Thursday, October 12, 2006

Prior to analyzing how the new federal law interacts with state gaming law,
it is necessary to have a basic understanding about the two constitutions by
which we are all bound. Every state has a constitution that is a body of
laws that the citizens of that state must follow. There is also a federal
Constitution that all citizens of the United States must follow. (The
federal Constitution and the US Constitution mean the same thing.) We are
each subject to both the laws of our state and federal laws. The Tenth
Amendment to the United States Constitution states that: "The powers not
delegated to the United States by the Constitution, nor prohibited by it to
the States, are reserved to the States respectively, or to the people." The
Tenth Amendment was intended to confirm the understanding of the people at
the time the Constitution was adopted that powers not granted to the United
States were reserved to the states. Historically, the states have
successfully regulated gambling within their borders, as that is seen to be
a power reserved to the state. Almost every state has some form of legal
gambling, be it a casino, lottery, video, lottery terminal, horse wagering,
bingo, or other forms of gambling. As to the issue of which law applies
(state or federal), the US Supremacy Clause states that the "Constitution
and the laws of the United States...shall be the supreme law of the
land...anything in the constitutions or laws of any State to the contrary
notwithstanding." This means of course, that any federal law - even a
regulation of a federal agency - trumps any conflicting state law. Finally,
the Commerce Clause makes Congress the guardian of interstate commerce.
Article I, Section 8, Clause 3 of the US Constitution states in relevant
part: "The Congress shall have power to... regulate commerce with foreign
nations, and among the several states .."

Every federal law must have a constitutional basis in order to be valid, and
the Commerce Clause has been widely used as a constitutional base for
federal legislation of every type. It has been predicted that the Commerce
Clause will ultimately regulate many activities on the World Wide Web.

Those three constitutional mandates taken together basically mean that any
federal law must be constitutionally based. If it is, and if there is a
federal law on a subject, it preempts state law. The federal government is
to regulate commerce, but powers not granted to the federal government are
"reserved to the states. And laws relating to the health and welfare of its
citizens usually fall within the purview of state law."

So what powers does the federal government have regarding online gaming law?
Traditionally, the federal government has stayed out of the gambling arena
and left its regulation to the states. However, when gambling crosses into
different states or countries, the federal government has a legitimate
interest and therefore gets involved.

The Unlawful Internet Gambling Enforcement Act

As I explained in a prior article, section 5361(b) of the Unlawful Internet
Gambling Enforcement Act specifically states that nothing in this new law
shall be construed as "altering, limiting, or expanding any Federal or State
law. prohibiting, permitting or regulating gambling within the US."

In other words, the language of the statute confirms that this new law does
not change existing gaming law. The federal government has merely enacted a
law that attempts to enforce state or federal laws already in existence.

The operative section of this new legislation states that "No person engaged
in the business of betting or wagering may knowingly accept." electronic
transfers, credit cards, etc. where a person is engaged in "unlawful
Internet gambling." This new law applies, if and only if, the gambling is
already illegal under current state or federal law.

Whereas my previous article focused on current federal law, this one
addresses applicable state laws.

State Gaming Law

From the letters I have received, I am concerned that some readers do not
know the gaming laws of their states.

A few states have passed statutes making it a misdemeanor to participate in
Internet gambling. For example, Illinois passed legislation that
criminalized the activity of the individual bettor, making it a Class A
misdemeanor (720 ILCS 5/28-1 (2001)(a)(c)).

This legislation was ridiculed by deputy district attorneys, who would be
the enforcers of this law, causing The Chicago Sun Times to conclude that
the legislation "has bark and no bite" and that "without cyber cops
monitoring households and their computers, the law will be difficult to
enforce."

To my knowledge, there has not been one prosecution in those states that
make it unlawful to play online poker in their state.

Problems with Enforcement

In a nutshell, the reason it is almost impossible to enforce a law
prohibiting a gambler from playing poker online is because prosecutors are
hard-pressed to come up with admissible evidence.

A criminal case must be pleaded and proved with specificity. What this means
is that a crime must be alleged to have occurred on a specific date in a
specific place, in order that the accused can lodge a defense. How could a
state prove that one was playing poker on a certain date and time in its
jurisdiction?

First, a county prosecutor would have to have sufficient information to file
a lawsuit against an individual and then prove that the crime occurred
within that county. With the advent of the Internet and laptop computers, it
is almost impossible to prove that someone was playing poker in a certain
jurisdiction. Many gamblers travel around the country to different venues.
The government would have an extraordinarily difficult time proving from
where a poker site was accessed. If a prosecutor cannot prove jurisdiction,
the case gets thrown out of court at its inception.

Next, even if it could be proven that a certain computer was used, the
identity of the user must be proven beyond a reasonable doubt. To prove the
user's identity, the prosecutor would have to provide first-hand knowledge
regarding who was at the computer playing poker. Also, subpoena power is not
available overseas, meaning that an offshore online site would not turn over
its records regarding who was playing and when.

The state cannot come into one's home without "probable cause" to believe a
crime was being committed, which would entitle it to have a search warrant
signed by a judge. The search warrant must be based upon probable cause,
which is defined as objective facts that raise in the mind of a reasonable
person the probability that a crime is being committed. It would be nearly
impossible to demonstrate probable cause to believe a crime was being
committed.

Finally, considering that some people play one- and two-penny poker, it
would be embarrassing for a prosecutor's office to dedicate its scarce
resources to catch a penny-ante online gambler, while murderers and rapists
are on the loose.

The State of Washington Makes Online Gambling a Felony

It is important for our readers to understand that Washington did make it a
felony to play online poker in their state. Although no entity appears to be
enforcing this law, it does exist.

On March 28, 2006, the state of Washington passed a law prohibiting Internet
gambling, which went into effect on June 7, 2006. The Washington bill
upgrades online gambling from a misdemeanor to a class C felony.

Gambling Commission Director Rick Day and State Senator Margarita Prentice,
who sponsored the legislation, have publicly stated that the aim of the law
is not directed toward the online gambler. Day said that jailing small-time
online gamblers is "not the focus of our work." Day said his priorities are
to go after national and international promoters or operators based in
Washington state. Evidently he thinks gamblers are like children, needing
protection. He has publicly stated that he wants to protect gamblers from
sites that won't pay, colluders, and money launderers.

In my opinion, this offensive, overbearing law is unconstitutional and needs
to be challenged in a Washington court. Besides the fact that it attempts to
legislate morality, the law is inconsistent with other Washington laws that
allow gambling in brick-and-mortar casinos. The prohibition does not include
online horse-race wagering, so that certain forms of online gambling are
still legal where the state makes money. These issues will have to be
hammered out in court. I eagerly await the first lawsuit and hope to be
personally involved.

Furthermore, the sentencing scheme is ridiculous. Playing poker online in
Washington has been deemed a class C felony, punishable by an amount not to
exceed $10,000 and/or confinement in a state correctional institution for up
to five years.

Other class C felonies in Washington include certain degrees of rape, child
molestation, stalking, bestiality, making deadly threats, failure to
register as a sex offender, theft, assault on a child, custodial sexual
misconduct, sex and labor trafficking, and the list goes on.

This means that under Washington law, a penny-ante poker player could
ostensibly receive the same sentence as one involved in certain types of
child molestation. This violates the Eighth Amendment's proscription against
cruel and unusual punishment. Allow me to explain.

In 1977, there was a law in Georgia that made rape punishable by death. In
the famous case of Coker v. Georgia, the US Supreme Court ruled that a
sentence of death for the crime of rape of an adult woman was grossly
disproportionate and excessive punishment forbidden by the Eighth Amendment
to the US Constitution. A sentence cannot be disproportionate to the crime.
This issue will also have to be tested in court.

Regardless of what we all think about the Washington law, it currently
exists. The next question is how it relates to the Unlawful Internet
Gambling Enforcement Act.

How Does the Federal Enforcement Act Interact with State Law?

Only in the case where a state makes it a crime to play poker online, the
new statute (if signed into law, of course) also makes it a crime for the
"person engaged in the business of betting or wagering" to "knowingly
accept" funds. As I have stated before, this rule does not apply to the
online gambler, but rather, to the online sites.

In other words, where Washington makes it a crime to play poker online, the
federal statute makes the operator of a site liable for accepting payment.
However, since all gaming sites are offshore and not subject to our laws,
this is a law with no teeth.

Recognizing that the US has no jurisdiction offshore, the bill ends in
section 803 by saying that the US government should "encourage cooperation
by foreign governments." Dream on.

People in the gaming world already know that a place like the Isle of Man
does not feel sympathy with US laws and refuses to enforce a violation of a
US law where no similar law exists there. As a matter of fact, the Isle of
Man was one of the first jurisdictions in the world to introduce legislation
specifically designed to benefit gambling and e-gaming firms as well as
protect consumers. The last thing they would consider is cooperating with US
antigaming laws.

In sum, the 2006 Enforcement Act does make it a felony for an owner or
operator of a site to accept money for gambling where it is already illegal
(that is, Washington), but since all gaming sites are located outside of the
jurisdiction of the United States, this portion of the law is, in all
practical terms, unenforceable.