Hey, your Web browser's not a remote off-track-betting site

Was your office NCAA pool on the server? Do you do a little online wagering during
lunch? If so, be careful--Big Brother doesn't like illegal sports bookings in federal
offices.


A word to the wise: Federal computers are already supposed to be stripped of games. But
your Internet browser, if used to place a bet, can get you into big trouble.


Last month marked the dawn of federal cybergambling prosecutions. On March 4, 14 owners
and operators of offshore Internet and telephone gambling operations were charged with
violating federal wagering laws.


The defendants are American citizens who own sports betting companies headquartered in
the Caribbean or Central America. The companies accept online wagers on sporting events
and have operating licenses from their home countries.


The indictments probably surprised the defendants. As recently as Jan. 31, the New York
Times reported that the Justice Department was not likely to bring any such cases because
"the offense was not made on U.S. soil and the United States does not have any
jurisdiction" in these areas.


But a press release from the U.S. Attorney for the Southern District of New York, where
the criminal charges were filed, pointed out the companies have marketing operations in
the United States from which advertising is mailed.


One charge stands out: the criminal charges filed against one Kenny Rogers, owner of
the Internet service provider for a Web site called "Winners Way." Winners Way
is a sports betting operation in the Dominican Republic. The undercover FBI agent who
participated in the investigation found that the Winners Way Web site was registered to
Orix Systems in Las Vegas. Rogers was charged with conspiracy for allegedly helping
establish the site.


Federal law prohibits transmitting bets or betting information over interstate wires.
If the location that receives the wager allows sports betting but the originating location
does not, the wager violates federal law. If sports betting is authorized by the state or
jurisdiction where the bet is placed and received, there is no violation of the federal
law.


Because bets were placed from New York, which does not authorize sports betting, the
complaint alleged that federal law had been violated.


Cyberbetting is now the subject of newly proposed federal regulations. Until March, the
states had been in the forefront of prosecutions and regulatory actions against Internet
sports betting companies. State prosecutions against Internet wagering relied on state
laws that prohibit gambling or consumer protection laws against deceptive trade practices,
false advertising and consumer fraud.


Sen. Jon Kyl (R-Ariz.) and Rep. Frank LoBiondo (R-N.J.) recently introduced federal
online gambling legislation. The bills would ban Internet gambling and online gambling
services. The proposed legislation would amend existing law to cover all wire and
electronic communications, putting Internet gambling operators within its scope.


A paragraph would be added to Section 1084 of the U.S. Code eliminating the requirement
that one of the parties be in the "business of gambling." Thus, someone who
places a bet from a home or office computer via the Internet could be subject to
prosecution.


Generally, the legislation would make anyone convicted of running an Internet gambling
site liable for a substantial fine and up to four years in prison.


It would subject cyberbettors and cybergamblers to fines and up to six months in
prison, and it would let police request discontinuation of service for Web sites engaging
in illegal gambling--with enforcement by court order if necessary.


The legislation does not directly mention the jurisdictional issue of Internet gambling
companies who operate and are licensed by other countries.


Opponents of this prohibition argue that it will only drive Internet betting offshore,
where enforcement of the regulations is less likely because it is difficult for U.S.
authorities to apprehend the culprits.


Until legislation directly clears up the jurisdictional issues, the legality of
cyberbetting will be murky. Nonetheless, the odds favor continued state and federal
scrutiny of online and Internet gambling.


When the term cyberspace was coined in 1984, who would have expected this type of
prosecution before the turn of the century?


Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan. He
has long experience in federal information technology issues. E-mail him at smr@blrlaw.com. Brand, Lowell & Ryan partner Jonathan
Feld contributed to this column.


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