Report No. 276
3. United States of America
6.16 In United States, gaming laws are comparatively liberal. Gambling activities are governed by three sets of regulations, one at each level- Local, State, and Federal. While some States have detailed gaming laws that go back more than two centuries, other States are yet to address key facets of this industry.
Federal Online Gambling Laws
6.17 Multiple Federal laws were enacted to regulate gambling activities, both online and offline. These enactments together make for a comprehensive regulatory system, comprising of:
1. The Interstate Wire Act,1961130 (The Federal Wire Act).
2. International Travel Act of 1961131 (Travel Act).
3. Interstate Transportation of Wagering Paraphernalia Act of 1961132 (Paraphernalia Act).
4. Illegal Gambling Business Act of 1970133.
5. The Professional and Amateur Sports Protection Act, 1992134 (PASPA).
6. The Unlawful Internet Gambling Enforcement Act, 2006135 (UIGEA).
6.18 The Federal Wire Act penalises the act of knowingly placing bets or wagering or assisting in placing of bets or wagering "using a wire communication facility" for the transmission in interstate or foreign commerce domain.
6.19 The Act was brought in to tighten the noose around the neck of major organised crime bosses and not to deal with the legality or morality of gambling per se. The Wire Act as interpreted by the Department of Justice for the United States of America outlaws only transmissions relating to "sporting events or contest"136.
The Department of Justice has also interpreted the Act to outlaw all forms of online gambling. However, the Court of Appeal of the Fifth Circuit in Thompson v. MasterCard International et al.137 affirmed a lower court ruling, holding that the Act struck online betting for sports only and casino games played online were legal. There still exists ambiguity regarding the application of the Act to online gambling.
6.20 The Travel Act138 aims to punish anyone who travels in interstate or foreign commerce, uses any facility in interstate or foreign commerce, or uses the mail, with intent to distribute the proceeds of any business enterprise involving unlawful activities (including gambling) or money laundering; or to otherwise promote, manage, establish, carry on, etc. any business enterprise involving unlawful activities (including gambling); and thereafter distributes the proceeds from any business enterprise involving gambling or from any act indictable as money laundering, or promotes, manages, establishes, carries on, or facilitates the promotion, management, establishment, or carrying on of any business enterprise involving unlawful activities (including unlawful gambling) or any act indictable as money laundering.
6.21 Interstate Transportation of Wagering Paraphernalia Act, 1961 was enacted with the purpose to criminalising interstate transportation, except by common carrier, "of any record, paraphernalia, ticket, certificate, bills, slip, token, paper, writing, or other device used, or to be used, adapted, devised or designed for use in" bookmaking, wagering pools with respect to sporting events or a numbers, policy, bolita, or similar game139. This enactment was designed to "erect a substantial barrier to the distribution of certain materials used in the conduct of various forms of illegal gambling"140.
6.22 The Illegal Gambling Business Act, 1970 was enacted as a part of the Organized Crime Control Act, with the purpose of striking at syndicated gambling141. Many experts142 have expressed that Section 1955, which outlaws conducting an illegal gambling business, prima facie strikes at any illegal gambling business conducted using the Internet. Violations are punishable with imprisonment and/or fine143. Further, the Federal Government has been entrusted with the power to confiscate any money or other property used in violation of this provision144.
6.23 In Philip D. Murphy, Governor of New Jersey v. National Collegiate Athletic Association etc., (Case Nos. 16-476 and 16-477) decided by the Supreme Court of the United States, on 14.05.2018 , the Professional and Amateur Sports Protection Act 1992 was under scrutiny, as to whether it was in conflict with the Federal Constitution or not. The Act provided that neither the States nor the private actors could indulge in the activities of sports gambling. It curtailed all the activities surrounding the sports gambling, such as sponsorship, promotion, advertisement and licensing the same.
6.24 The Supreme Court of the United States, with a ratio of 6:3, declared the Act to be unconstitutional. It opined that the scheme of the Act was 'anti-commandeering' in nature; the Congress could not directly control the States; rather it could regulate the actions of the individual, directly. Therefore, prohibiting the States from regularising sports gambling was unconstitutional.
6.25 While dealing with various constitutional and legal issues, the Court took note of arguments from both sides, in the following words:
The legalization of sports gambling is a controversial subject. Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime.Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.
(emphasis added)
6.26 The Supreme Court left the task of policy making to the Congress and in case the Congress did not wish to do so, the States were at liberty to regularise the sports gambling.
6.27 The Unlawful Internet Gambling Act regulates online gambling in the United States of America. The Act declares that no person engaged in business of betting or wagering may knowingly accept in connection with Unlawful Internet Gambling, credit, electronic fund transfer, cheque, draft, etc.
Unlawful Internet Gambling is defined to mean "to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made"145.
6.28 Violations of its provisions are punishable by imprisonment and/or fine146. Further, offenders may also be subject to both civil and regulatory enforcement actions147.
6.29 This Act prohibits online betting by targeting the intermediaries such as banks and financial groups to process payments made in regard to gambling or betting. The Act explicitly excludes a few markets viz. certain fantasy sports bets and existing legal intrastate and inter-tribal gaming. The Act also explicitly covers lotteries148. The list of activities exempted from the definition includes securities and commodities exchange activities149, insurance150, Internet games and promotions that do not involve betting151, and certain fantasy sporting activities152.
6.30 There exist other federal laws such as the Racketeer Influenced and Corrupt Organization Act, 1970153, and Money Laundering enactments154 that supplement the aforementioned enactments to form a cohesive system of regulation at the Federal level.
6.31 In short, it is a federal offence to:
Use wire communications to place or receive bets on, or to transmit gambling information relating to, sporting contests or events155; Conduct a large-scale gambling business in violation of state law156; Travel interstate or overseas, or to use any other facility of interstate or foreign commerce, to facilitate the operation of an illegal gambling business157; Conduct a gambling business and accept payment for illegal Internet gambling participation158; Systematically commit these crimes in order to acquire or operate a commercial enterprise159; Launder the proceeds of an illegal gambling business or to plough them back into the business160; Spend or deposit more than $10,000 of the proceeds of illegal gambling in any manner161; or conspire with others, or to aid and abet them, in their violation of any of these federal laws162.
6.32 At State level, there exist other enactments for regulation of gambling activities. According to the American Gaming Association, commercial casinos paid $8.95 billion towards direct gaming taxes applied by state, county and municipal governments in 2016, which helped State and Local Governments across the country to balance their budgets and fund education programs, make investments in infrastructure and keep essential services running.
Notably, 2016's $38.96 billion revenue total represents only moneys won by commercial casino operations across the United States. Native American casinos generated a record total of $31.2 billion in gross gaming revenues in 2016, according to the National Indian Gaming Commission. Combined, the tribal and commercial casino industries in 2016 generated a total annual gross gaming revenue in excess of $70 billion163.
