The DOJ Wants to Amend the Wire Wager Act to Fit the Internet
Charles Carreon
The DOJ opposed creating an entirely new law, preferring to amend the Wire Wager Act, 18 U.S.C. § 1084, which the courts currently construe as outlawing only sports betting using a telecommunications facility in interstate commerce. The DOJ said it was opposing sloppily-crafted legislation that failed to address practical concerns of administration, investigation, and even-handed enforcement against unlawful wagering both on and off the Net. But the DOJ had invited action by Congress by failing to take the initiative as Americans watched their dollars whisked away by the billions to foreign jurisdictions. The DOJ objected to exemptions that would “essentially make legal on the Internet lots of ... wagering ... not legal in the physical world.” The DOJ also wants its jurisdictional reach clearly defined, so that any new law should clearly criminalize actions taken outside the U.S. that aid unlawful betting by U.S. residents. The DOJ also wanted a clear statement that the law proscribes both gambling over the Internet, and gambling via a “private network or a closed-loop subscriber-based system.” This position was expressed by the DOJ in the testimony of Kevin V. Di Gregory during March and June, 2000, addressing the House Judiciary Subcommittee on Crime.
THE JAY COHEN CASE
The DOJ has prosecuted Internet sports books. On March 26, 1998, the DOJ announced its big wire wagering act conviction of Jay Cohen, the President of World Sports Exchange, an Internet sports book that he and his friends founded on Antigua in 1996. On July 31, 2001, the U.S. Court of Appeals for the Second Circuit upheld his conviction and sentence of 21 months in prison and a $5,000 fine. The appellate court cruised through Cohen's fancy jurisdictional arguments like Schwarzeneger driving a Humvee through a terrorist-littered street — aggressively. Cohen argued that the bets actually took place in Antigua, where betting is legal, and thus no illegal bets occurred or were “transmitted” from New York to Antigua. The Second Circuit found “no dispute that betting is illegal in New York,” where bets originated, so it was unlawful to use interstate commerce on behalf of New York bettors. Cohen's belief that betting activity was legal in New York was held immaterial. His claim that he “did not deal with daily operations” was also ignored, because “he also made no effort to curtail those operations ... benefited from them by receiving a salary, his travel expenses, and his legal fees from WSE.” The defeat was total, and Cohen was found guilty even of aiding and abetting wagering transmissions that occurred after his arrest, on the grounds that he had set the process in motion.
OTHER FEDERAL ANTI-GAMBLING LAWS
In addition to the Wire Act, there are many other gambling-unfriendly federal criminal laws. The Interstate Professional and Amateur Sports Protection Act, 28 U.S.C. §§ 3701-3704 prohibits state governments and Indian tribes from authorizing sports betting; however, it does not prohibit sports booking licensed by other countries, and does not limit intrastate transactions. Section 3704 appears to legalize Nevada's purely intrastate system of authorizing Nevada casinos to offer all types of lawful wagering to Nevada residents.
The Organized Crime Control Act, 18 U.S.C. § 1955, makes it illegal to conduct, finance, manage, supervise or own all or part of an “illegal gambling business,” which is defined as any operation having gross revenue of $2,000 in one day or a continuing operation of at least five people working together for at least one month, regardless of gross revenue. The Lottery Statutes, 18 U.S.C. §§ 1301-1307 prohibit shipping and mailing of physical materials (like tickets) for betting on lotteries. Similarly, the Interstate Transportation of Wagering Paraphernalia Act, 18 U.S.C. § 1953 prohibits the transport of physical items used for wagering, such as slot machines.
The Money Laundering statute, 18 U.S.C. § 1956, forbids financial transactions involving “unlawful activity” including violations of the Wire Act. The Racketeer Influenced and Corrupt Organizations Act (the “RICO” law), 18 U.S.C. §§ 1961-1968, defines all of the above crimes as criminal acts that can be prosecuted under a racketeering theory. Finally, the crime of conspiracy, 18 U.S.C. § 371, can potentially cast a wide net for prosecutors, sweeping in big and little fish alike, in the event of a major gambling crackdown similar to what we have going on with the war on drugs.
The DOJ opposed creating an entirely new law, preferring to amend the Wire Wager Act, 18 U.S.C. § 1084, which the courts currently construe as outlawing only sports betting using a telecommunications facility in interstate commerce. The DOJ said it was opposing sloppily-crafted legislation that failed to address practical concerns of administration, investigation, and even-handed enforcement against unlawful wagering both on and off the Net. But the DOJ had invited action by Congress by failing to take the initiative as Americans watched their dollars whisked away by the billions to foreign jurisdictions. The DOJ objected to exemptions that would “essentially make legal on the Internet lots of ... wagering ... not legal in the physical world.” The DOJ also wants its jurisdictional reach clearly defined, so that any new law should clearly criminalize actions taken outside the U.S. that aid unlawful betting by U.S. residents. The DOJ also wanted a clear statement that the law proscribes both gambling over the Internet, and gambling via a “private network or a closed-loop subscriber-based system.” This position was expressed by the DOJ in the testimony of Kevin V. Di Gregory during March and June, 2000, addressing the House Judiciary Subcommittee on Crime.
THE JAY COHEN CASE
The DOJ has prosecuted Internet sports books. On March 26, 1998, the DOJ announced its big wire wagering act conviction of Jay Cohen, the President of World Sports Exchange, an Internet sports book that he and his friends founded on Antigua in 1996. On July 31, 2001, the U.S. Court of Appeals for the Second Circuit upheld his conviction and sentence of 21 months in prison and a $5,000 fine. The appellate court cruised through Cohen's fancy jurisdictional arguments like Schwarzeneger driving a Humvee through a terrorist-littered street — aggressively. Cohen argued that the bets actually took place in Antigua, where betting is legal, and thus no illegal bets occurred or were “transmitted” from New York to Antigua. The Second Circuit found “no dispute that betting is illegal in New York,” where bets originated, so it was unlawful to use interstate commerce on behalf of New York bettors. Cohen's belief that betting activity was legal in New York was held immaterial. His claim that he “did not deal with daily operations” was also ignored, because “he also made no effort to curtail those operations ... benefited from them by receiving a salary, his travel expenses, and his legal fees from WSE.” The defeat was total, and Cohen was found guilty even of aiding and abetting wagering transmissions that occurred after his arrest, on the grounds that he had set the process in motion.
OTHER FEDERAL ANTI-GAMBLING LAWS
In addition to the Wire Act, there are many other gambling-unfriendly federal criminal laws. The Interstate Professional and Amateur Sports Protection Act, 28 U.S.C. §§ 3701-3704 prohibits state governments and Indian tribes from authorizing sports betting; however, it does not prohibit sports booking licensed by other countries, and does not limit intrastate transactions. Section 3704 appears to legalize Nevada's purely intrastate system of authorizing Nevada casinos to offer all types of lawful wagering to Nevada residents.
The Organized Crime Control Act, 18 U.S.C. § 1955, makes it illegal to conduct, finance, manage, supervise or own all or part of an “illegal gambling business,” which is defined as any operation having gross revenue of $2,000 in one day or a continuing operation of at least five people working together for at least one month, regardless of gross revenue. The Lottery Statutes, 18 U.S.C. §§ 1301-1307 prohibit shipping and mailing of physical materials (like tickets) for betting on lotteries. Similarly, the Interstate Transportation of Wagering Paraphernalia Act, 18 U.S.C. § 1953 prohibits the transport of physical items used for wagering, such as slot machines.
The Money Laundering statute, 18 U.S.C. § 1956, forbids financial transactions involving “unlawful activity” including violations of the Wire Act. The Racketeer Influenced and Corrupt Organizations Act (the “RICO” law), 18 U.S.C. §§ 1961-1968, defines all of the above crimes as criminal acts that can be prosecuted under a racketeering theory. Finally, the crime of conspiracy, 18 U.S.C. § 371, can potentially cast a wide net for prosecutors, sweeping in big and little fish alike, in the event of a major gambling crackdown similar to what we have going on with the war on drugs.