Must the House Always Win?: a Critique of Rousso v. State

• Publication year: 2012

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 35, No. 4SUMMER 2012

Must the House Always Win?: A Critique of Rousso v. State

Rachel J. Schaefer(fn*)

"[A]ny American with a broadband connection and a checking account can engage in any form of Internet gambling from any state."(fn1)

I. Introduction

Gambling enthusiasts in Washington may be dismayed to learn that while it is legal to place a wager at one of the numerous brick-and-mortar casinos located in the state,(fn2) placing the same wager over the Internet is a crime.(fn3) This result arises from a 2006 amendment to Washington Revised Code 9.46.240 (the Gambling Act), which effectively bans individuals from placing bets or wagers over the Internet from Washington.(fn4) In addition to prohibiting bets made by individuals, the law also prohibits Internet gambling businesses from receiving bets placed by individuals in Washington-even if those gambling businesses operate far from the state's borders.(fn5)

Washington's Gambling Act is merely one component in a complex-and often contradictory-regulatory scheme on Internet gambling. Internet gambling laws operate at both the state and federal levels in what is best described as a "regulatory and enforcement quagmire."(fn6) At the locus of this regulatory scheme are two federal laws that purport to ban Internet gambling businesses from operating in the United States by criminalizing the interstate transmissions of bets and wagers.(fn7) Both federal laws, however, recognize the authority of states to pass laws on the subject of gambling.(fn8) Against this backdrop, some states, like Washington, prohibit Internet gambling.(fn9)

But not all states agree that online gambling should be banned. Some states, perhaps looking to increase tax revenues and close budget deficits, have recently considered legalizing the activity. In 2011 alone, lawmakers in Iowa, California, Florida, and New Jersey introduced bills to legalize certain forms of online gambling.(fn10) Given the alluring prospect of Internet gambling operations to be a source for local jobs and revenue, other states may soon follow with similar proposals.(fn11) Should these proposals become law, it is possible that some states may permit individuals to place bets over the Internet, while other states forbid such activity-a result that may have inconsistent consequences in light of the "borderless" nature of the Internet.

In addition to the potential for inconsistencies within this regulatory quagmire, state Internet gambling regulations raise constitutional questions that invoke federalism(fn12) concerns. Whereas Internet gambling is of federal purview because the funds wagered pass over state lines,(fn13) regulation of gambling has traditionally been an exercise of state police power within an individual state's borders.(fn14) Before the Washington State Supreme Court's recent opinion in Rousso v. State, it was uncertain whether a state such as Washington could regulate Internet gambling without running afoul of federal constitutional authority. Yet in Rousso, the supreme court affirmed the state's authority to regulate Internet gambling.(fn15) Ultimately, the court upheld the law under the dormant Commerce Clause, determining that the Gambling Act did not impermissibly interfere with the federal government's authority to regulate interstate commerce.(fn16)

As the first decision addressing the constitutionality of a state Internet gambling law,(fn17) the Washington State Supreme Court's decision in Rousso is significant. In light of recent state proposals to legalize Internet gambling, Rousso will likely become persuasive precedent as other courts struggle to determine whether other state Internet gambling laws will share a similar fate. However, the Washington State Supreme Court's reasoning in Rousso may leave these states with more questions than answers. Specifically, the court's conclusory and incomplete reasoning provides little guidance for how future courts may assess the constitutionality of state Internet gambling laws.

This Note critiques the Washington State Supreme Court's decision in Rousso and proposes that future courts should adopt the reasoning articulated by the Washington Court of Appeals when assessing the constitutionality of state Internet gambling laws. To that end, this Note proceeds in five Parts. Part II explains the social concerns associated with Internet gambling and outlines the federal and state laws that seek to address those concerns. Part III outlines the origin, principles, and legal standard of the dormant Commerce Clause, the doctrine used by Washington courts to assess the constitutionality of the state's Internet gambling ban. Part IV then discusses the legal challenge in Rousso, beginning with a background of the case and concluding with the court's application of the dormant Commerce Clause. In particular, this Part argues that although the court reached the correct conclusion, its analysis was unfaithful to precedent and incomplete. Part V argues that future courts should adopt the reasoning applied by the Washington State Court of Appeals when assessing the constitutionality of state Internet gambling regulations. Part VI concludes.

II. An Uncertain Regulatory Scheme

Internet gambling raises a host of social concerns that both federal and state laws have sought to address. This Part first identifies these concerns and then explains how current legislation operates to address these concerns. In particular, section B provides an overview of two federal statutes on the subject of Internet gambling, while section C provides an overview of Washington's Gambling Act.

A. Social Concerns Associated with Internet Gambling

The Internet gambling industry is estimated to bring in over $24 billion a year.(fn18) Fueling the success of this industry is the fact that gambling online is simply easier than in traditional "brick-and-mortar" casinos.(fn19) Instead of having to travel to a casino or lottery outlet to place a bet, individuals can simply gamble while sitting at a home computer.(fn20) Placing bets online allows individuals to avoid not only the inconvenience and other costs of traveling to a gambling venue, but also the reputational harm sometimes associated with gambling in a public place.(fn21) And while roughly 86% of Americans have gambled or will gamble at some point in their lives,(fn22) this figure may soon increase as individuals are able to gamble "in every home and every bedroom and every dorm room, and on every iPhone, every BlackBerry, every laptop."(fn23)

For lawmakers, the popularity of Internet gambling, coupled with technological advancements, raise regulatory concerns in three particular areas. First, children are susceptible targets of Internet gambling operations.(fn24) Children are particularly captive audiences who spend considerable amounts of time on the Internet, often sitting unsupervised in front of computer screens.(fn25) Exacerbating this unsupervised access is the fact that most gambling websites rely on a user to truthfully disclose his or her correct age prior to gambling, often making little or no attempt to verify the accuracy of the information before permitting the user to gamble.(fn26) Because Internet gambling websites can be used anonymously, these underage users may access-and potentially abuse-gambling websites even if such websites request age verification.(fn27)

Second, compulsive gamblers are particularly vulnerable to the allure of Internet gambling.(fn28) Internet games are available twenty-four hours a day and offer instant gratification to individuals in the privacy of their homes.(fn29) This instant gratification, coupled with the ease with which gambling information can be transmitted over the Internet, may "magnify the potential destructiveness" of existing gambling addictions.(fn30)

Lastly, the lack of accountability and transparency associated with Internet gambling may result in criminal abuse of online gambling operations. As one user describes, the absence of face-to-face interaction reduces the legitimacy of gambling online:Not only are you not looking at your opponents, you're not looking at the cards being dealt, you're not looking at who's dealing them to you. So, you don't know if the whole thing is legitimate, even if all the players sitting with you are just as legitimate as you are. Maybe the whole game isn't.(fn31)

Because Internet gambling businesses currently operate out of foreign jurisdictions, these businesses could quickly alter, move, or entirely remove sites without users catching on.(fn32) The ease of mobility and lack of transparency associated with foreign Internet gambling operations thus makes it possible for dishonest operators to take users' money and promptly close down without ever paying winnings.(fn33)

B. The Federal Response to Internet Gambling

In light of these social hazards, at least two federal statutes have sought to prevent the interstate transmission of online gambling information: the Wire Act and the Unlawful Internet Gambling Enforcement Act (UIGEA).(fn34) Both statutes, however, are vague and attempt to regulate Internet gambling only indirectly; neither operates as an outright ban of Internet gambling.

1. The Wire Act

The Wire Act of 1961 (the Wire Act) was one of the first federal statutes used to question the legality of Internet gambling.(fn35) Although the Wire Act does not explicitly...