Whether or not online gambling is legal in the United States depends largely on state law. Some states allow online casinos while others ban them. For example, some states permit online sports betting but prohibit other forms of internet gambling. Aside from state laws, several federal criminal statutes also involve illegal internet gambling. For example, the Wire Act, the Illegal Gambling Business Act, and the Racketeer Influenced and Corrupt Organizations (RICO) provisions prohibit gambling on the Internet.
The definition of unlawful Internet gambling includes transmitting, receiving, or placing bets, or utilizing at least part of the Internet for these purposes. Specifically, the Wire Act makes it illegal to use the wires of common carriers or internet service providers to conduct gambling. In addition, Section 1956 of the Federal Wire Act makes it illegal to engage in laundering or concealing the source of funds. These two statutes are the most serious, and they have a great deal of constitutional objections.
Section 1956 creates several separate crimes, including laundering, laundering for a law enforcement sting, and laundering with intent to promote illicit activity. It also creates launderers for international purposes, and launderers for purposes of disguise.
Although many states have banned online gambling, it is legal in most of the European Union. In some countries, such as New Zealand, it is regulated by a government authority. In other nations, such as Australia, it is not regulated by the government.
The first online gambling venue for the general public was the Liechtenstein International Lottery. The Kahnawake Gaming Commission, which operates in the Mohawk Territory of Kahnawake, issues gaming licences to many online poker rooms. The Commission attempts to keep operations of licensed online gambling organizations fair.
The Kahnawake Gaming Commission also issued an online gambling license to the Costa Rican casino operation Tropical Paradise. The operator agreed to launch a $3 million public service campaign. The operation was stopped by U.S. marshals, who seized $3.2 million. The case is now in the Fourth Circuit.
In addition to the three federal criminal statutes mentioned above, there are seven other laws involved in illegal Internet gambling. These include the Wire Act, the Illegal Gambling Businesses Act, the Racketeer Influenced & Corrupt Organizations (RICO) Act, and the Travel Act. These statutes are often cited as a basis for prosecution. However, most of these laws are not enforced. In a few cases, the First Amendment has come into play. In one such case, federal prosecutors warned PayPal that it could be prosecuted for accepting financial instruments from an Internet gambling website.
The United States has also used the Commerce Clause to attack players who engage in illegal gambling activities at interstate facilities. While these attacks have been unsuccessful, they have raised questions regarding the power of the Commerce Clause.
The question of whether or not the Commerce Clause can be applied to a commercial activity has been a persistent stumbling block in the law enforcement community. A recent example involves the United States v. Nicolaou case. In this case, the federal government charged a company, K23 Group Financial Services, with violations of the UIGEA, the Illegal Gambling Business Act, the Racketeer Influenced And Corrupt Organizations Act, and the Travel Act.