Using the internet to conduct gambling is a no-no under both state and federal law. In fact, federal law reinforces state law in some cases, while in others it trumps it. In addition, a number of state officials have expressed concerns that the Internet could be used to bring illegal gambling into their jurisdictions. In response to these concerns, the Attorney General has proposed a rule that would ban financial transactions that take place in the United States as a result of illegal Internet bets.
While the laws and regulations that affect the Internet may not be crystal clear, the federal government has a few tricks up its sleeve. First, there are seven federal criminal statutes that have been used to prosecute illegal Internet gambling. These include the Wire Act, the Illegal Gambling Business Act, and the Racketeer Influenced and Corrupt Organizations (RICO) Act. Secondly, there are a number of state laws that regulate gambling in the first place. In addition, some state laws ban certain forms of sexual conduct at home. In light of these, prosecutors have warned PayPal that it could face prosecution if it failed to comply.
Using the internet to conduct gambling is likewise not a legal or moral obligation. In fact, a number of state officials have raised the question as to whether the Internet could be used to bring illegal gambling in from overseas. In the case of Costa Rican casino operations such as Tropical Paradise, this question is a legitimate one. In fact, a recent study conducted by the Government Accountability Office found that Costa Rican casinos have a higher turnover rate than those in Nevada. The result is that the average Costa Rican citizen is a bit stingy when it comes to gambling. The best strategy for Costa Rican officials is to enact laws that prevent foreign elements from disrupting state enforcement policies.
In the aforementioned GAO report, the government found that the best way to detect online gambling was to monitor the flow of money through PayPal’s online payment system. Despite the ambiguous nature of this approach, the government found that PayPal had paid out more than $500,000 in illegal Internet gambling bets. While the government has not yet taken any action against PayPal, federal prosecutors warned the company that it could face legal action. Fortunately for PayPal, the company did not lose out on the cash. However, the company could still face a federal criminal prosecution if it violated the UIGEA.
Despite these statutory and regulatory efforts, state officials have questioned whether the federal government has the ability to prosecute illegal Internet gambling. This is a good question, since the Federal Communications Commission (FCC) has authority over common carriers. In addition, the FCC has the power to levy fees against Internet providers. The FCC has also been known to take action against gambling operators. In fact, the FCC has been known to shut down facilities and prevent the leasing of gambling facilities.