Federal Court Upholds Online Gaming Prohibitions
02 September 2009 - 8:36PM
Dow Jones News
The U.S. Court of Appeals for the Third Circuit upheld the
federal government's controversial and vague policies concerning
Internet gambling. But the ruling appeared to open the door for
states to have more say on the matter.
In a decision handed down Tuesday, the court rejected a claim by
New Jersey-incorporated Interactive Media Entertainment &
Gaming Association that current laws aimed at cracking down on
online gaming are too vague, unconstitutional and infringe on an
individual's right to privacy. The decision comes amid a struggle
between the Justice Department, which wants to shut down the
online-gambling industry, and several members of Congress who are
advocating legalization and view it as a potentially important
revenue generator.
The court's decision upheld the Unlawful Internet Gambling
Enforcement Act of 2006 ban on credit card companies or other
institutions from processing payments for online cyberbetting.
"We're disappointed that the court didn't overturn the law,"
said Joe Brennan Jr., chairman of Interactive Media, which sued the
Justice Department, the Federal Reserve and the Federal Trade
Commission. But, he said that language in the decision appearing to
place the issue under state jurisdiction was a silver lining.
"We lost the decision," he said. "But the court gave us an awful
lot to work with going forward."
The court said, "It bears repeating that the Act itself does not
make any gambling activity illegal. Whether the transaction in
Interactive's hypothetical constitutes unlawful Internet gambling
turns on how the law of the state from which the bettor initiates
the bet would treat that bet..."
Brennan said there are currently six states where Internet
gaming would violate state laws. Thus, "There are 44 states where
this is an opportunity for Internet gaming to become regulated and
normalized," he said.
A few months ago, federal authorities in New York froze bank
accounts holding $34 million belonging to 27,000 online poker
players and last September the state of Kentucky received a court
order to seize more than 100 Internet gaming sites that it said
were operating illegally.
Opponents of online gaming say such activity would promote
gambling addictions and attract minors. However, critics of the ban
say the laws remain murky and are sometimes contradicted by state
laws.
The casino industry is also divided on the issue. The American
Gaming Association is neutral on online gambling "due to the
divergent views of our members. There is not a consensus," said
Holly Thomsen, director of communications for the trade group,
noting that Harrah's Entertainment and MGM Mirage (MGM) had
expressed some interest in Internet gaming.
In May, U.S. Rep. Barney Frank, D-Mass., chairman of the House
Financial Services Committee, proposed legislation to legalize and
regulate Internet gambling so revenue could be taxed and consumers
would have some protections. The legislation is pending in the
committee.
-By A.D. Pruitt, Dow Jones Newswires, 212-416-2197,
angela.pruitt@dowjones.com
(Tamara Audi contributed to this report)