Is Internet Gambling Legal?

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by Eric Furman

The short answer is no. The long answer is, of course, much more complicated. When it comes to online gambling in the United States, the American legal system has more wild cards than 7-Card Stud. In fact, about 12 million Americans gamble online, and Internet gaming companies make upwards of $10 billion a year.

According to the U.S. Department of Justice, the Federal Wire Act of 1961 prohibits Internet gambling—even though there was no such thing as the Internet back then. But because the statute forbids wagering via wire, the Feds claim it extends to online gambling because the Internet runs through wires.

The purpose of the 1961 law was to clamp down on sports gambling, which was often tied to organized crime.

It didn't cover games of chance such as poker, roulette, or blackjack—the type of games most people play online. But even if you're betting on your favorite sports team, the law tends to penalize the people involved on the business end. If you're not running an online casino, odds are, you won't
be prosecuted.

NFL-linesAmerican authorities can only police online casinos located within the United States, which is why gambling websites operate offshore in places such as Antigua, Australia, and the United Kingdom. Plenty of governments worldwide license Internet gambling, and some sites claim that as much as 80 percent of their business comes from U.S. consumers. So, how does all that U.S. money gets into their hands? In 2006, Congress passed legislation that forbids American banks from making transactions with online gambling houses. In theory, they can only accept bettors' money via cash transfer or Swiss bank account. But in practice, most online casinos blatantly flout the law. Typically, it works like this: The player uses a credit card to put money into an account with the online casino. The charge appears on the player's credit card statement as something like www.silverjewelryplus.com or www.weloveroses.com or another fake company name.

Although online gambling is illegal, you probably remember seeing ads for it on Google. You won't anymore, though. Microsoft, Google, and Yahoo! all paid fines for running ads for online gambling sites.

The fines weren't stiff (Google lost about one-third of a day's revenue), but the companies got the message. Or at least, they got the message that they needed to be sneakier. While you won't see ads for partypoker.com anymore, you may see ads for partypoker.net, a poker-teaching site that links you to partypoker.com, the full-fledged gambling site.

Is Internet gambling illegal? Yes. Is it easy to do? Yes. Should you do it? We can't answer that. All we can say is that you can definitely lose a lot of money playing online poker, and the U.S. Department of Justice isn't known for its leniency.

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August 16, 2009 - 7:05pm
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