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In the world of Internet gambling, United States citizens are the backbone consumers supporting the industry.  There are approximately 1,900 Internet gambling sites (250-300 operating companies) in approximately 60 different jurisdictions, all of which are outside of the United States.3  In 1999, there were 4 million Internet gamblers.4  Today that number has grown to 15 million, nearly 90% being United States citizens.5  Internet gambling expenditures were $4.5 billion in 2002 and $6.3 billion in 2003.6

Recognizing that Internet gambling is an important business with enormous financial implications and contradicting moral attributes, this paper explores the current legal issues involved with offshore gambling operators and proposes legalization and global regulation as the best solution to resolve the current dilemmas that it presents.  First, it introduces existing United States federal legislation that prohibits Internet gambling, how it developed, and how it is being applied extraterritorially to reach operations in foreign jurisdictions.  Next, the paper examines the legal issues concerning personal jurisdiction over offshore Internet gambling operations and concludes that minimum contacts will be considered sufficient by U.S. courts to exercise jurisdiction over the offshore operations.  Then, it focuses on 'account wagering' as an attempt to avoid prosecution, analyzes the seminal Cohen case, and acknowledges the success and limitations of the Federal Wire Act as a means for prosecution.  Subsequently, the paper addresses problems concerning conflicts of law and discusses why prohibition is a problematic, inefficient, and perhaps a violation of International Trade Policies in its attempt to resolve issues created by Internet gambling.  Finally, it proposes legalization and global regulation as the most reasonable solution to the problems associated with Internet gambling and offers a model regulatory framework to achieve the proposed solution.

Current Legislation: Applicable Interstate and Transnational Law

Historically, a look back at federal treatment of gambling in the United States reveals clear governmental concern for the negative secondary effects associated with the activity.  Whenever new communication systems have arisen, such as mail, the telephone, or the computer, the federal government has acknowledged the possibility of increased gambling and has responded with prohibitory legislation.7  When federal mail service was implemented, federal statutes prohibited the use of United States mail for the promotion of lotteries.8

The federal government also enacted a series of statutes in the 1960's in response to the increasing illegal gambling activities conducted by organized crime groups.9  The most relevant statutes, the 1961 Wire Act (18 U.S.C. § 1084), the 1961 Travel Act (18 U.S.C. § 1952), and the 1970 Gambling Business Act (18 U.S.C. § 1955), were passed with an express legislative intent that the laws be applied extraterritorially. This is apparent in the plain language of the statutes, which explicitly indicate intention that law be extended to "interstate or foreign commerce."10  These three Acts remain the only currently existing federal law relevant to prosecuting Internet gambling activity.
The Wire Act has been the most successful statute countering Internet gambling.  In its relevant part, the Wire Act prohibits anyone who is,

"(a)...engaged in the business of betting or wagering who knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both."11

Applying U.S. Law Extraterritorially to Gambling Activity in Cyberspace

The Internet provides an unprecedented forum for gamblers located virtually anywhere in the world to place a bet in cyberspace.  This presents a serious jurisdictional problem because of the differing laws that nations and states apply to the regulation or prohibition of gambling activities.  In the United States, legal gambling businesses operate under various state regulations.14  The various schemes that have been legalized by individual state legislatures vary from the prohibition on all forms of gambling, like those found in Utah and Hawaii, to schemes such as Nevada, which bases a large portion of its economy on the gambling industry.  With the creation of the Internet gambling sites, these U.S. state-regulated operators now face competition from regulated as well as unregulated Internet operators. These services are available to virtually anyone with an Internet connection without regard for sovereign borders.  Their operators, based outside the United States, in jurisdictions where gambling is legal, are unlikely to turn away big-betting United States customers because U.S. state and federal law prohibiting such gambling simply cannot reach them for prosecution.

The issue of whether Internet gambling is an offense committed by the operator or by the bettor calls for a determination of just where the actual act of gambling occurs?  Is the bet made at the location in the United States where the bettor clicks his/her mouse button, or at the location where the operator receives that information and makes changes to the bettor's account?  The answer seems to be somewhere between these two locations - in a place called cyberspace, a place without jurisdiction.  The question of jurisdiction over conduct that takes place in cyberspace and touches the territories of several independent sovereigns then becomes a series of related questions about our current jurisdiction borders and complex conflicts of law issues.15  As the Internet meshes the formerly distinct jurisdiction borders, we are faced with the dilemma of which governments are justified in exercising authority against particular operations or individuals.16

When the conduct of the bettor and the operator both occur within the United States, there is no question that there is jurisdiction over the operator.17  Likewise, when the operation is based in the United States and the bettor is outside the United States, jurisdiction is also readily apparent in the U.S.18  However, the typical situation existing today is one in which the bettor is located in the United States and the operator is located abroad.  Jurisdiction in the United States in this scenario is much less apparent.  To prosecute a foreign operator in the United States requires the extraterritorial application of U.S. law.  In determining whether this is justifiable, courts look to the plain language of the statute and legislative intent in providing for such an application19 as well as the international bases of jurisdiction based on: subjective territoriality, objective territoriality, and nationality.20

Language of Statute and Congressional Intent

In some instances, Congress provides clear statutory language indicating that criminal conduct may be prosecuted irrespective of whether it occurred inside or outside this country.  A clear congressional intent for extraterritorial application of a particular statute provides an easy answer to questions of extraterritorial jurisdiction.  For example, some criminal statutes are focused specifically on extraterritorial conduct, such as the Foreign Corrupt Practices Act.21  Other statutes include explicit provisions of extraterritoriality, such as section (b) of the federal Wire Act22, which is the only statute that has been used to successfully prosecute offshore Internet gambling.23  Statutes such as these, which provide a clear indication that Congress intended for the statutes to operate extraterritorially, and do not present much problem.

The recent trend has reflected this intention in the courtroom, where extraterritorial jurisdiction has been permitted in criminal cases if the criminal conduct affected or was intended to affect individuals in the United States.24  Despite the fact that many relevant questions remain unanswered, the United States has proceeded with extraterritorial application in prosecuting Internet gambling crimes.25

Subjective Jurisdiction

Subjective territoriality is the strongest basis for jurisdiction and, by definition, includes only activity that takes place wholly within one jurisdiction.26  Historically, if an activity takes place completely within one territory, then that territory has the jurisdiction to create the laws that regulate or prohibit the activity.27

With time it became commonplace for commercial transaction to routinely involve more than one state.  Additionally, with the trend of Internet commerce, it is essential to have modern rules pertinent to the times.  Rules have developed to allow jurisdiction without physical presence as long as there was "purposeful availment."28  Jurisdiction continues to be tied to place, but now incorporates other aspects such as minimum contacts, place of incorporation, and physical presence, which are discussed in more detail below.  It would be impossible to protect its citizens and their property in this day and age if a sovereign did not have the authority to regulate beyond its borders to foreign nations and states.29

Effects-based (Objective) Jurisdiction

Effects-based territoriality refers to an act committed in one jurisdiction with the intention and knowledge that its effects would be felt in another sovereign.30  A classic example of effects-based jurisdiction is a situation in which a rifleman in Canada shoots an American across the border at Niagara Falls.31  The shooting takes place in Canada, but the murder occurs in the United States.  In this circumstance, the United States would have jurisdiction to prescribe a rule of law because the effect of the shooter's action was felt within its borders.32  Application of this effects test is however limited by a 'reasonableness' requirement, which takes into account the respective interests of other jurisdictions as well as the one in which the effects are felt.33  It has long been held that "acts done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a state in reasonably punishing the [operator] as if he had been present at the effect."34

Applying this theory to Internet gambling, it would be possible for states to claim jurisdiction of persons acting via the Internet from outside of the state's border if the Internet activity was intended to produce a certain effect inside of it's borders.35  Minnesota achieved the pinnacle of jurisdictional infringement on other states through its warning statements, which were later upheld by the courts in State v. Granite Gate Resorts, Inc..36  The Minnesota Attorney General issues a statement on the Internet to all users who come into contact with Minnesotans that warns, "Persons outside of Minnesota who transmit information via the Internet knowing that information will be disseminated in Minnesota are subject to jurisdiction in Minnesota courts for violations of state criminal and civil laws."37  The notice then reinforces the statement with the state's long-arm statute and Minnesota case law that permitted jurisdiction over cases the Attorney General equates with cybercrime.38

In 1997, the Minnesota Court of Appeals affirmed a district court's finding of personal jurisdiction over an out-of-state website owner based on advertisements that had been placed on his website and were subsequently accessed by computer users in Minnesota.39  In State v. Granite Gates Resort, Inc., a Nevada businessman provided Internet advertising on the website www.vegas.com, which provides Nevada tourists with general information about the state.  Among the businesses advertised was WagerNet, an on-line wagering service based out of Belize that was available to international users.  Upon awareness of this site, an investigator for the Minnesota Attorney General's office, telephoned the toll-free number shown on the site and asked how to bet on sports events.  The investigator identified himself as a Minnesotan interested in placing bets.  WagerNet then set up an account for him, informing him that he was ready to begin wagering under a completely legal betting service.  The attorney general subsequently filed a complaint alleging that appellants had engaged in deceptive trade practices, false advertising, and consumer fraud by advertising in Minnesota that gambling on the Internet is lawful.40
The issue became whether Minnesota had proper jurisdiction over the WagerNet site operator.  The Minnesota Court of Appeal determined that it did have this authority because Wagernet, through its Internet advertising, "demonstrated a clear intent to solicit business from markets that include Minnesota and, as a result, have had multiple contacts with Minnesota residents, including at least one successful solicitation."41  The advertisements reaching Minnesota residents were considered sufficient contacts with the state.  The court held that WagerNet was "subject to personal jurisdiction in Minnesota because, through its Internet activities, it purposefully availed itself of the privilege of doing business in Minnesota."42  The WagerNet case provides the first glimpse of the danger that sweeping jurisdictional claims can have for persons operating gambling websites and shows how creating diverse statutes in an unregulated global Internet system will infringe upon other states' jurisdictional rights, bring about issues of conflicting laws, and inevitably create a chaotic mess.

Nationality Jurisdiction

Nationality jurisdiction places three limitations upon the prohibiting government. First, the offense must be prohibited in the national's country as well as the country where the offense took place.43  Another limiting factor of constitutional extraterritorial regulation is the citizenship of the site operator.44  Applied to the United States, laws such as the Wire Act can only reach American citizens operating Internet businesses abroad.45  These laws are completely exclusive of any foreign citizen operator of Internet gambling websites.46  Finally, it is a violation of the operator's due process rights to prosecute him/her without U.S. residency or voluntary appearance in the country.47

In the typical case of Internet gambling, the gambling operator is either a foreign citizen or an American citizen that opens an off-shore operation in a country that favors and licenses such businesses.  A foreign citizen operating an off-shore business cannot be reached by United States prosecutors in any circumstance, and a U.S. citizen may only be prosecuted if he/she returns to the country.  After U.S. citizen Jay Cohen was recently convicted for illegally operating a gambling business in Antigua, his companions remain elusive to U.S. prosecutors by simply physically remaining outside of United States jurisdiction.48  The only reason Cohen was successfully convicted was because he chose to return to the United States to challenge the constitutionality of the Wire Act.  Two of his colleagues continue to operate the gambling business in Antigua as fugitives of the U.S.

In order for prosecution of U.S. citizens operating off-shore Internet gambling operations to occur, domestic law enforcement would have to rely heavily on the willingness of the foreign government to apprehend and hand over the alleged criminal.49  Given that Internet gambling is not considered to be an illegal activity in Antigua or any other off-shore location coupled with the fact that the business is a major source of revenue for those sovereigns, such cooperation seems unlikely.  Thus, the option will remain for U.S. citizen operators to avoid prosecution by simply permanently staying outside the territorial jurisdiction of the United States.

Establishing Personal Jurisdiction Over Off-shore Operators

Jurisdiction to adjudicate in the United States requires personal jurisdiction, as well as power over the subject matter of the controversy.50  There are explicit references to the subject matter of gambling in U.S. legislature, but the typical American Internet gambling site operator is a person residing outside of the United States.  This presents and interesting question of personal jurisdiction to adjudicate in the United States, and we look to the law laid out in International Shoe Co. v. Washington, 325 U.S. 310 (1945).  In International Shoe, the Supreme Court held that due process required the existence of "minimum contacts" between the defendant and the forum state for jurisdiction over a particular defendant to be deemed constitutional.51

Historically the jurisdiction of courts over a particular defendant was grounded on their de facto power over the defendant's person.  Hence his presence within the territorial jurisdiction of court was prerequisite to its rendition of a judgment personally binding him.52  Today, due process requires only that a defendant not present within the territory of the forum have certain 'minimum contacts' with that forum, such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'53  After laying out this standard, the Supreme Court in Asahi further clarified what would be considered sufficient minimum contacts.  A finding of minimum contacts must come about "by an action of the defendant [that is] purposefully directed toward the forum state."54  The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum state.55  Additional conduct of the defendant must be analyzed to determine whether intent or purpose to serve the market in the forum state existed.  For example, designing the product for the market in the forum state, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State.56  But a defendant's mere awareness that the stream of commerce may sweep its product or service into the forum state will not suffice as an "act purposefully directed toward the forum State."57

These established rules seem to cut clearly in favor of the United States government demonstrating the necessary minimum contacts to prosecute offshore gambling operations at home.   Internet gambling operators have argued that these minimum contact rules are less clear than they appear when applied in the context of Internet gambling transactions because an activity on the Internet is directed at the global Internet community as a whole, not one particular jurisdiction.
Furthermore, it has been held that telephone calls between an alien defendant and a forum state, standing alone, are "insufficient to satisfy the requirements of due process."58  In TJ Raney & Sons, a Kansas corporation was sued by an Arkansas corporation in the United States District Court for the Eastern District of Arkansas.  The Kansas company did not maintain an office or any agents in Arkansas, nor did it send any representative to Arkansas to complete the business deal which was the basis for the suit, the only contacts that the company had with Arkansas were via the telephone.  The court upheld a lower court's ruling that a company "does not subject itself to the jurisdiction of a court in a different forum if the only contacts it has with the forum are through telephone calls."59

Similarly, in Standard Entertainment v. Bag-it, Inc., the court held that a defendant who conducted business through an "800" toll-free telephone number was not subject to the jurisdiction of the court.60  The court found that toll-free telephone calls creating invoices for the sale of plastic bags combined with a single written communication between the defendant and the plaintiff in a different forum did not represent "sufficient transaction" necessary to support the court's exercise of jurisdiction.61  Offshore gambling services typically communicate with bettors only via website access or phone calls, and can thus point to these rulings as support for their argument that they are not subject to the jurisdiction of U.S. courts.
Likewise, courts have reached differing conclusions as to whether placing advertisements in publications that reach a certain forum permit a court in that forum to exercise jurisdiction against the nonresident defendant.  Offshore gambling services can argue that the advertisement they place on the Internet do not rise to the level of directed activities at the United States62 which "avail [themselves] of the privilege of conducting business there."63

The government would argue that in Commission v. Carillo, the court found that the advertisements of an alien defendant did support a U.S. court's exercise of jurisdiction.64  In that case, a Costa Rican corporation placed advertisements regarding the sale of unregistered U.S. securities in two airlines' in-flight magazines. The court reasoned that the articles were reasonably calculated to reach readers in the American forum because they were in English and because the corporation knew that the magazines would be carried into the country aboard U.S. airlines.65

Internet gambling operators would argue that the magazine ads directed at United States consumers are distinguishable from general Internet ads that are accessible to virtually anyone.  However, this argument would probably not go to far.  There are many factors suggesting that Internet gambling ads are specifically marketed toward U.S. consumers such as the typically American sporting events that they advertise, the fact that ads are written in English, and the hours of business operation.  Additionally, Internet gambling operators are well aware that close to ninety percent of their customers come from the United States.66  The fact that the operators have had to move to the Caribbean to open a telephone sports betting service that accepts virtually all of its business from the United States indicates that they are aware of, and running the risk that this activity may not be legal.

Therefore, a court's exercise of jurisdiction over an offshore service does not appear to be a "surprise," but rather somewhat "reasonable" expectation.67  It seems likely that courts will conclude that offshore betting services do in fact "purposefully direct gambling activities" 68 at U.S. consumers.

Thus, U.S. courts will most likely determine that proper jurisdiction does exist to prosecute an offshore betting service for its minimum contacts with American consumers.

Account Wagering - A Way Around Minimum Contacts?

 Even though the United States appears to have personal jurisdiction over Internet gambling operations affecting its citizenry, the operators have attempted to elude prosecution by utilizing an "Account Wagering" system.  Most current Internet gambling operations are structured so that the bettor opens an account at the offshore location.  Any transaction made to that account is done from the host jurisdiction where gambling activity is legal.  The idea is that a bettor in the United States, or another jurisdiction where gambling is illegal, merely 'informs' an operator abroad of the changes they would like to make to there account.  The operator later acts on this information in a completely separate action and moves money reflecting the account-holder's request.  Everything substantial to the 'gambling activity' is thus theoretically only conducted in the gambling-friendly jurisdiction.

 The popular Internet gambling system of "Account wagering" was initially derived from New York's off-track betting system for horse races, which has been legally operational for years.  This is a practice in which a customer of a licensed racing association or off-track betting ("OTB") corporation establishes an account with the racing facility.69  Once the account is established, the bettor has the option to make wagers on his/her account by appearing in person or by sending instructions to the facility from a remote location by phone or other wire transmissions.70

 When this OTB system was first initiated, instructions were sent by telephone only, but advances in technology have accounted for an increasing number of instructions to be sent electronically via the Internet or other interactive devices.  Furthermore, it has been held that the act of 'gambling' takes place at the location where the money changes hands, not the place where the better sits at a computer or makes a phone call.71  In Truesdale, The jury was confused about whether accepting money for future betting constitutes "betting" under Texas law.  During deliberations, the jury sent a note to the judge asking, "[d]oes receiving money to facilitate the placing of a wager (to be done at a future time) constitute a bet?"  The court responded to this question indicating that it does not.

 Relying on this fundamental theory of legal account wagering, Jay Cohen opened the World Sports Exchange Internet gambling operation in Antigua in 1996 and provided us with the seminal case concerning the current status of the law on Internet sports gambling.  In 1996, Jay Cohen enjoyed a lucrative position at Group One, a San Francisco firm that traded in options and derivatives.  With the Internet revolution in the fast lane and inspired by the new technology and its potential, Cohen decided to pursue the dream of owning his own e-business.  By year's end he had left his job at Group One, moved to the Caribbean island of Antigua, and had become an Internet bookmaker.

 Cohen, the President, and his partners, all American citizens, dubbed their new venture the World Sports Exchange ("WSE").  WSE's sole business involved bookmaking on American sports events, and was patterned after New York's Off-Track Betting Corporation.  WSE targeted customers in the United States, advertising its business throughout America by radio, newspaper, and television.  Its advertisements invited customers to bet with WSE either by toll-free telephone or via the Internet.

 WSE operated an "account-wagering" system very similar to that of New York's OTB corporation.  It required that its new customers first open an account with WSE in Antigua.  A customer seeking to place a bet would then contact WSE either by telephone or Internet and request the particular wager.  WSE would issue an immediate, automatic acceptance and confirmation of that bet, and would maintain the bet from that customer's account.

 In the course of an FBI investigation of offshore bookmakers, FBI agents in New York contacted WSE by telephone and via the Internet numerous times between October 1997 and March 1998 to open accounts and place bets, which they did successfully.  Cohen was arrested in March 1998 under an eight-count indictment charging him with conspiracy and substantive offenses in violation of the Wire Act.72

 Only Cohen chose to contest the charges at trial. Of the remaining indicted defendants, most pleaded guilty to violating the Wire Act and other misdemeanor charges and some remain fugitives from the United States, unreachable by U.S. prosecutors because of their location in a foreign nationality. Two of the fugitives continue to operate the business.  Cohen put forth 3 substantial arguments suggesting the legality of his business under the Wire Act.

(1) Exemption to the Wire Act - What constitutes a 'bet'?

 First, Cohen argued that under WSE's account-wagering system, the transmissions between WSE and its customers contained only information that enabled WSE itself to place bets entirely from customer accounts located in Antigua.  He argued that any actual 'gambling activity' was conducted solely in Antigua.  Cohen claimed that his conduct should be exempt from criminal liability under §(a) of the Wire Act because it falls within the statutory exemption of §(b), which provides as follows:  "Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal." (emphasis added).73

 The §(b) exemption by its terms applies only to the transmission of "information assisting in the placing of bets," not to the other acts prohibited in §(a), i.e. transmissions of actual "bets or wagers."  The court analyzed the relationship between §(a) and §(b) and determined that congress had a "dual purpose" in enacting the statute74 to both "assist various States ... in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses" and to "[suppress] organized gambling activities" as a matter of national policy.75

 Cohen argued that a "bet or wager" is a contract, that when the government's agents called WSE to "place" bets from New York City, they transmitted merely "offers to bet," and that such offers to bet should properly be construed as "information assisting in the placing of bets" rather than "bets" themselves.76  According to defendant, no "bets" existed until Island Casino "accepted" these offers when its ticket writers "struck the 'submit' key on the computer, causing the computer to freeze the amount in the Antigua account wagered...."77  The government countered that without its agent's command to bet, no bet would have been made; that "the bets were conceived by an undercover agent in New York, and subsequently communicated from the  agent to WSE in Antigua"; and that the bets were then merely "recorded" in Curacao.78
 The federal courts had not previously addressed this question of what constitutes a 'bet' and where it actually takes place in the context of a §(b) exemption.  The first circuit, however, in Sagansky v. United States determined that an undercover agent's actions in similar circumstances indeed constituted a 'bet.'  In Sagansky, the First Circuit rejected a challenge to the sufficiency of the evidence in a Wire Act conviction based on incidents in which a telephone caller "placed a bet which [the defendant] readily accepted."79  Defendants had argued that the word "transmission" in §(a) of the Wire Act encompasses the sending but not the receiving of bets, but the court concluded that §(a) imposes criminal penalties on bookmakers who "accept offers of bets or wagers over the telephone."80 (emphasis added).

 The Cohen court adopted this rationale and affirmed the validity of the jury instructions that read,

"If there was a telephone call or an internet transmission between New York and [WSE] in Antigua, and if a person in New York said or signaled that he or she wanted to place a specified bet, and if a person on an internet device or a telephone said or signaled that the bet was accepted, this was the transmission of a bet within the meaning of the Wire Act."

(2) Exemption to the Wire Act When Gambling is Legal in Both Jurisdictions

  Next, the Court rejected Cohen's argument that his operation fell under the exemption to the Wire Act for the transmission of betting information "between jurisdictions where betting was legal" (relying on New York's OTB Corporation).81  With regard to transmissions of "information assisting in the placing of bets," the court noted that the exemption is further narrowed by its requirement that the betting at issue be legal in both jurisdictions in which the transmission occurs.82  The Cohen court found that (1) gambling is illegal in New York under its constitution83 and, notwithstanding statutory exemptions granted to the State's own OTB organization, betting remains generally illegal in New York.  The court was unwilling to recognize that gambling is a legal activity in New York because of one exception that the state had made for the OTB Organization.

(3) Insufficient Mens Rea

 Finally, Cohen argued that he lacked the requisite mens rea because (1) he did not "knowingly" transmit bets, and (2) he did not transmit information assisting in the placing of bets or wagers to or from a jurisdiction in which he "knew" betting was illegal.  The court, however, found that it only mattered that Cohen knowingly committed the deeds forbidden by the Wire Act, not that he intended to violate the statute.84  Cohen's own interpretation regarding what constituted a bet was held to be irrelevant to the issue of his mens rea under the Wire Act.

 Cohen was convicted and sentenced to 21 months in prison and a fined $5,000.  In summary, this case established that an Internet gambling operator, related facilitators, and other peripherally involved persons (with the exception of individual bettors85), no matter where they are located, may be prosecuted under state and federal law for accepting interstate and extraterritorial bets from United States residents.  Account wagering will not provide offshore gambling operators a loophole to elude U.S. prosecution.

Limited Scope of the Wire Act - Proposed Amendment to Prohibit Individuals from Placing Wagers

Although the Wire Act has been the most successful means of prosecuting offshore gambling operations, one of its chief criticisms has been its limited scope.  Because the Wire Act only applies to individuals who are "engaged in the business of betting or wagering,"86 and because courts have held that congress did not intend for casual bettors to be included in the definition of persons engaged in the business of betting,87 the only available means for controlling this growing industry is to prosecute individuals who work for and operate offshore services, as these individuals are the only ones who are technically "in the business of betting or wagering."  The Wire Act has proven effective in rare cases such as Cohen, but Jay Cohen was an American citizen who returned to the United States to challenge the Wire Act.  Cohen could have easily avoided prosecution by simply remaining outside of the U.S. as is business partners did.  Similarly, the scope of the Wire Act will not reach the large portion of non-U.S. citizen Internet gambling operators.  Although effective in the Cohen case, the Wire Act possesses some serious flaws and does not appear to be a foreseeably efficient means to prosecute Internet gambling activity in the future.

One suggestion that has been proposed to alleviate the problem would be to amend the Wire Act so that individual bettors using the telephone to transmit bets could be prosecuted the same as those who are working for gambling services, and thus are engaged in the business of betting.  The Internet Gambling Prohibition Act of 1997 proposed to amend the Wire Act so that it would become applicable to individual bettors.88  Allowing the United States to prosecute individuals as well as those engaged in the business of betting would provide prosecutors more flexibility in attempting to control this exploding industry.  Similarly, by simply prosecuting individuals for betting with these services, the government need not face some of the difficult issues relating to obtaining jurisdiction and custody of defendants who are living outside of the United States.  This amendment would provide the government with a weapon to deter American citizens from gambling over the Internet in the same way it has deterred personal computer users from illegally downloading music from the Internet.  Louisiana is one of few U.S. states to specifically outlaw Internet gambling for the individual bettor.  In Louisiana, "individual gamblers are subject to a $500 fine and operators of Internet gambling sites are subject to a $20,000 fine and a five year prison sentence."89

 This proposed amendment to the Wire Act did not make it through congress, and with good reason.  The main argument against amending the Wire Act to permit the prosecution of individuals who place bets with gambling services is one based on the practicality of enforcing such a law.  While perhaps serving as a mild deterrent to those who wish to bet offshore, it is doubtful that this change in the law would reap significant benefits because it would be nearly unenforceable.  Similarly, both the federal government and state governments provide little funding for gambling prosecutions.  As a result, it would be unwise to spend this money attempting to prosecute individual bettors who may only wager a few hundred dollars a month.  A much more cost-efficient approach seems to be prosecuting the services who accept wagers under the existing statute, instead of amending the law to attempt to stop individuals from placing bets.

Conflict of Laws - A Problem of Growing Concern

 Putting prohibitory statutes such as the Wire Act into practice raises yet another serious concern: conflict of laws.  Jurisdiction to make and enforce laws concerning subjects such as Internet gambling can only be effective if the jurisdiction has the authority to apply its law extraterritorially, such as the United State's prohibitory laws.  However, the jurisdiction upon which U.S. laws are being applied extraterritorially may have its own laws regarding Internet gambling that are quite different from U.S. law.  This presents the burdensome issue of which sovereigns law should apply.

As the court held in Truesdale, Texas law considers the act of gambling to occur at the location where money changes hand.90  United States federal law, however, applies the effects-based jurisdictional analysis, which allows the government to find authority to prescribe at the location of the bettor, where the effects of the gambling will be felt, in addition to, not instead of, the presence-based jurisdiction of the gambling operator.91  We have seen examples of the United States employing its law extraterritorially and finding proper jurisdiction in cases such as Cohen and Sagansky.  However, the same United States government that extended its jurisdiction extraterritorially to prosecute Cohen and Sagansky refused to acknowledge a France's right to do the same when Yahoo!, a U.S. corporation, was facing criminal charges in France.92
In the Yahoo! case, a dispute arose between French law, which prohibits the sale of any nazi-related propaganda as a criminal infraction, and U.S. law, which protects the sale of such items under the free speech clause of the First Amendment.93  Yahoo! is a corporation organized under the laws of Delaware with its principal place of business in Santa Clara, California. Yahoo! is an Internet service provider that operates various Internet websites and services that any computer user can access its URL.94  Yahoo! has subsidiary corporations that operate regional Yahoo! sites and services in twenty other nations, including France.  Each of these regional web sites contains the host nation's unique two- letter code, which allows the site use the local region's primary language, target the local citizenry, and operate under local laws.95

Yahoo! provides a variety of means by which people from all over the world can communicate and interact with one another over the Internet such as a search engine, e-mail service, an automated auction site, shopping services, chat rooms, etc.96  Any computer user with Internet access is able to post materials on many of these Yahoo! sites, which in turn are instantly accessible by anyone who logs on to Yahoo!'s Internet sites. At issue in this case was Yahoo!'s auction site, which allows anyone to post an item for sale and solicit bids from any computer user from around the globe.97  Yahoo! monitors transactions on the auction site through limited regulation by prohibiting particular items from being sold such as stolen goods, body parts, prescription and illegal drugs, weapons, etc.98  Yahoo! allowed individuals to sell Nazi-related propaganda and Third Reich memorabilia, on its auction site.  Such items are protected under First Amendment free speech law in the United States, but are deemed to be criminal violations of the penal code in France.

The French Court found that approximately 1,000 Nazi and Third Reich related objects, including Adolf Hitler's Mein Kampf, The Protocol of the Elders of Zion, an infamous anti-Semitic report produced by the Czarist secret police in the early 1900's, were being offered for sale on Yahoo.com's auction site.  Because any French citizen is able to access these materials on Yahoo.com directly or through a link on Yahoo.fr, the French Court concluded that the Yahoo.com auction site violated Section R645-1 of the French Criminal Code, which prohibits exhibition of Nazi propaganda and artifacts for sale.99
On May 20, 2000, the French Court entered an order requiring Yahoo! to take all necessary measures to dissuade and render impossible any access via Yahoo.com to the Nazi artifact auction service and to any other site or service that may be construed as constituting an apology for Nazism or a contesting of Nazi crimes.100  The order subjects Yahoo! to a penalty of 100,000 Euros for each day that it fails to comply with the order.101

Regardless of these orders, the Yahoo.com auction site still offers certain items for sale such as stamps, coins, and a copy of Mein Kampf, which appear to violate the French Order.  Yahoo! claims that because it lacks the technology to block French citizens from accessing the Yahoo.com auction site to view materials which violate the French order or from accessing other Nazi-based content of websites on Yahoo.com, it cannot comply with the French order without banning Nazi-related material from Yahoo.com altogether.102  Yahoo! contends that such a ban would infringe impermissibly upon its rights under the First Amendment to the United States Constitution.103

Accordingly, Yahoo! filed a complaint in the Northern District Court of California seeking a declaratory judgment that the French Court's orders are neither cognizable nor enforceable under the laws of the United States.104  French defendants immediately moved to dismiss on the basis that this Court lacks personal jurisdiction over them, but their motion was denied.  The court found no basis for abstention, and deference to French law was determined to be outweighed by the obligation to uphold the First Amendment.105

American courts seem to be very hypocritical in prosecuting off-shore Internet gambling operations for their negative effects in the U.S., while making determinations such as that in Yahoo! that blatantly ignore similar criminal effects resulting from American-produced Internet conduct in foreign sovereigns.  U.S. court decisions like this, which blatantly hold American law as superior over foreign law will not play smoothly into the task of resolving Internet-related conflicts of law.  This problem of conflicting law is one of increasing concern.  The only solution is some degree of international agreement on how to address the issue of Internet gambling.

Addressing the Issue of Internet Gambling Through International Trade Law - The WTO's Recent Ruling Against U.S. Prohibitory Laws

On March 22, 2004, a WTO Dispute Resolution Panel released a report regarding the Measures Affecting The Cross-Border Supply Of Gambling And Betting Services dispute.106  The WTO's decision found that the United States is violating its commitments under the General Agreement on Trade in Services, "GATS", by not providing market access to Internet gambling services provided by operators licensed by the Governments of Antigua and Barbuda.107
At issue is the provision of Internet gambling services to customers in the United States from operators located in Antigua and Barbuda.  Antigua and Barbuda argued that certain U.S. laws have had the effect of a prohibition on the supply of gambling and betting services from outside the United States to consumers within the United States.  Antigua and Barbuda asserted that the United States had made a GATS commitment, of which various obligations were violated through its prohibition on gambling operations from Antigua and Barbuda.108

Under International Trade Law, in order to reach the reported result, the WTO panel must have correctly concluded that: (1) Antigua and Barbuda met their prima facie case; and (2) the United States had indeed made a commitment to gambling and betting services in its schedule of GATS commitments.109  Both findings, if upheld on appeal, could have implications for trade the on-line gambling industry and services in general.

Although the final version of the WTO findings will not be released to the public until late May at the earliest, the Bush administration vowed to appeal the decision, and several members of Congress said they would rather have an international trade war or withdraw from future rounds of the World Trade Organization than have American social policy dictated from abroad.110  "It's appalling," said Rep. Bob Goodlatte, R-Va. "It cannot be allowed to stand that another nation can impose its values on the U.S. and make it a trade issue."111  "We intend to appeal and will argue vigorously that this deeply flawed panel report must be corrected by the Appellate Body," said Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, in a press statement made March 24th, 2004.112

Potential Ramifications from this Ruling on U.S. Laws and Current Enforcement Policies

Internet gambling operators should not be too quick to think that the WTO Panel Report will change U.S. laws or policies.  The WTO report is not final and is still pending appeal.  Furthermore, even if the Appellate Body ultimately agrees with the Panel's decision, such a decision does not directly affect U.S. law.  Only Congress and the President have the power to amend U.S. law.113  There are many other options, for example, the U.S. Government may prefer to allow Antigua and Barbuda to impose trade sanctions or may choose to pay compensation to Antigua and Barbuda rather than amend its laws.

Although certainly the U.S. Administration could adapt and narrow its reading and enforcement of those laws in response to this ruling, such a decision is unlikely given the quick and adamantly announced decision to appeal.  Adapting current law would also be in direct conflict with strong-held U.S. government policy regarding gambling activities.  Looking at the rulings as a whole, the release of the WTO report does not appear to change much in terms of the legal risk to off-shore operators providing their services to U.S. consumers.

But there is a foreseeably significant result in the potential future effect that this ruling will have on the Internet gambling industry.  Although the United States may prefer to allow Antigua and Barbuda to impose trade sanctions rather than change its law, an affirmation by the WTO Appellate body would open the door to future WTO dispute settlements in the Internet gambling arena114.  Other WTO members with active Internet gaming industries like England or Australia, who have more economic influence, may follow Antigua's lead.  If so, the United States may need to take a serious look at its laws and policies on Internet gambling.

Proposed Solution - Legalize and Globally Regulate Internet Gambling

The solution to the complex problem of an increasingly large number of Americans placing bets overseas would be to legalize Internet gambling in the United States and pursue a global system of regulation.  It does not make sense that United States federal and state governments so adamantly reject the idea of Internet sports gambling when they so actively promote other forms of gambling such as lotteries, river-boat casinos, and race tracks.  With government regulation, these endorsed operations are ensured to provide legitimate business practice, while simultaneously producing significant government revenue through taxes.  As it exists today, there are no means to ensure the legitimacy of the existing Internet gambling operations and protect the American consumers that are spending enormous quantities of money utilizing their services.

Furthermore, jurisdiction issues will be a continuing problem as individual states and nations develop even more diverse prohibitory laws on Internet gambling.  For example, even if a jurisdiction with a law that allowed approved locally regulated Internet gambling was to issue an Internet gambling license, licensed operators would only be protected from prosecution in that state.  Prosecution by the U.S. federal government and even prosecution by prohibiting state governments, where effects have been felt would still be possible consequence for operators.  Compliance with one jurisdiction's laws will not guarantee protection from potential liability in other jurisdictions, and it is apparent that this mess of a problem will persist until a uniform system is developed.

In addition, without a uniform system of regulation, conflicts of law will continue to present serious concern.  Different states and nations will fight for the enforcement of their own laws and protection of the own citizens and corporations.  A standstill in the prosecution of foreign Internet gambling operators is thus very foreseeable as laws continue to develop more diversity.  Universal prohibition is simply impossible and prosecution by prohibiting jurisdictions of operators located abroad is only going to get messier and more difficult.  The most reasonable solution, therefore, is to legalize and regulate Internet gambling universally.

Proposed Regulations for Legal Internet Gambling

Evolving technology is increasingly outpacing the ability of individual governments to regulate Internet gambling activity and of law enforcement to enforce such regulations.115  Therefore, the resolution of these matters must be addressed at the international, level.  A policy of legalizing, regulating, and licensing Internet gambling operations would provide incentives for the operators to subscribe to the policy standards and investigative requirements set by a universal regulation.116  The proposed universal regulation117 includes the creation and implementation of an international regulatory board to issue licenses to operators and monitor conduct on a regular basis.  The regulation would additionally provide for restrictions of gambling in certain nations or states explicitly opposed to all forms of gambling, such as Utah and Hawaii.  Furthermore, the regulation would ensure a system of equitable tax distribution and would actively monitor and address instances of underage and problem gambling.

Regulatory Board

The regulatory board is the most essential element to devising an international regulatory system and would consist of members including (1) representatives from nations and states with strongest economic interests in the business of Internet gambling.  Representatives should include members with experience in regulatory gaming boards in their home jurisdictions; (2) Accountants with expertise in gambling or a gambling-related field; (3) law enforcement officers with expertise in the area of money laundering and other fraudulent conduct; (4) individuals with a experience in land-based casino operations to provide input and suggestions; and (5) individuals with expertise in Internet technology, security, and cybercrime.118
The board would have the power to carry out the policies and approve licenses of Internet gambling operators, employees, and creators of gaming software.  Applicant operations would be required to submit sufficient proof that both the individuals involved and the corporations as a whole are suitable for an Internet gambling license.  The board should cooperate with and give weight to findings of suitability by local state regulatory gaming boards that are familiar with the applicant's business history and conduct.  The board's investigative department would conduct comprehensive background checks of all owners and management personnel involved in the operation.

The board's technology department would test all Internet software and games in order to ensure the games' integrity.  All games should be open to inspection by regulators at all times, and with controls in place to ensure the software used in operating the games is from the source code that has been reviewed and approved.  Minimum payout percentages and posting of odds of winning and payout percentages should comply with the standard practice, which can also be determined by the board.  The board should implement a method to verify that monetary and non-monetary prizes won have been paid as well as a method for ensuring the delivery of prizes, and certified audits by the boards accounting department or a by a contracted firm.119

The board would maintain operating software as a reference source.  Internet gambling companies would not be allowed to change the nature of their games without board approval to ensure that the board has continual knowledge of what is being offered to the consumer and that what is being offered to the consumer has been thoroughly tested and approved as meeting board requirements."120

Gambling site operators would be required to submit reports to the Board on a regular basis, providing a paper trail for auditing operations.  The board's audit staff would perform periodic audits and routine inspections.121  Regulators would have access on demand to the operator's physical premises and would have the authority to seize equipment when they encounter improper or fraudulent activities.  Regulators would also have real-time, online testing ability at approved locations and be able to require changes to management practices, control procedures, accounting practices, game operations, etc., to ensure the integrity of the operation.122

All applicants must provide proof of financial solvency to the board.  The financial stability of the operator would need to be insured through a trust or escrow account to provide insurance for large payoffs and insurance for errors and omissions.123
The Board would further have the authority to set standards requiring minimum payouts for slots and prohibition of certain kinds of advertisement.  The board would be responsible for providing arbitration, mediation, or a similar mechanism for settling disputes between operators and customers.  Finally, the board should also be responsible for imposing penalties on operators who negligently accept bets from underage gamblers, problem gamblers, or individuals from a jurisdiction that has indicated a desire to be excluded from participation.124

Restriction of Gambling in Certain Locations

Internet gambling shall not be permitted in those states such as Hawaii, Utah, or other locations that prohibit all forms gambling.  If a state does not desire to participate in regulated Internet gambling, it may notify the board, which would then require all sites to draft or display prominently a notice warning that "bets shall not be accepted from the state of X."  An operator would be subject to penalty from the board for negligently accepting bets from a state that has indicated a desire to be excluded.

Taxes

Operators shall pay an annual licensing fee as well as pay gaming profit taxes.  Applicants would also be responsible for ensuring that federal taxes on winnings be collected from players, and that other taxes be returned to the state or country where the Internet gambling has taken place.

Under Age and Problem Gambling

It would be the burden of the operator to verify the age of the players.  One suggestion is the implementation of a waiting period prior to commencement of wagering play to ensure that players have been screened properly.  During such a waiting period, the operator would have the opportunity to verify employment or age and whatever additional information is necessary to ensure that the site is not being used by under aged participants.  In addition, it would allow the operator to use the player's registration as a way of tracking that player's performance or habits to determine if the player may be flagged as a problem gambler.

Conclusion

The implementation of an international regulatory board will ensure that Internet gambling operators are conducting their businesses in a non-fraudulent and legitimate manner.  The proposed regulatory scheme is not claimed to be perfect, but certainly provides a start for a reasonable solution.  Of course unlicensed sites will continue to operate, but most gamblers will not want to deal with an unregulated sports entity or a casino out of suspicion that the operator may cheat or deceive.  Further, this uniform system will eliminate the mess that has developed concerning conflicts of law and jurisdiction disputes and will comply with the WTO's international trade guidelines.  It will provide increased tax revenues to be put toward beneficial causes and provide a more efficient means to identify under-age and problem gamblers.  Prohibition has proven to be an unworkable response to Internet gambling, thus governments should move towards enacting a universal regulatory framework to achieve a more efficient, cooperative, and logical response to the problematic issue of Internet gambling.

1 Copyright (c) 2004 by Jonathan R. Ehtessabian.  All rights reserved.

2 J.D. Candidate 2004, University of Iowa College of Law

3 Christiansen Capital Advisors, LLC., Wagering on the Internet: State of the Industry (available at http://www.cca-i.com/publications>.)

4 Id.

5 Id.

6 Id.

7 See 18 U.S.C. § 1301, the Act of Mar. 2, 1827, ch.61, 6,4, Stat. 238; Act of July 27, 1868, ch. 246, 13, 15 Stat. 196; Anti-Lottery Act of 1890, Ch. 908, 1, 26 Stat. 465

8 Id.

9 Antonia Z. Cowan, The Global Gambling Village: Interstate and Transnational Gambling, 7 Gam L R 251 (2003).

10 Id.

11 The Wire Act 18 U.S.C. § 1084(a)

12 The Travel Act, 18 U.S.C. § 1952.

13 The 1970 Illegal Gambling Business Act, 18 U.S.C. § 1955.

14 See 15 U.S.C. § 3001(a)(1)-(2) (1994) ("The Congress finds that ... the states should have the primary responsibility for determining what forms of gambling may legally take place within their borders [and] ... the Federal government should prevent interference by one state with the gambling policies of another.").

15 See Cowan, supra, note 9, at 252.

16 Allen R. Stein, Frontiers of Jurisdiction: From Isolation to Connectedness, 2001 U. CHI LEGAL F. 373, 374 (2001).

17 See Cowan, supra, note 9, at 261.

18 Id.

19 As is noted in section b of the Wire Act, "Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce ... in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal." 18 U.S.C. 1084(b).

20  See Cowan, supra, note 9, at 261.

21 The Foreign Corrupt Practices Act criminalizes the bribery of foreign government officials by United States individuals and companies. See 15 U.S.C. §§ 78dd-1 to -3, 78ff (1994 & Supp. V 1999).

22 Section b of the Wire Act again states, "Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce ... in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal." 18 U.S.C. 1084(b).

23 See United States v. Cohen, 260 F.3d at 73 (2001). See also 18 U.S.C. § 1956 and 18 U.S.C. §§1081-1084, supra, note 20 (permitting extraterritorial prosecution in certain circumstances).

24 See, e.g., United States v. Pizzarusso, 388 F.2d 8 (2d Cir. 1968).

25 See Second Circuit Upholds Conviction of Founder of Offshore Internet Gambling Operation, 1 Cybercrime L. Rep. (P & F) No. 10, at 7 (Aug. 13, 2001).

26 See Cowan, supra, note 9, at 261.

27 Darrel Menthe, Jurisdiction in Cyberspace: A Theory of International Spaces, 4 MICH. TELECOMM. TECH. L. REV. 69, at 71 (1998).

28 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985).

29 See Stein, supra, note 16, at 376.

30 Strassheim v. Daily, 221 U.S. 280, 285 (1911).

31 See Cowan, supra, note 9, at 262.

32 Id.

33 Restatement (Third) of Foreign Relations Law § 403 (1987).

34 See Strassheim v. Daily, supra, note 30, at 281-82.

35 Darrel C. Menthe, Jurisdiction in Cyberspace: A Theory of International Spaces, 4 Mich. Telecomm. & Tech. L. Rev. 69-70 (1998), available at www.mttlr.org/volfour/menthe.html.

36 State v. Granite Gate Resorts, Inc., 568 N.W. 2d 715, 718 (Minn. Ct. App. 1997), aff'd, 576 N.W.2d 747 (Minn. 1998).

37 See Statement of Minnesota Attorney General, supra note 38, available at  http://www.ag.state.mn.us/consumer/fraud/Fraud_Pyramid.htm.

38 Id.

39 See State v. Granite Gate Resorts, Inc., supra, note 36, at 718.

40 Id.

41 Id.

42 Id. at 719.

43 This again begs the question of where the actual act of gambling takes place.  In the typical scenario, the United States will apply an effects based standard in deciding this question and will result the application of only one jurisdiction's law.

44 Mark D. Rosen, Extraterritorriality and Political Heterogeneity in American Federalism, 150 U. PA. L. REV. 855, 866 (2002).  See also, The Restatement (Third) of Foreign Relations Law of the United States, which provides that states "may apply...to persons outside territory on the basis that he is a citizen, resident or domiciliary of the State."

45 Id.

46 Id.

47 Pennoyer v. Neff, 95 U.S. 714 (1877).

48 See United States v. Cohen, supra, note 23, at 73.

49 Restatement (Third) of the Foreign Relations Law of the U.S. at 236-237.

50 Henry H. Perritt, Jr., The Internet is Changing the Public International Legal System, 88 KY. L.J. 885, 1126-27 (1999-2000).

51 Asahi v. Superior Court, 480 U.S. 102, 111-12 (1987).

52 See Pennoyer v. Neff, supra, note 46, at 714.

53 International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945).

54 See Asahi v. Superior Court, supra, note 50, at 312.

55 Id.

56 Id.

57 Id.

58 T.J. Raney & Sons, Inc. v. Security Savings & Loan, 749 F.2d 523, 525 (8th Cir. 1984).

59 Id. at 530.

60 Standard Enter., Inc. v. Bag-It, Inc., 673 F. Supp. 1216, 1220 (S.D.N.Y. 1987).

61 Id. at 1220

62 See Burger King, supra note 28, at 472.

63 Id. at 475.

64 U.S. Securities and Exch. Comm. v. Carrillo, 115 F.3d 1540 (11th Cir. 1997).

65 Id. at 1545.

66 See Christiansen Capital Advisors, supra note 1, See also Steven Crist, All Bets Are Off: The U.S. Is on the Verge of an Explosion in Internet Sports Betting That Could Change the Face of Gambling in this Country Forever. But Is It Legal? And Even If It Isn't, Can It Be Stopped?, SPORTS ILLUSTRATED, Jan. 26, 1998, at 82.

67 See International Shoe Co. v. Washington, supra, note 52, at 316.

68 See Burger King, supra note 28, at 472.

69 See Cowan, supra, note 9, at 259.

70 Id.

71 United States v. Truesdale, 152 F.3d 443, at 449.

72 The Wire Act, 18 U.S.C. § 1084(a),(b).

73 Id.

74 Id.

75 H.R.Rep. No. 87-967, 1961 U.S.C.C.A.N. 2631, 2631. See also, United States v. McDonough, 835 F.2d 1103, at 1104-1105 (1998).

76 (Defendant's Memorandum of Law in Support of Defendant's Motion to Dismiss ("Def.Mem.") at 10.)

77 Id. at 9

78 (Government's Memorandum of Law in Opposition to Defendant's Motion to Dismiss ("Govt.Mem.") at 16.)

79 Sagansky v. United States, 358 F.2d 195 (1st Cir.1966)

80 Id. at 200.

81 18 U.S.C. § 1084(b)

82 United States v. McDonough, 835 F.2d 1103, at 1105 (1988).

83 See United States v. Cohen, supra, note 23, at 73.

84 Bryan v. United States, 524 U.S. 184, 193, 118 S.Ct. 1939, 141 L.Ed.2d 197 (1998).

85 During the House of Representatives debate on the bill, Congressman Emanual Celler, Chairman of the House Judiciary Committee stated, "[t]his bill only gets after the bookmaker, the gambler who makes it his business to take bets or to lay off bets ... It does not go after the casual gambler who bets $2 on a race. That type of transaction is not within the purview of the statute." United States v. Baborian, 528 F. Supp.324, 328 (quoting the 197th Cong.Rec. 16,534 (1961)).

86 The Wire Act, 18 U.S.C. § 1084 (a).

87 United States v. Barborian 528 F. Supp. 324, 328-29 (D.R.I. 1981).

88 The Bill proposed to amend the Act by adding the following paragraph:
Whoever other than a person described in paragraph (1) knowingly uses a communication facility for the transmission or receipt in interstate or foreign commerce of bets or wagers, information assisting in the placing of bets or wagers, or a communication that entitles the transmitter or receiver to the opportunity to receive money or credit as a result of bets or wagers, shall be fined not more than $2,500 imprisoned not more than six months, or both.
Internet Gambling Prohibition Act, S. 474, 105th Cong., 1st Sess. (1997). In addition to this change, the Bill would also amend the Wire Act to specifically cover services who accepts bets via the Internet.

89 La. Rev. Stat. Ann §14.90.3 (D)(E)(i).

90 See United States v. Truesdale, supra, note 70, at 449.

91 See Cowan, supra, note 9, at 264.

92 Yahoo!, Inc. v. La Lique Contre Le Racisme et L'Antisemitisme, 169 F.Supp.2d 1181.

93  Id. at 1183

94  Uniform Resource Locator ("URL"), for example: http://www.yahoo.com.)

95  For example, Yahoo! France is found at http://www.yahoo.fr and Yahoo! Korea at http://www.yahoo.kr ).

96 See Yahoo!, Inc. v. La Lique Contre Le Racisme et L'Antisemitisme, supra, note 91, at 1184.

97 Id.

98 Id.

99 Id.  noting that the High Court of Paris, May 22, 2000, Interim Court Order No. 00/05308, 00/05309 (translation attested accurate by Isabelle Camus, February 16, 2001). The French Court set a return date in July 2000 for Yahoo! to demonstrate its compliance with the order.]

100 Id.

101 Id.

102 Id.

103 Id.

104 Id.

105 Id.

106 WTO Dispute Rulings.  Antigua and Barbuda as complainants, available at http://www.wto.org/english/tratop_e/dispu_e/distabase_wto_members1_e.htm.

107 U.S. loses preliminary WTO ruling on Internet gambling, March 25, 2004.  Available at http://seattlepi.nwsource.com/business/166397_gambing26.html.  See also http://www.detnews.com/2004/technology/0403/25/technology-102443.htm.

108  WTO Dispute Rulings.  Antigua and Barbuda as complainants, supra, note 105.

109 Id.

110 U.S. Ban on Internet Gambling Illegal Found Illegal by WTO http://seattlepi.nwsource.com/business/166397_gambing26.html.

111 Id.

112 See supra, note 106, http://www.detnews.com/2004/technology/0403/25/technology-102443.htm.

113 Id.

114 Coudert Brothers Attorney-client update on status of law.  See www.coudert.com/news/client_advisory/ 040326_31_internet_gambling.pdf.

115 The Florida Attorney General stated that, "evolving technology appears to be far outstripping the ability of government to regulate gambling activities on the Internet and of law enforcement to enforce such regulations. Thus, the resolution of these matters must be addressed at the national, if not international, level." Op. Att'y Gen., available in LEXIS 70 (Oct. 18, 1995).

116 Michael D. Shagan, Presentation at the 2nd International Symposium on Internet Gambling Law and Management (Dec. 1, 1998)

117 My proposed International regulation is based on the combination of ideas from Joseph M. Kelly Internet Gambling Law, William Mitchell Law Review 2000 at 171-75; (2) The Testimony of Larry Montgomery before the Subcommittee of NGISC, Internet Gambling Subcommittee, Dec. 1, 1998; and (3) A Letter from Frank L. Miller, Esq., to Joseph Kelly, Professor, Buffalo State College, suggesting amendments to Kelly's proposed regulatory system (Feb. 12, 1999).

118 Joseph M. Kelly Internet Gambling Law, William Mitchell Law Review 2000 at 171.

119 Id. at 172.

120 Id.

121 Id.

122 Id. at 173

123 Id. at 173.

124 Id. at 174.