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Wire Act Overview
In 2002, the Department of Justice (”DOJ“) won a case against an Internet Gambling Operator using the Wire Act, which was turned over by an appellate judge. The DOJ appealed the case to the 5th Circuit Court, which upheld the decision of the lower court, which stated that it agreed that the Wire Act was for Sports Betting only.
The DOJ has not appealed to the Supreme Court. It has been said that the DOJ knew it would lose the case, ergo, online gambling would be legal in the States if the Supreme Court agreed with the 5th Circuit.
Download the the November 2002 ruling by United States Fifth Circuit Court of Appeals where they uphold District Court Judge Stanwood Duval's opinion that the Wire Act "does not prohibit Internet gambling 'on a game of chance'. here. 
The Wire Act was not ever intended to be the jurisprudence for a technology that hadn’t even been invested yet.
AMERICAN law is being applied to foreign companies and directors because US courts have ruled that a crime takes place where the wager is placed and not where the online bookmaker is based.
Gambling in the US is covered by a complex mix of laws that vary from state to state, and federal laws that cover the entire country.
The Federal Wire Act of 1961 has been the main prosecutorial weapon used against online gaming firms.
It states that: ‘Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.’
The Department of Justice argues that the act means that all online gambling is illegal. But US courts have ruled that it applies only to sports betting, not poker or online casinos.
Investors in online-gaming firms are worried about The Prohibition of Illegal Gambling Businesses Act of 1972. It states that: ‘Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both.’
The law has investors worried that US prosecutors could come after them, arguing that they are financing illegal gambling businesses. The law could also be used to prosecute directors of the firms and anyone who helped the company — from advertising to public relations. The legislation covering gaming was largely drawn up before the arrival of the internet. These concerns are being tackled by the Internet Gambling Prohibition and Enforcement Act now before Congress.
Also known as the Goodlatte-Leach bill, after the Republican politicians who are championing it, the bill would update the Wire Act to clearly outlaw internet gaming across America.
It would also prevent banks and credit-card companies from processing payments to internet-gambling sites.
A vote is scheduled for later this fall and the gaming industry believes it has a slim chance of passing.
In addition, seven states — Illinois, Indiana, Louisiana, Michigan, Oregon, South Dakota and Washington — have legislation clearly outlawing online gaming.
One thing is clear though. It was aimed at Sports Betting over the phone.
In the case of United States v. Cohen, 260 F.3d 68, 76 (2nd Cir. 2001) an operator of an offshore sports betting website was charged and convicted of violations of the federal Wire Wager Act, 18 U.S.C. 1084. Jay Cohen accepted bets from U.S. citizens over the telephone as well as from punters on the Internet.
Many dispute the conviction given the recent perceived easing on IGaming, and an increased acceptance of mainstream Sports Betting over the Internet.
However, at trial, the evidence demonstrated that Cohen, president of WSE, a sports betting company located in Antigua, caused WSE to take bets on various sporting events and contests from Americans.
As the evidence at trial demonstrated, among other things, COHEN solicited Americans to call WSE through the use of toll-free 800 telephone numbers, and to contact WSE via WSE’s Internet website. The Wire Wager Act makes it a crime to, among other things, use telephone lines in interstate or foreign commerce for the placement of sportsbets, or for the transmission of information assisting in the placing of bets on sporting events and contests.
As demonstrated at trial, through advertisements placed in various United States newspapers and magazines, WSE invited customers from throughout the United States to contact WSE by telephone or by Internet and open a sports betting account; to wire transfer money to WSE to fund that account; and then to bet on American sporting events and contests using that account.
It is the position of the Department of Justice that a wager, including an electronic or phone wager, occurs in the location it is placed and in the location in which it is received. To be legal, the wager must comply with the laws of the states at both ends of the transaction. Therefore, individuals or enterprises that solicit or accept wagers in states that have not authorized them to engage in such conduct violate state criminal law, and in many cases, federal criminal law as well.
One way or another, with the United Kingdom paving the way of future online betting laws, the USA will have to come to a decision.
Or continue to lose out on millions in potential taxation and licensing revenues.
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The following is the November 2002 ruling by United States Fifth Circuit Court of Appeals where they uphold District Court Judge Stanwood Duval's opinion that the Wire Act "does not prohibit Internet gambling 'on a game of chance'." Text of Judge Duval's ruling.
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UNITED STATES COURT OF APPEALS - For the Fifth Circuit No. 01-30389
In Re: MASTERCARD INTERNATIONAL INC. INTERNET GAMBLING LITIGATION
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LARRY THOMPSON, On behalf of himself and all others similarly situated, Plaintiff-Appellant,
VERSUS
MASTERCARD INTERNATIONAL; FLEET BANK, (RHODE ISLAND); and FLEET CREDIT CARD SERVICES LP, Defendants-Appellees.
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In Re: VISA INTERNATIONAL ASSOCIATION INTERNET GAMBLING LITIGATION
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LAWRENCE BRADLEY, On behalf of himself and all others similarly situated, Plaintiff-Appellant,
VERSUS
VISA INTERNATIONAL SERVICE ASSOCIATION; TRAVELERS BANK USA CORP, Defendants-Appellees.
Appeal from the United States District Court For the Eastern District of Louisiana November 20, 2002
Before DeMOSS, STEWART, and DENNIS, Circuit Judges. DENNIS, Circuit Judge:
In this lawsuit, Larry Thompson and Lawrence Bradley (”Thompson,“ ”Bradley,“ or collectively ”Plaintiffs“) attempt to use the Racketeer Influenced and Corrupt Organizations Act (”RICO“), 18 U.S.C. §§ 1961-1968, to avoid debts they incurred when they used their credit cards to purchase ”chips“ with which they gambled at on-line casinos and to recover for injuries they allegedly sustained by reason of the RICO violations of MasterCard International, Visa International, and banks that issue MasterCard and Visa credit cards (collectively ”Defendants“).[1] The district court granted the Defendants’ motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. We AFFIRM.
I.
Thompson and Bradley allege that the Defendants, along with unnamed Internet casinos, created and operate a ”worldwide gambling enterprise“ that facilitates illegal gambling on the Internet through the use of credit cards. Internet gambling works as follows. A gambler directs his browser to a casino website. There he is informed that he will receive a gambling ”credit“ for each dollar he deposits and is instructed to enter his billing information. He can use a credit card to purchase the credits.[2] His credit card is subsequently charged for his purchase of the credits. Once he has purchased the credits, he may place wagers. Losses are debited from, and winnings credited to, his account. Any net winnings a gambler might accrue are not credited to his card but are paid by alternate mechanisms, such as wire transfers.
Under this arrangement, Thompson and Bradley contend, ”[t]he availability of credit and the ability to gamble are inseparable.“[3] The credit card companies facilitate the enterprise, they say, by authorizing the casinos to accept credit cards, by making credit available to gamblers, by encouraging the use of that credit through the placement of their logos on the websites, and by processing the ”gambling debts“ resulting from the extension of credit. The banks that issued the gamblers’ credit cards participate in the enterprise, they say, by collecting those ”gambling debts.“
Thompson holds a MasterCard credit card issued by Fleet Bank (Rhode Island) NA. He used his credit card to purchase $1510 in gambling credits at two Internet gambling sites. Bradley holds a Visa credit card issued by Travelers Bank USA Corporation. He used his credit card to purchase $16,445 in gambling credits at seven Internet gambling sites. Thompson and Bradley each used his credits to place wagers. Thompson lost everything, and his subsequent credit card billing statements reflected purchases of $1510 at the casinos. Bradley’s winning percentage was higher, but he fared worse in the end. He states his monthly credit card billing statements included $7048 in purchases at the casinos.
Thompson and Bradley filed class action complaints against the Defendants on behalf of themselves and others similarly situated. They state that the Defendants participated in and aided and abetted conduct that violated various federal and state criminal laws applicable to Internet gambling. Through their association with the Internet casinos, the Defendants allegedly ”directed, guided, conducted, or participated, directly or indirectly, in the conduct of an enterprise through a pattern of racketeering and/or the unlawful collection of unlawful debt,“ in violation of 18 U.S.C. § 1962(c).[4]They seek damages under RICO’s civil remedies provision,[5] claiming that they were injured by the Defendants’ RICO violations. They also seek declaratory judgment that their gambling debts are unenforceable because they are illegal. Upon motions by the Defendants, the district court dismissed the Plaintiffs’ complaints. In a thorough and careful opinion, the court determined that the Plaintiffs not only could not satisfy the necessary prerequisites to a RICO claim but also could not establish their standing to bring such a claim. The Plaintiffs now appeal.
II.
We review a district court’s grant of a Rule 12(b)(6) motion de novo, applying the same standard used below.6 ”In so doing, we accept the facts alleged in the complaint as true and construe the allegations in the light most favorable to the plaintiffs.“[7] But ”conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.“[8]
III.
All RICO violations under 18 U.S.C. § 1962 entail ”(1) a person who engages in (2) a pattern of racketeering activity, (3)connected to the acquisition, establishment, conduct, or control of an enterprise.“[9] As to the second element, a RICO plaintiff may show that the defendant engaged in the collection of unlawful debt as an alternative to showing the defendant engaged in a pattern or racketeering activity.[10] A RICO claim alleging a violation of § 1962(c), as here, also requires that the defendant ”participate[d] in the operation or management of the enterprise itself.“[11] Of these required elements, the district court concluded that Thompson and Bradley failed to plead facts showing a pattern of racketeering activity or the collection of unlawful debt; a RICO enterprise; or participation in the operation of management of the enterprise. We agree that the Plaintiffs’ allegations do not show a pattern of racketeering activity or the collection of unlawful debt. Because this conclusion, alone, is dispositive, we need not consider whether the Plaintiffs sufficiently alleged the other elements.
”A pattern of racketeering activity requires two or more predicate acts and a demonstration that the racketeering predicates are related and amount to or pose a threat of continued criminal activity.“[12] The predicate acts can be either state or federal crimes.[13] Thompson and Bradley allege both types of predicate acts.
On appeal, Thompson alleges that the Defendants’ conduct violated a Kansas statute that criminalizes five types of commercial gambling activity.[14] Only two sections of the statute—sections (c) and (e)—are even remotely relevant here. Neither implicates the Defendants’ conduct. Because the Defendants completed their transaction with the Plaintiffs before any gambling occurred, that transaction cannot have involved taking custody of something bet or collecting the proceeds of a gambling device. Both of those activities, which constitute commercial gambling under Kansas law, necessarily ”can only take place after some form of gambling [has been] completed.“[15] Accordingly, we find that Thompson fails to identify a RICO predicate act under Kansas law.[16]
Bradley alleges on appeal that the Defendants’ conduct violated a New Hampshire gambling statute aimed at persons who operate or control places where gambling occurs.[17] Bradley did not, however, allege a violation of the statute in his complaint. In any event, this statute is patently inapplicable to the Defendants under the facts alleged. Indeed, Bradley makes no effort in his briefs to explain its applicability. Accordingly, we find that Bradley, too, fails to identify a RICO predicate act under a state criminal law.[18]
Thompson and Bradley both identify three substantive federal crimes as predicates—violation of the Wire Act, mail fraud, and wire fraud.[19] The district court concluded that the Wire Act concerns gambling on sporting events or contests and that the Plaintiffs had failed to allege that they had engaged in internet sports gambling.[20] We agree with the district court’s statutory interpretation, its reading of the relevant case law, its summary of the relevant legislative history, and its conclusion. The Plaintiffs may not rely on the Wire Act as a predicate offense here.[21]
The district court next articulated several reasons why the Plaintiffs may not rely on federal mail or wire fraud as predicates.[22] Of these reasons, two are particularly compelling. First, Thompson and Bradley cannot show that the Defendants made a false or fraudulent misrepresentation.[23] Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling are not illegal. Hence, the Defendants could not have fraudulently represented the Plaintiffs’ related debt as legal because it was, in fact, legal. We agree that ”the allegations that the issuing banks represented the credit charges as legal debts is not a scheme to defraud.“[24] Second, Thompson and Bradley fail to allege that they relied upon the Defendants’ representations in deciding to gamble.[25] The district court correctly stated that although reliance is not an element of statutory mail or wire fraud, we have required its showing when mail or wire fraud is alleged as a RICO predicate.[26] Accordingly, we conclude that Thompson and Bradley cannot rely on the federal mail or wire fraud statutes to show RICO predicate acts.[27]
In the alternative, Thompson and Bradley allege that the Defendants engaged in the collection of unlawful debt. Under § 1961, a RICO plaintiff may attempt to show that the debt is unlawful because it was incurred or contracted in an illegal gambling activity or in connection with the illegal business of gambling or because it is unenforceable under usury laws or was incurred in connection with the business of lending at usurious rates.[28] Neither Thompson nor Bradley raise the specter of usury. And, as we have already found, the Defendants’ conduct did not involve any violation of a state or federal gambling law. Thus, we agree with the district court’s conclusion that the Plaintiffs have not sufficiently alleged ”the collection of unlawful debt.“[29]
Because Thompson and Bradley cannot prove a necessary element of a civil RICO claim, namely that the Defendants engaged in a pattern of racketeering activity or the collection of unlawful debt, we hold that dismissal is proper under Rule 12(b)(6).[30]
Finally, we reiterate the district court’s statement that ”RICO, no matter how liberally construed, is not intended to provide a remedy to this class of plaintiff.“[31] Thompson and Bradley simply are not victims under the facts of these cases. Rather, as the district court wrote, ”they are independent actors who made a knowing and voluntary choice to engage in a course of conduct.“[32] In engaging in this conduct, they got exactly what they bargained for—gambling ”chips“ with which they could place wagers. They cannot use RICO to avoid meeting obligations they voluntarily took on.
IV.
For the foregoing reasons, we AFFIRM the judgment of the district court.
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[1] Thirty-three virtually identical cases were transferred to the Eastern District of Louisiana through multidistrict litigation. Of these, the two on appeal were selected as test cases and consolidated for pre-trial purposes. See In re Mastercard Int’l Inc., Internet Gambling Litigation and Visa Int’l Internet Serv. Ass’n Internet Gambling Litigation, 132 F. Supp. 2d 468, 471 n.1 (E.D. La. 2001).
[2] Gamblers can purchase the credits through online transactions or by authorizing a purchase via a telephone call. Gamblers also can purchase the credits via personal check or money order using the mails.
[3] The Plaintiffs state that 95% of Internet gambling business involves the use of credit cards.
[4] ”It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.“ 18 U.S.C. § 1962(c).
[5] 18 U.S.C. § 1964.
[6] Nolen v. Nucentrix Broadband Networks, Inc., 293 F.3d 926, 928 (5th Cir. 2002); see also Rubinstein v. Collins, 20 F.3d 160, 166 (5th Cir. 1994) (”Such dismissals may be upheld only if it appears that no relief could be granted under any set of facts that could be proven consistent with the allegations." (internal quotation and citation omitted)).
[7] Nolen, 293 F.3d at 928 (citing Rubinstein, 20 F.3d at 166).
[8] Id. (citing Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993)).
[9] Crowe v. Henry, 43 F.3d 198, 204 (5th Cir. 1995) (citing Delta Truck & Tractor, Inc. v. J. I. Case Co. , 855 F.2d 241, 242 (5th Cir. 1988)).
[10] 18 U.S.C. § 1962(a)-(c); see also Nolen, 293 F.3d at 928-29.
[11] Reves v. Ernst & Young, 507 U.S. 170, 185 (1993).
[12] St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 441 (5th Cir. 2000) (citing Word of Faith World Outreach Ctr. Church, Inc. v. Sawyer, 90 F.3d 118, 122 (5th Cir. 1996)).
[13] 18 U.S.C. § 1961(1).
[14] Kan. Stat. Ann. § 21-4304. This statute, which states that commercial gambling is a ”level 8, nonperson felony,“ defines commercial gambling as: ”(a) Operating or receiving all or part of the earnings of a gambling place; (b) Receiving, recording, or forwarding bets or offers to bet or, with intent to receive, record, or forward bets or offers to bet, possessing facilities to do so; (c) For gain, becoming a custodian of anything of value bet or offered to be bet; (d) Conducting a lottery, or with intent to conduct a lottery possessing facilities to do so; or (e) Setting up for use or collecting the proceeds of any gambling device.“
[15] See In re Mastercard, 132 F. Supp. 2d at 479.
[16] Thompson has abandoned his reliance on three other violations of Kansas law he alleged below. Violations of those statutes cannot serve as predicates because they identify only misdemeanor offenses. See 18 U.S.C. § 1961(1)(A).
[17] N.H. Rev. Stat. Ann. § 647:2(I-a)(b). This statute provides that ”[a] person is guilty of a class B felony if such person conducts, finances, manages, supervises, directs, or owns all or part of a business and such person knowingly and unlawfully conducts, finances, manages, supervises, or directs any gambling activity on the business premises . . . .“
[18] Bradley has abandoned his previous reliance on various New Hampshire civil statutes, each of which was obviously inadequate to identify a predicate crime under 18 U.S.C. § 1961(1)(A).
[19] 18 U.S.C. §§ 1084, 1341, 1343.
[20] In re Mastercard, 132 F. Supp. 2d at 480 (”[A] plain reading of the statutory language [of the Wire Act] clearly requires that the object of the gambling be a sporting event or contest.“).
[21] Bradley criticizes the district court for ignoring his identification of an Internet site named ”Sportsbook“ in his complaint. The name of the site is irrelevant, for Bradley nowhere alleges that he gambled on sporting events or contests at that or any other site.
[22] Id. at 481-83.
[23] See In re Burzynski, 989 F.2d 733, 742 (5th Cir. 1993) (stating that an element of a RICO mail fraud claim is ”a scheme to defraud by means of false or fraudulent representation“).
[24] In re Mastercard, 132 F. Supp. 2d at 482.
[25] Based in part on this same failure, the district court correctly determined that the Plaintiffs could not establish standing to sue under 18 U.S.C. § 1964(c). See id. at 495-96 (explaining that standing requires a showing of both factual and proximate causation).
[26] Summit Props., Inc. v. Hoechst Celanese Corp., 214 F.3d 556, 562 (5th Cir. 2000) (stating that the element of reliance is required to recover damages in a RICO fraud claim); see also In re Mastercard, 132 F. Supp. 2d at 482, 496 (explaining that the element of reliance is also key to the issue of standing).
[27] Because we find neither the Wire Act nor the mail and wire fraud statutes may serve as predicates here, we need not consider the other federal statutes identified by the Plaintiffs: § 1952 (Travel Act); § 1955 (illegal gambling businesses); and § 1957 (money laundering). As the district court correctly explained, these sections may not serve as predicates here because the Defendants did not violate any applicable federal or state law. See In re Mastercard, 132 F. Supp. 2d at 482-83 & n.6. The Plaintiffs’ reliance on § 1960 fails because it is not an authorized RICO predicate under § 1961(1)(B).
[28] 18 U.S.C. § 1961(6).
[29] In re Mastercard, 132 F. Supp. 2d at 483.
[30] We need not analyze the validity or merit of Plaintiffs’ claim based on aiding and abetting liability because (assuming it is valid) it necessarily falls along with the underlying RICO claim. Likewise, we need not consider the merits of the Defendants’ motions to join the Internet casinos pursuant to Rule 19 of the Federal Rules of Civil Procedure. We agree with the district court that those motions are moot.
[31] Id. at 497.
[32] Id.
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The Legalese
Federal Wire Wager Act
By: Jeffrey Rodefer
Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review
In 1961, Congress enacted the Wire Act [57]as a part of series of antiracketeering laws. The Wire Act complements other federal bookmaking statutes, such as the Travel Act (interstate travel in aid of racketeering enterprises, including gambling), the Interstate Transportation of Wagering Paraphernalia Act, and the Illegal Gambling Business Act (requires a predicate state law violation).
The Wire Act was intended to assist the states, territories and possessions of the United States, as well as the District of Columbia, in enforcing their respective laws on gambling and bookmaking and to suppress organized gambling activities.[58] Subsection (a) of the Wire Act, a criminal provision, provides:
In order to prove a prima facie case, the government must establish that:
- The person was "engaged in the business of betting or wagering"
- (compared with a casual bettor);
- The person transmitted in interstate or foreign commerce:
- bets or wagers,
- information assisting in the placement of bets or wagers, or
- a communication that entitled the recipient to receive money or credit as a result of a bet or wager;
Some courts have construed the second element concerning transmission to mean just the "sending" of information and not the receipt thereof.[63] Other courts have interpreted the term "transmission" more broadly to include both parties using a wire communication facility. [64]
The term "wire communication facility" is defined, for purposes of transmitting as set forth in the third element above, as:
The fourth element is that the person acted "knowingly." This does not mean that he or she knew they were violating the statute, but rather, the individual knowingly used an interstate wire communication facility to engage in one of the three forms of prohibited transmissions listed above.[66]
Subsection (b) of the Wire Act sets forth exceptions, also known as a "safe harbor" clause and provides:
The first exemption was designed to permit 'bona fide news reporting of sporting events or contests.'"[68] The second exemption "was created for the discrete purpose of permitting the transmission of information relating to betting on particular sports where such betting was legal in both the state from which the information was sent and the state in which it was received."[69]
Subsection (c) simply provides that nothing contained in the provisions of the Wire Act shall create immunity from criminal prosecution under any state laws.[70] Finally, subsection (d) dictates when a telephone company or other common carrier, subject to the jurisdiction of the Federal Communications Commission, must terminate service when that service is being used to transmit or receive gambling information in violation of law.[71]
The language of the Wire Act clearly prohibits the use of the Internet for transmission of sports bets or wagers or information assisting in the placement of such bets or wagers,[72] unless transmission falls within one of the two exceptions noted above. The statute, however, does not expressly discuss its possible application to other forms of gambling. As a result, differing interpretations have arisen over the construction of the phrase "any sporting event or contest," and over whether the 40-year old Wire Act prohibits Internet gambling.
The interpretation of this language turns upon the determination of whether "sporting" is an adjective intended to modify both "event" and "contest." [73] Neither section 1084 nor the definitional section 1081 defines the term "sporting event or contest." A narrow construction would seem to suggest that the phrase is limited to sports-related activities. [74] There is support for this argument in the language of the statute, in the legislative history and in case law.
Statutory language: Section 1081 defines a "gambling establishment" as "any common gaming or gambling establishment operated for the purpose of gaming or gambling, including accepting, recording, or registering bets, or carrying on a policy game or any other lottery, or playing a game of chance, for money or other thing of value." [75] However, the term "gambling establishment" does not appear in section 1084.
A narrow construction approach is further bolstered by looking at the Interstate Transportation of Wagering Paraphernalia Act, [76] which was enacted as part of the same anti-organized crime legislation as the Wire Act. Section 1953 separately references bookmaking, wagering pools with respect to a sporting event, numbers, policy, bolita or similar games. [77] By contrast, section 1084 only references bets or wagers on "sporting events or contests." Similarly, the Illegal Gambling Business Act, [78] defines "gambling" to include "but is not limited to poolselling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein."[79]
Legislative history: The legislative history of the Wire Act seems to provide support for a narrow construction. The title of the legislation is "Sporting Events- Transmission of Bets, Wagers, and Related Information." [80] The House of Representatives Report on Senate Bill 1656, dated August 17, 1961, states that the bill is in response "modern bookmaking." [81] In the "Sectional Analysis" of the report, the terms "sporting event or contest" and "sporting event" seemed to be interchangeable. [82] Included in the report is a letter from Attorney General Robert F. Kennedy to the Speaker of the House of Representatives, dated April 6, 1961, which only refers to wagering on sporting events. [83] Moreover, the Congressional debates on this legislation concerned the bill's impact on "horse racing and other sporting events."[84]
Congress' use of these different terms reflect its knowledge of the various forms of gambling, including traditional casino games or games of chance and specifically limited the Wire Act's application to sporting events or related contests.[85] This is evident from the statement of United States Senator Jon Kyl of Arizona as he introduced the Internet Gambling Prohibition Act of 1997. [86] Specifically, Senator Kyl stated that the bill was necessary, because "[i]t dispels any ambiguity by making it clear that all betting, including sports betting, is illegal.
Currently, nonsports betting is interpreted as legal" [87] under the Wire Act. [88]
Case law: most notably the recent decision by the United States District Court for the Eastern District of Louisiana, clearly supports this conclusion. In In re MasterCard Int'l, et al., a class action against several banks and credit card companies alleged unlawful interaction with Internet casinos in violation of RICO. [89] The various defendants moved to dismiss the action under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief may be granted. [90] The court held that the plain language of the Wire Act was limited to gambling on a sporting event or related contest. [91] The court reasoned that:
The case is currently on appeal to the Fifth Circuit.
If on the other hand the term "contest" is to be viewed more broadly to encompass traditional casino games or games of chance, then on-line gaming, as some have argued, [93] will be prohibited by the Wire Act.
Finally, there is a secondary debate ongoing about whether the definition of "wire communication facility" in section 1081 applies to the Internet. [94] Some have pointed to section 1084(d) and its reference to "common carriers" within the jurisdiction of the Federal Communications Commission to support the argument that "wire communication facility" is limited to telephone companies. [95] "Thus, absent a determination that it violates federal, state, or local law, use of the Internet for gambling would not appear to implicate directly any of the FCC's common carrier rules." [96] 96 Others simply argue that Congress chose to broadly define "wire communication facility" to cover a wide range of wire communication modes that were known and unknown in 1961, like the Internet. [97]
"Despite the divergent views . . ., the official position as expressed by the Justice Department [during the Clinton Administration] and several state attorneys general is to treat the Wire Act as applying broadly and covering all forms of Internet gaming." [98]
End notes:
[57] See Sporting Events – Transmission of Bets, Wagers, and Related Information Act,Pub. L. No. 87-216, § 2, 75 Stat. 491, 552-553 (1961)
[58] See United States v. McDonough, 835 F.2d 1103, 1105 n. 7 (5th Cir. 1988); see also Martin v. United States, 389 F.2d 895, 898 n. 6 (5th Cir. 1968), cert. denied, 391 U.S. 919 (1968) (quoting 2 U.S. Code & Cong. News, 87th Cong., 1st Sess., 2631, 2633 (letter from Attorney General Robert F. Kennedy to Speaker of the House of Representatives, dated April 6, 1961)).
[59] 18 U.S.C. § 1084(a).
[60] See S. 1656, 87th Cong., 1st Sess. (1961); see also H.R. 7039, 87th Cong., 1st Sess.(1961)
[61] United States v. Baborian, 528 F. Supp. 324, 328 (D.R.I. 1981) (quoting 107 Cong.Rec. 16,534 (1961)).
[62] See id.
[63] See Telephone News Sys., Inc. v. Illinois Bell Telephone Co., 220 F. Supp. 621, 638 (N.D. Ill. 1963), aff'd, 376 U.S. 782 (1964).
[64] See Sagansky v. United States, 358 F.2d 195, 200 (1st Cir. 1966), cert. denied, 385 U.S. 816 (1966) (focusing on the phrase "uses a wire communication facility for the transmission" the court held that an individual who holds himself out as being willing to and does, in fact, accept offers of bets or wagers over an interstate telephone line has used a wire communication facility); see also United States v. Pezzino, 535 F.2d 483, 484 (9th Cir. 1976); United States v. Tomeo, 459 F.2d 445, 447 (10th Cir. 1972).
[65] 18 U.S.C. § 1081.
[66] See United States v. Southard, 700 F.2d 1, 24-25 (1st Cir. 1983), cert. denied, 464 U.S. 823 (1983); United States v. Cohen, 260 F.3d 68, 76 (2nd Cir. 2001) ("it mattered only that Cohen knowingly committed the deeds forbidden by § 1084, not that he intended to violate the statute").
[67] 18 U.S.C. § 1084(b).
[68] Joseph V. DeMarco, Assistant United States Attorney, Southern District of New York, Gambling Against Enforcement - Internet Sports Books and the Wire Act, supra, n. 27, at 35.
[69] Id.
[70] See 18 U.S.C. § 1084(c).
[71] See 18 U.S.C. § 1084(d).
[72] See e.g., Cohen, 260 F.3d at 68 (the conviction of Antigua bookmaker who accepted wagers from New York was upheld as a violation of 18 U.S.C. 1804(a)).
[73] See Anthony N. Cabot, Internet Gambling Report IV, at 247-248 (2001).
[74] See United States v. Bergland, 209 F. Supp. 547, 549-550 (E.D. Wis. 1962), cert. denied, 375 U.S. 861 (1963) (a criminal statute, such as the Wire Act should be strictly construed)
[75] 18 U.S.C. § 1081 (emphasis added).
[76] See Wagering Paraphernalia - Transportation Act, Pub. L. No. 87-218, § 1, 75 Stat. 492, 553-554 (1961).
[77] See 18 U.S.C. § 1953(a).
[78] See Organized Crime Control Act, Pub. L. No. 91-452, § 803, 84 Stat. 922, 1091-1092 (1970).
[79] 18 U.S.C. § 1955(b)(2).
[80] See supra, n. 57.
[81] See U.S. Code & Cong. News, 87th Cong. 1st Sess., 2631.
[82] See id. at 2632-2633.
[83] See id. at 2633-2634.
[84] Baborian, 548 F. Supp. at 328.
[85] "[U]ntil the legislature manifests its intent to include on-line gambling within the purview of present gambling laws, courts should not apply Section 1084 to Internet gambling activities." Harley J. Goldstein, On-Line Gambling: Down to the Wire?, supra, n. 1, at 8; see also Scott Olson, Betting No End to Internet Gambling, supra, n. 17.
[86] See S. 474, 105th Cong., 1st Sess. (1997).
[87] Id.
[88] See e.g., Tom Lundin, Jr., The Internet Gambling Prohibition Act of 1999: Congress Stacks the Deck Against Online Wagering But Deals in Traditional Gaming Industry High Rollers, 16 Ga. St. U. L. Rev. 845, 863 (Summer 2000).
[89] See In re MasterCard Int'l, et al., 132 F. Supp. 2d 468, 472 (E.D. La. 2001).
[90] See id
[91] See id. at 480.
[92] Id.
[93] See Seth Gorman and Anthony Loo, Blackjack or Bust: Can U.S. Law Stop Internet Gambling?, 16 Loy. L.A. Ent. L.J. 667, 671 (1996); see also Mark G. Tratos, Gaming on the Internet, 3 Stan. J.L. Bus. & Fin. 101, 105 (Winter 1997).
[94] See Cynthia R. Janower, Harvard Law School, Gambling on the Internet, 2. J. Computer - Mediated Com. 2, (September 1996) (http://jcmc.huji.ac.il/vol2/issue2/janower.html).
[95] See id.
[96] See American Gaming Association, Federal Laws and Regulations Affecting the Use of the Internet for Gambling, at 1 (September 19, 1995).
[97] See supra, n. 94; see also Nicholas Robbins, Baby Needs a New Pair of Cybershoes: The Legality of Casino Gambling on the Internet, 2 B.U. J. Sci. & Tech. L. 7 (1996).
[98] See Adrian Goss, Jay Cohen's Brave New World: The Liability of Offshore Operators of Licensed Internet Casinos for Breach of United States Anti-Gambling Laws , 7 Rich. J.L. & Tech. 32 (Spring 2001).
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