“Depend on the rabbit’s foot if you will, but remember it didn’t work for the rabbit.”
R. E. Shay
Following the recent Supreme Court decision in MURPHY, GOVERNOR OF NEW JERSEY,
ET AL. v. NATIONAL COLLEGIATE ATHLETIC ASSN. ET AL., online sports betting is no
longer per se criminalized in the United States. Writing the majority 6-3 opinion, Justice Alito wrote, “Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own.” Thus, the decision is left to the legislatures of each state. But not unlike the tension between federal and state laws regarding the use, production and sale of marijuana, online sports betting, even if allowed by the state, may still come in conflict with federal laws.
There are several federal anti-gambling laws which might prove problematic for gaming operators and even individual bettors in the near future, including the Illegal Gambling Business Act (the “IGBA”) and the Unlawful Internet Gambling Enforcement Act (the “UIGEA”). But, possibly the most pertinent of federal laws pertaining to online sports gambling is the Federal Wire Act (the “FWA”). That is because, unlike the IGBA and UIEGA, which are mainly concerned with prohibiting interstate gambling between states where the online sports gambling is illegal in one of the states, the FWA prohibits interstate gambling even if gambling is legal in both states.
The FWA, a fifty-year old law initially passed to combat organized crime, has two key provisions. It prohibits those “in the business of betting or wagering” from using “a wire communication facility” to place bets or wagers on sporting events across state lines or in the transmission of money or credit won or lost on those bets. The other critical section of the Act is its “safe harbor” provision, which allows for the transmission of “information for use in news reporting” or for “assisting in the placing of bets or wagers” from one state where such a bet is legal to another state where it is legal.
To avail themselves of the safe harbor provision, states, like New Jersey, have placed “geofences” around their borders. They use the location services of mobile phones or the IP addresses of computers to prevent users from placing bets when they are not physically located within the state, where such sports betting is legal.
However, the internet is a decentralized network that relies on intermediate routing as the most efficient means of transmitting information. Consequently, the most efficient means of relaying
information, even information intended to travel exclusively intra-state, may be routed outside of the state (through a state where online sports gambling is illegal) because that is the fastest way for the information to reach its intended target. And even if gambling operators rely on the safe harbor provision of the FWA, there is still potential danger; because not all sates that permit online sports betting permit the same types of betting. For instance, New Jersey prohibits sports betting on New Jersey collegiate games, but such betting is permitted in Nevada.
Proponents of online sports betting are encouraging Congress to update the FWA so that it can accurately reflect today’s technology and gambling laws. In the meantime, states and gaming operators are moving forward. It will be interesting to see whether the federal government will seek to update the FWA or if it will seek to prosecute individual bettors or gaming operators who violate the Act’s safe harbor provision.
