA requires that gaming conducted by Indian Tribes be conducted "on Indian lands" [231] and that casino gambling activities, in particular, be "located in a State" which permits Indian Tribes to conduct gaming. [232] Recently, a dispute has developed about exactly what those phrases mean. In November 1997, the National Indian Gaming Commission held a public hearing on regulating Internet gambling to determine exactly what the phrase "on Indian lands" means. [233] Moreover, the Missouri attorney general has filed suit against the Coeur d'Alene Indian Tribe, Unistar Entertainment (the company which manages the Tribe's web site), and Executone (Unistar's parent company) in Idaho to prevent the offering of Internet gambling to Missouri residents. [234] Although the court in Missouri v. Coeur d'Alene Tribe, [235] has not yet decided whether the state can prohibit Internet gambling, the Tribe won its first battle when the court refused to remand the case back to a state court after it held that the Indian Gaming Regulatory Act preempted the field with respect to all gaming issues pertaining to Indian Tribes. [236] In addition, the Tribe itself was dismissed from the lawsuit because Indian Tribes have broad sovereign immunity privileges; [237] the lawsuit against Unistar and Executone proceeds, however, despite the fact that any judgment against the third, non-immune parties will have an affect on the Tribe. [238]
{71} At issue in the case is whether, by offering gambling on the Internet from a location on the Indian reservation, the gaming is conducted "on Indian lands." [239] The state claims that the Tribe and Unistar are not conducting gaming on the Indian reservation since bets themselves are not being placed on Indian lands; the Tribe and Unistar claim that gaming is conducted on Indian lands since the web site and server are located on the Indian reservation. [240] Although the court has not yet decided that issue, the court did state that "even assuming [the Indian Tribe and Unistar are] arguing a strained construction of the federal legislation,which may very well not contemplate broadcasting beyond Indian Territory,there is clearly a federal question present." [241] This seems to suggest that the court is not inclined to find that the gambling is being conducted "on Indian land" as required by the legislation. However, given the fluid nature of the Internet, the court would be making a precedent-setting decision about where the gambling actually occurs.
{72} In deciding the case, the court must carefully consider the technical nature of how the Internet operates. A home page or web site is located on a server which is at a physically identifiable location. [242] For example, Microsoft's web site is hosted on a physically identifiable server in the state of Washington. [243] Although the web site may be accessible in Missouri, it certainly is not located there. A contrary conclusion does not comport with the workings of the Internet which requires a user to access the web site at the web site's host location; if the server is not working at that location, then the web site is not available to the user. Thus, although the gambling web site may be offered throughout the world, the court in Coeur d'Alene should conclude that it is not located in Missouri but, instead, on Indian lands in Idaho, thereby allowing the Tribe to conduct gambling on the Internet.
{73} Nonetheless, the court's decision in Coeur d'Alenewill have significant implications. If the court decides that Indian Tribes which set up web sites offer gambling "on Indian lands," then legalized Internet gambling may become widespread in the United States. Gambling on Indian reservations is only subject to IGRA, [244] thereby precluding regulation and enforcement under the proposed IGPA. Furthermore, Indian Tribes are already specifically exempted from the prohibition on advertising through television and radio broadcasts, [245] thereby allowing them to advertise both in states which allow gambling and in those which forbid it. Thus, the IGPA would have almost no effect if Indian Tribes are allowed to offer on-line gaming.
{74} Even if states have the constitutional right to enact their own anti-Internet gambling laws or if Congress passes the Internet Gambling Prohibition Act, enforcing the provisions against the home user who places a bet will be difficult, if not impossible. [246] The Act before Congress allows states or federal governments to prosecute those who place bets or wagers. [247] This section discusses the two primary reasons that law enforcement likely will be unable to prosecute individuals: (1) possible invasion of privacy claims, and (2) the ability of a person to anonymously use the Internet.
{75} The Department of Justice currently believes that Internet gambling is illegal, [248] yet there has been only one attempted prosecution of bettors or gambling providers, [249] primarily because it has no means to monitor the Internet. [250] Even if the government did have a method to determine whether a business was offering illegal gambling on-line, there is an issue of privacy regarding how the government would go about finding individuals who bet or wagered illegally. [251] There are two primary methods available to the federal and state governments for determining whether an individual illegally placed a bet or wager on-line: the government could (1) establish their own on-line gambling site, or (2) wiretap a person's Internet communications.
{76} The first alternative is for the law enforcement agency, itself, to establish an Internet gambling site, require individuals to register with the site, and allow them to place bets or wagers which would provide evidence of a direct violation of the IGPA. However, such a sting operation by the government may be deemed entrapment. Entrapment occurs when "the government induces a defendant to commit a crime that he was not otherwise predisposed to commit." [252] The primary focus is on whether the defendant was "predisposed" to committing the crime. [253] Since the Supreme Court's decisions regarding what constitutes predisposition have been unpredictable, [254] determining with foresight whether the government's creation of a gambling web site would be entrapment is difficult. Nonetheless, the idea that the government would purposely make a web site available where people can commit an illegal act would likely cause significant public indignation, especially since gambling has become a generally accepted form of entertainment.
{77} The second primary tool which law enforcement could use is to wire tap an Internet user's telephone line and monitor his or her Internet activity. [255] However, the effectiveness of such action is quite limited. Although wire taps are allowed under federal law and the laws of thirty-seven states, [256] tapping an Internet communication would require the government to follow the same procedures which have been established to tap telephone communications. To conduct such wiretapping, the police first must obtain a court order. [257] However, to obtain a court order authorizing the wire tap, the police must first show probable cause that a crime is being committed. [258] This creates a circular problem since such proof concerning illegal Internet gambling activity would be difficult to obtain without a wire tap. [259]
{78} If the government could obtain a record of the on-line communications in which users engaged and the gambling transactions into which they entered, then such information would likely provide sufficient evidence that the anti-gambling statute has been violated. However, without a warrant (which requires probable cause), the government is not able to obtain such information from any communication facility, including telephone companies or Internet service providers. [260] Practically, for the government to obtain probable cause, it could possibly obtain a list of users who have registered with an on-line gambling business itself. Such a list, however, is not conclusive that the person placed a bet or wager on-line in violation of the law. One possibility is that the individual registered with the site but later decided not to gamble. Another realistic possibility is that the person listed is not the same as the person who either (a) registered as another individual and falsely used that individual's identity, or (b) stole another person's password to gain access to the site. Therefore, obtaining a wire tap to prove that an individual has engaged in illegal Internet gambling or obtaining sufficient information about an individual's on-line activity to prosecute would be difficult. [261]
{79} A more significant problem is the anonymity which the Internet affords its users. Internet users have the capability of concealing their identity or easily assuming the identity of a new (but not necessarily illegal) character. For example, a person could have an alias on an Internet server which is located in a different state,which may legalize on-line gambling, from the one in which they live.
{80} Furthermore, if the on-line gambling site does not require its users to register, then the only information available to the business is the IP address of the remote computer from which the person accessed the site. If an on-line gambling casino accepts applications for its site or requires users to register, however, then it may be deemed to know from which state its users are located. Registration would provide the requisite knowledge so that on-line gambling businesses would be required to prevent access by individuals in states where such gambling is not legal. For example, in United States v. Thomas, [262] the Sixth Circuit held that computer operators in California who offered sexually explicit photographs could be held to the contemporary community standards of western Tennessee when determining whether the transmitted materials were obscene. [263] The court stated that the computer operators easily had the ability to prevent Tennesseans from accessing the site since applications were required; thus, the "defendants had in place methods to limit user access in jurisdictions where the risk of a finding of obscenity was greater than that in California." [264]
{81} On-line gambling sites could work around this result by not requiring their users to register. Instead, they could simply require a third-party verification system such as Adult Check, [265] which, for a yearly fee, provides passwords for adults to access certain sites. Although the person is registered with Adult Check, an on-line gambling business which requires users to log on with their Adult Check password does not know the user's location. However, if the burden of determining the user's location is not too great, a court may nonetheless require an on-line gambling operator to undertake such actions. [266]
{82} Another way for a person to be anonymous on-line is to use an Internet form of cash payment such as DigiCash [267] or Cyber Cash. [268] These forms of payment allow a person to use a credit card, for example, to obtain a prepaid account (like a prepaid phone card) with a third party which can be used at Internet sites which accept such forms of payment. The user instructs the third party payor to charge his or her credit card a certain amount. This amount is then stored in an account at the third party payor. When a person wishes to purchase a product, or to place a bet, on the Internet from a company who also has an account with the third party, the user instructs the third party to pay the amount.
{83} However, the identity of the parties involved is undetectable since the third party uses several layers of encryption, with each layer using several undecipherable formulas. [269] The ability to encrypt Internet communications virtually masks the entire transaction and prevents it from being traced or wire tapped. [270] A casino operator can employ very strong encryption devices that use formulas which change the actual numbers and words displayed into different numbers based on the formula. [271] To determine what the numbers being transmitted mean, one must be able to break the code,a nearly impossible task, especially given the strong encryption devices available today. [272] Therefore, it would be almost fruitless for law enforcement authorities to wire tap either a suspected bettor's or gambling business's phone lines.
{84} Thus, using this form of third-party payment device instead of directly providing a credit card (which can easily be traced and oftentimes requires a correct address for verification) to the on-line business allows a user to gamble without revealing his or her true identity. This anonymity, along with the availability of encryption devices, would make it very difficult for law enforcement to determine whether an individual has placed an illegal bet or wager on-line.
{85} Those who argue against Internet gambling claim that it will increase the already large number of social burdens which result from gambling: addiction, crime, diminished job performance, and reduced spending on other forms of entertainment. [273] However, gambling is not entirely detrimental; it does provide some benefits: "(1) serves as a social adhesive for the working class; (2) provides a form of adult play; (3) provides a useful diversion of the stresses of the modern world; and (4) provides enjoyment to elderly citizens and others who would otherwise have no entertainment outlets." [274]
{86} Despite state attempts to crack down on Internet gambling and the various federal statutes which have been enacted or are under consideration, Internet gambling likely will remain available and will be utilized by many people in the United States. One reason is that there is a critical shortage of resources, training, and staff expertise available to law enforcement to fight cyber-crime. [275] Arguably, Internet gambling is not as serious as some types of crime since gambling is usually considered a victimless crime; thus, gambling has a lower priority in crime prevention given the more serious nature of many crimes in our society. [276]
{87} Opponents of Internet gambling frequently advance the argument that it should be prohibited because the unregulated nature of the activity is a serious problem and people should not be playing in that type of unregulated environment. [277] However, as Congress rightly admitted when it passed the Communications Decency Act: "The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation." [278] In essence, the position of Congress is that the Internet should be self-regulating. [279]
{88} Many on-line gambling sites have already engaged in several self-regulating mechanisms. For example, one site limits the amount that customers can wager to $500 per month. [280] Some sites display a list of twenty questions that would-be customers can use to determine whether they are compulsive gamblers. [281] Others even include a link to a Gambler's Anonymous site. [282] Finally, some sites also prove that their odds of winning are fair by having reputable accounting firms audit the algorithms used to determine payouts. ;[283]
{89} Moreover, the Interactive Services Association's [284] Interactive Gaming Council has created a ten-point Code of Conduct for its members which establish guidelines for Internet gaming. [285] The Code governs such conduct as regulatory compliance, accountability, consumer privacy, truth in advertising, dispute resolution, limiting access by minors, controlling compulsive gambling, processing banking transactions, prize payouts, and corporate citizenship. [286] Thus, on-line gambling businesses have undertaken a significant amount of self-regulation.
{90} Nonetheless, another concern that critics have with on-line gambling is that minors have easy access to such sites. Critics feel that Internet gambling will make it much easier for minors to have access to forms of gambling which they otherwise would be prevented from engaging in if, for instance, they had to go into a casino or a bingo parlor. However, studies have not proven this argument to be true. A 1996 Australian study about minors and on-line gambling,where legalized gambling is much more prevalent,found that there was "no apparent correlation . . . between use of the Internet and/or video games with gambling behaviours." [287] The study concluded that "it is questionable . . . [that] new delivery mechanisms themselves will significantly impact on what is already deeply imbedded within our culture. . . . Broader availability clearly relates to broader exposure but as the psychological literature demonstrates, broader exposure by itself, does not necessarily lead to problem gambling." [288] Finally, the study concluded that "[u]ltimately parental responsibility and parental/family influences have to be acknowledged as the key factors affecting responsible or irresponsible gambling among youth." [289]
{91} Thus, the Australian study demonstrates that there is very little, if any, connection between the availability of Internet gambling and an increased risk that children will be more prone to gamble. No report has been located which concludes otherwise; no report has even found that children are significantly at risk or have lost money gambling on the Internet. [290] Similarly, no study has been reported that the availability of on-line gambling increases the risk that gambling addicts will lose more money on the Internet than they would buying lottery tickets or going to the local Indian casino. Consequently, completely prohibiting an activity when there has been no evidence that it poses any serious risks is inappropriate.
{92} Until such risks become evident, the government should continue to allow the Internet gambling industry to be self-regulating. Self-regulation exists not only at the business level, but also home users must engage in self-regulation of their behavior on-line. The responsibility to ensure that children do not access on-line gambling sites belongs with the parents, not the government. The government cannot be parents to children. [291] Parents should have the responsibility of monitoring what their children access on the Internet. Even if they do not have the time or ability to monitor all on-line activities at all times of the day, there are inexpensive software programs such as Cyber Sitter [292] or Net Nanny [293] which allow parents to prevent their children from accessing certain sites. [294]
{93} At the very least, Congress should wait until the final report of the National Gambling Impact Study Commission [295] is issued in 1999 before rushing to prohibit something which possibly does not pose a serious problem. Nonetheless, even if legislation is enacted which prohibits Internet gambling, the likelihood of prosecution is not great. [296] Thus, instead of trying to prohibit an activity which cannot be prohibited and has become generally accepted throughout most of the United States, [297] the more practical approach is to impose some regulations on Internet gambling. [298] This would allow the states and federal government to collect the potentially large amount of tax revenue from gambling operators which become established in the United States. [299] Otherwise, merely prohibiting Internet gambling sites from establishing themselves in the United States forces them offshore. This would certainly not be a positive development given the nonexistent regulations by some international locations.
{94} For model legislation, Congress could look at the Interactive Gambling (Player Protection) Act of 1998 enacted in Queensland, Australia to regulate, but not prohibit, Internet gambling. [300] This regulation addresses all of the concerns stated by those who support the prohibition of Internet gambling. First, through the use of a comprehensive system of licensing, auditing, inspection, and enforcement powers, the government will ensure the validity of all businesses which offer Internet gambling. [301] Second, to prevent access by minors, players must register with the gambling provider and provide proof of their age, identity, and place of residence; to place bets, players must enter personal identification numbers or passwords. [302] Third, to protect against compulsive gambling, service providers must offer players the ability to set maximum bet levels or total bets during a period. [303] The Internet gambling businesses are also required to provide players and their families with the ability to submit an application to ban the player from further participation in the on-line gambling activity. [304] Finally, the law imposes taxes on the Internet gambling businesses. [305]
{95} Congress could enact legislation similar to the Australian law which would be more effective than prohibiting Internet gambling. In particular, it could impose licensing and registration standards on Internet gambling similar to those imposed on casinos in Nevada and New Jersey. Licensing Internet gambling sites would likely be effective because most United States citizens would likely prefer to play on United States sites which they know are regulated and secure. This would create the positive effect of coercing foreign gambling sites into obtaining a license and subjecting them to the same stringent regulations as the domestic sites, or else to the risk that people will stop using the foreign sites in favor of domestic ones which are regulated. Granted, there are unscrupulous operators who will take advantage of consumers, especially because of the low barriers to entry into the on-line gambling world. However, regulation, especially with international cooperation, instead of prohibition would help to prevent unscrupulous operators.
{96} Society's attitude toward gambling is ambiguous. For example, some view gambling on the Internet in the form of blackjack, slots, or roulette as disdainful, yet they embrace, and, moreover, encourage,other activities such as Internet stock and futures trading [306] (which is actually a legalized form of gambling that can carry the same amount of risk for unknowing participants). Some states enhance this ambiguity by prohibiting most forms of gambling, yet they promote it by operating state-run lotteries. Even some social organizations such as churches, which regard gambling as a vice, promote the activity by running their own bingo programs. Given this ambiguity, it is arguably hypocritical for the state or federal governments to prohibit Internet gambling, yet condone other forms of the activity which are no less risky.
{97} Whether states have the power to enact their own legislation to restrict Internet gambling is questionable because of the dormant Commerce Clause. Even if they do have such a right, enforcement by either the state or federal governments will be difficult, if not impossible, because of the jurisdictional hurdle which must be overcome to prosecute out-of-state and international defendants.
{98} Since the Internet Gambling Prohibition Act proposed by Congress likely will not be successful at stopping Internet gambling, Congress should accept it as a form of recreation in which some people should have the right to engage. If Congress prohibits Internet gambling, the on-line gambling industry will be driven offshore where there may be no age or validation regulations, thereby increasing the very risks that the prohibition laws are supposed to prevent. Instead of trying to prevent the impossible, Congress should either let Internet gambling become self-regulating or, at most, impose regulations that are similar to those already imposed on legalized gambling sites in the United States. This would allow American citizens the ability to continue exercising their freedom of choice about the forms of entertainment in which they want to participate and would provide additional revenue to the tax coffers of the state and federal governments.