Drawing Dead: Recognizing Problems with Congress' Attempt to Regulate the Online Gambling Industry and the Negative Repercussions to International Trade

By Carlson, Eric J. | Suffolk Transnational Law Review, Winter 2008 | Go to article overview

Drawing Dead: Recognizing Problems with Congress' Attempt to Regulate the Online Gambling Industry and the Negative Repercussions to International Trade


Carlson, Eric J., Suffolk Transnational Law Review


I. INTRODUCTION

The moment you realize you are playing a hand that cannot win, you are drawing dead. (1) Gamblers are trained to read specific situations and make moves when the odds are in their favor. (2) Professional gamblers realize when the house is stacked against them and they have not left themselves any outs. (3) Their ability to recognize these moments and act accordingly separates professional gamblers from the rest of us. (4) While casinos prefer the common gambler, in the card game of life, online gamblers would prefer Congress play like a rounder, rather than a sucker. (5)

Congress should survey the global legal landscape of online gambling, recognize that their attempted approach at prohibition is a losing hand, muck the Unlawful Internet Gambling Enforcement Act of 2006, and begin working towards an informed process of regulation that will not offend trade regulations. (6) This note begins with a brief history of the online gambling industry, Congress' attempts at regulation, and an outline of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). (7) This note transitions into a discussion of the international trade guidelines set forth by the World Trade Organization (WTO) and corresponding U.S. obligations. (8) Part IV of this note analyzes the impact of UIGEA on the online gambling industry and international trade, while comparing its provisions to online gambling legislation in the United Kingdom and France. (9) Finally, this note proposes a revised attempt to regulate an industry in dire need of positive direction. (10)

II. FACTS

A. Gambling Industry

1. Industry Growth and Statistics

The gambling industry has a long history of games of chance and skill, which date back as early as 2300 B.C. (11) Individual games and the industry evolved significantly in the last 4000 years as the American Gaming Association (AGA) reports gross revenue totals from 2005 of $84.65 billion. (12) Gaming revenue growth has been considerable over the past ten years and has nearly doubled since 1995. (13)

Online gambling is a relative new-comer to the gambling industry in that the first website designed to take wagers launched in August 1995. (14) The AGA estimated that the number of online gambling websites swelled to over 2000 during 2005 and 2006. (15) Online gambling enjoyed revenues of over $12 billion in 2005 and the AGA anticipated continued growth in 2006 to reach $15 billion. (16) The United States is a major market force in online gambling because U.S. gamblers account for nearly one-third of the online gambling market. (17) An estimated 23 million players gambled online during 2005, and 8 million of those players lived in the United States. (18)

2. Previous Attempts at Regulating Players and Operators

U.S. law allows individual states to regulate gambling operations within its borders. (19) The commerce clause of the U.S. Constitution grants the federal government the authority to regulate interstate gambling in light of the flow of commerce across state borders. (20) Congress used the Wire Act, Travel Act, and Illegal Gambling Business Act to regulate, prohibit, and prosecute online gambling. (21)

The Wire Act criminalizes the use of a wire communication to engage in the business of betting or wagering. (22) Despite this broad scope, courts do not agree that the Wire Act universally applies to all forms of online gambling. (23) The United States Court of Appeals for the Second Circuit held that the Wire Act applied to sports betting, but did not consider whether the act also applied to casino games or other games of chance. (24) The Fifth Circuit held that the impact of the Wire Act is limited to sporting events or contests. (25) At the other extreme, the Department of Justice views the Wire Act as applying to all forms of gambling, including online gambling. …

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