Betting on the net: an analysis of the government's role in addressing Internet gambling.

• Author: Kish, Stevie A.

Respect for the law is among the most precious qualities a decent society Can adorn and protect itself with, and when that respect is attenuated by attempted enforcement of moral principles widely flaunted by the otherwise law abiding, foolishness is surely at work.(1)

1. INTRODUCTION

   Recognizing that gambling was spreading and gaining greater acceptance among many Americans, the 1976 Commission on the Review of the National Policy Toward Gambling (1976 Gambling Commission) recommended that the legality of gambling should be determined by individual state governments as a better method for capturing the will of the people.(2) Since the issuance of that report, gambling has flourished in the United States to the extent that every state, except Hawaii and Utah, has some form of legalized gambling.(3) In the intervening years since that study, an entirely new industry has developed--Internet gambling. Because of the borderless, interstate nature of the Internet,(4) its recent union with gambling renews the controversy surrounding an issue thought to have been resolved by the 1976 Gambling Commission--whether gambling policy should be formed primarily at the state or national level. Congress currently appears poised to settle this state versus national debate within the realm of Internet gambling in favor of the federal government.

   Somewhat reminiscent of Congress's earlier effort to establish a federal ban of all indecent materials on the Internet, congressional lawmakers are now seeking a blanket ban on Internet gambling.(5) Asserting not only that states are unable to address the issue adequately on their own, but that existing federal anti-gambling laws are insufficient and that children must be protected from this vice, the Senate passed the Internet Gambling Prohibition Act (IGPA) in July 1998.(6) As currently written, the IGPA makes Internet gambling a federal crime and thereby removes state governments from having a role in determining whether or not such an activity should be legal in a particular state.(7)

   This Note asserts that a federal ban on Internet gambling is problematic because of its impact on principles of federalism, its possible unconstitutionality in light of Reno v. ACLU,(8) and its unlikely enforceability. First, since the IGPA makes Internet gambling a federal crime, states cannot permit their citizens to gamble over the Internet even if all the gambling occurs within states that have legalized various forms of traditional gambling.(9) The Internet Gambling Prohibition Act would also prohibit Internet gambling between residents of states that already permit the use of telephone wires for placing bets.(10) Second, recent language of the Supreme Court in Reno suggests that Congress should not dismiss Internet gambling as merely a vice activity that is undeserving of any First Amendment protection. Finally, the IGPA could meet with considerable enforcement difficulty because of the ability of Internet users to disguise their identities(11) and the fact that most online gambling services are currently based outside the United States.(12) These significant enforcement problems could cause the IGPA to be only a national moral proclamation lacking legitimacy because it does not reflect the will of the citizenry--the very situation against which the National Gambling Commission cautioned in 1976.

   Part II of this Note describes the nature of Internet gambling including its rise and continued development as well as some of the concerns that such gambling raises. Part III outlines the Senate's response to the issue of Internet gambling, the Internet Gambling Prohibition Act, and explains several difficulties inherent in this blanket ban. Finally, Part IV suggests an alternative, state-centered method for addressing gambling on the Internet.

2. NATURE OF INTERNET GAMBLING

   1. The Development of Internet Gambling

      With the growth of state lotteries, riverboat gambling, racetrack betting, and Native American casinos in the United States over the last several years, the opportunity to gamble no longer requires an excursion to Las Vegas. With the development of the Internet, the opportunity to gamble no longer even requires a person to leave his or her home. A computer, a modem, and a credit card are all that one needs to engage in a variety of online betting activities such as casino games, sports wagers, and lotteries.(13) Indeed, every traditional gambling activity appears to have an Internet counterpart: Virtual Vegas;(14) Internet Casino;(15) Lottery.com;(16) and Paradise Sports Book.(17)

      The fact that gambling has combined with the Internet is certainly not surprising from an economic perspective. In 1993, it was estimated that "more Americans visited casinos than attended a major league baseball game"; revenue from non-Internet based gambling reached nearly $550 billion in the United States in 1996.(18) It was economically inevitable that an activity with this level of demand would be combined with a medium such as the Internet, which has the capacity to reach an audience of millions throughout the United States alone.(19) Currently, only about 100 gambling Web sites exist(20) with a combined estimated yearly profit of between $100 and $200 million.(21) However, industry analysts predict that by the year 2000, Internet gambling will become a billion-dollar business worldwide.(22)

   2. Concerns Raised by Internet Gambling

      Internet gambling presents essentially many of the same concerns that traditional gambling activities have raised throughout the years: uneasiness about the morality of the activity; the likelihood of addiction; the possibility of fraud; and the conflict between state versus national regulation.(23) Questions of morality primarily surface in connection with Internet gambling's accessibility to children and are reminiscent of arguments made during the passage of the Communications Decency Act. Because children have potentially unlimited access to computers and the Internet, it is possible that without proper monitoring they will access gambling Web sites as readily as they could access indecent materials. Supporters of a ban of Internet gambling maintain that outlawing the activity for all individuals is the only way to insure that a segment of the population, children, will be adequately protected from corruption.(24)

      The likelihood of addiction to Internet gambling among both children and adults is another area of concern. For example, the video game-like nature of virtual casinos, labeled the "crack cocaine of gambling,"(25) could make online gambling a temptation difficult to resist. Furthermore, the fact that the Internet gambler need not leave the comfort and privacy of his or her home could mean that an individual might become easily addicted.(26) While it may still be too early to determine that addiction levels for Internet gambling will be higher than addiction levels for traditional types of legalized gambling, advocates of a ban warn that the economic devastation to compulsive Internet gamblers could be so great that the federal government should not wait to act. According to the Senate testimony of Ann Geer, Chairperson of the National Coalition Against Gambling Expansion, "Addicts could literally click their mouse and bet the house."(27)

      Fraud is another aspect of Internet gambling that poses a danger to the Internet gambler. Unlike traditional gambling activities, such as Las Vegas casinos or state-run lotteries, which are highly regulated by state gaming commissions, Internet gambling, for the most part, exists without any significant regulation.(28) This lack of regulation means that Internet gamblers do not know whether the games they are playing are legitimate and cannot be assured a payout if they do win online.(29) Other experts also warn of the potential for money loss due to the use of credit cards when gambling online, as credit card numbers may be intercepted by hackers.(30) Describing this present state of Internet gambling, Wisconsin Attorney General James E. Doyle cautioned, "If gambling, in general, is a dumb bet, then gambling on the Internet is a very dumb bet."(31)

      Assuming that Internet gambling is dangerous enough to warrant some type of regulation, another vexing problem posed by the activity is determining who should have the authority to address it. While pursuant to the Tenth Amendment, a state can decide whether gambling is legal or not within its borders, gambling that affects interstate commerce can be regulated by Congress under the authority granted to it by the Commerce Clause.(32) Such a balance between state and national regulation operates seamlessly where traditional gambling is concerned because a lottery or a casino can generally be contained within the definitive borders of a state. On the contrary, the Internet cannot even be contained within a particular country.(33) According to Senator Kyl, "The global information revolution has created the opportunity to gamble across state lines in a way ... the law could not have anticipated."(34) Because of this global nature of Internet gambling, supporters of a blanket ban maintain that the federal government is in a better position than the individual states to address this issue.(35)

3. INTERNET GAMBLING PROHIBITION ACT

   1. Provisions

      Congressional proponents of the Senate's Internet Gambling Prohibition Act describe it as an update of federal law rather than a pointed attack on the Internet.(36) Defending the IGPA, Senator Kyl stated, "Our gambling laws must be consistently written, applied and enforced so that activity which is illegal in one forum is not allowed in another."(37) An update of federal law is thought to be warranted because existing federal antigambling provisions were written long before the development of the Internet, and therefore, their present applicability to the Internet is uncertain.(38)

      The Internet Gambling Prohibition Act was introduced in the Senate...