GPWA Times Magazine - Issue 5 - May 2008

47 1952, and 1955 of United States Code, Sec- tion 2. Any person or entity who aids or abets in the commission of any of the above-listed offenses is punishable as a principal violator of those statutes. The Department of Justice is responsible for enforcing these statutes, and we reserve the right to prosecute viola- tors of the law. In September 2003, the DOJ issued subpoe- nas to media outlets, broadcasters, and others to provide information pursuant to a grand jury investigation, mostly concerning adver- tising for online gambling companies. Other entities avoided advertising complaints by paying a penalty. Perhaps the most publicized DOJ action con- cerning interactive gambling was the $31.5 million settlement on Dec. 19, 2007, by the U.S. Attorney for the Eastern District of Mis- souri with Microsoft, Google, and Yahoo. The U.S. Attorney had charged all three com- panies with violations of the Wire Act and other laws when they accepted advertising of online “sports bookmaking and casino-type gambling activities.” These prosecutions had nothing to do with the UIGEA, since all three had stopped accepting advertisements at least three years before the publicized settle- ments. In the settlements, all defendants did not admit any liability and agreed to pay a combined $31.5 million to the government and public service groups. Yahoo’s share of the settlement was $7.5 mil- lion with the $3.5 million going to the government. Microsoft’s share was $21 million with $4.5 million going to the government and Google is paying the gov- ernment $3 million. It is uncertain whether the fed- eral government would have been successful had these mat- ters gone to trial. In fact, the DOJ deliberately avoided resolv- ing the advertising issue when it moved to dismiss a civil com- plaint brought by Casino City, an online advertising company. Had the DOJ initiated criminal action, it would have relied pri- marily on the Wire Act. An Internet gambling provider might be li- able under the Wire Act if it participates in offshore sports betting (e.g., United States v. Cohen, 260 F.3d 68, 2nd Cir. 2001), but probably would not be if it engaged in Inter- net casino-style gambling, poker or lotteries. While the DOJ continues to insist that the Wire Act and other federal statutes prohibit all forms of Internet gambling, the Wire Act was specifically found by the Fifth Circuit Court of Appeals to apply only to sports bet- ting. In In Re MasterCard International Inc., 132 F. Supp. 2d 468, 478, 480-481 (E.D. La. 2001), aff’d 313 F.3d 257 (5th Cir. 2002). The DOJ was not a party to this case, how- ever, thus the holding is not binding on it. Furthermore, there are other cases that have concluded that the Wire Act does apply to non-sports gambling. Since the UIGEA’s passage, the Justice De- partment has taken criminal action against former executives of Neteller and various executives of BetonSports, but on charges unrelated to UIGEA. The DOJ never believed additional legislation was necessary. Instead, it continues to rely on three federal statutes that were passed long before the develop- ment of interactive gaming, viz., the Wire Act (18 U.S.C. §1084), the Travel Act (18 U.S.C. §1952), and the Anti-Gambling Act (18 U.S.C. §1955). However, every successful prosecution by the DOJ has included a Wire Act allegation. It is not clear to what extent the DOJ’s “cold war” on interactive gambling is being, or has been, driven by the political views of the current administration. An additional com- plicating factor has been the World Trade Organization litigation between the U.S. and Antigua. Essentially, the governing body ruled that the U.S. was discriminating against offshore interactive gambling operators by excluding them from the U.S. market while allowing domestic interactive horseracing. Part of the United States’ defense was that – consistent with the DOJ view – interactive horseracing was not authorized by U.S. law. That de- fense was deemed unpersuasive, as the DOJ’s view has been by most legal experts, but the DOJ’s position may in part have been meant to accommodate the WTO theory. The entire WTO issue may have been rendered moot by the United States’ recent deci- sion to withdraw gambling from the reach of its international trade agreements. Whether that, or the change in administration coming in 2009, will result in any reconsideration of U.S. law and policy regarding interactive gambling – and yield a new position by the DOJ – remains to be seen. Joseph M. Kelly , Ph.D., J.D., is a Professor of Business Law at State College at Buffalo, and an associate of Catania & Associates, Law Offices, L.L.C. and Catania Consulting Group. He is licensed to practice law in Illinois, Nevada, and Wisconsin. He is also co-editor of Gaming Law Review. The DOJ has essentially been waging a “cold war” – long on intimidation but short on prosecutions – against “soft targets” within the United States or federal jurisdiction America’s ‘Cold War’ against online gambling | GPWA TIMES