Several federal laws, namely the Wire Act and the Travel Act, prohibit illegal gambling on the internet. Specifically, the Wire Act prohibits the unlawful participation in contests for money, prizes, or any other thing of value by any person. The Travel Act likewise prohibits the illegal gambling of money in interstate commerce. The Federal Communications Commission (FCC) is charged with the oversight of common carriers. Among other things, it may decide to shut down a facility if the company that operates it is found to be engaged in unlawful activities. Similarly, the FCC can decide to discontinue the leasing or furnishing of facilities. It is also possible that a company will not be prosecuted for illegal gambling because the activity is outside its jurisdiction.
Aside from the Wire Act and the Travel Act, there are several other federal statutes that may be implicated by illegal gambling on the internet. One such statute is the Illegal Gambling Business Act, which provides that it is a federal offense to conduct any illegal gambling business. This includes such activities as placing bets, receiving bets, conducting lotteries, pool-selling, and bookmaking. In addition, there are several federal criminal statutes, such as the Money Laundering Control Act and the Racketeer Influenced and Corrupt Organizations (RICO) Act, which prohibits certain illegal gambling business activities. Lastly, there is the Gambling Devices Transportation Act, also known as the Johnson Act. These statutes also prohibit the transportation of gambling devices.
The most important statutory and regulatory change was made by the federal government in 2004 when it banned Internet gambling. In that year, the United States Attorney General issued an order stating that it would not accept any financial instruments from individuals or companies engaged in illegal Internet bets. This is the first time that the federal government has taken a public stance on Internet gambling. However, state officials have expressed concerns that the Internet could be used to bring illegal gambling into their jurisdictions. In the meantime, the Attorney General has re-examined his previous opinion and has warned companies that they could face prosecution.
There are several other federal laws that may be involved, but the most important is probably the Illegal Gambling Business Act, and the Travel Act, which together make illegal Internet gambling illegal. The best way to avoid prosecution for this crime is to conduct business only within your jurisdiction. This may be particularly difficult to do, given the presence of interstate or foreign elements in the mix. The good news is that the federal government has the legal authority to make this law more effective. It is also possible to enlist the assistance of state officials in enforcing these laws. However, it is imperative to bear in mind that these laws are not a panacea for online gambling operators. There are several legal challenges to these laws, most notably on the constitutional grounds of free speech and due process.
The aforementioned CRS Report RS21984 provides a useful summary of federal and state laws pertaining to the online gambling world. While the report includes a lot of good information, it also provides some omissions. In addition to its comprehensive list of state laws, it includes a brief summary of the best known of these statutes, which is the Unlawful Internet Gambling Enforcement Act.