U.S. Gambling Culture Spreads to Wall Street

In 1995 we saw the emergence of internet casino gambling, which includes playing games of chance such as poker, blackjack, and roulette as well as betting on sports events. By the year 2000, nearly 300 companies around the world operated almost 2,000 internet gambling websites. And in 2005, worldwide online gambling revenue is expected to be over $US10 billion for such operators while a total of $US 200 billion is expected to have been wagered.

Widely an issue of intense debate since its inception, the criminality of online gambling has been argued at the U.S. Department of Justice as well as in the halls of the U.S. Congress. But since internet gaming sites are primarily offshore, U.S. residents are presently not held accountable for breaking federal law in the absence of such precedent. However, individual states may mandate such practices illegal, going after banking inst itutions to prevent such transactions, for example, but individuals have not been prosecuted. bandarq

The prevalence of online gaming and the large revenues enjoyed from it has however prompted major U.S. brokerage firms to claim their piece of the pie. At stake is whether or not the Department of Justice will apply the Wire Act of 1961 in enforcing the law and how long it will be before the Congress can agree on passing new legislation which will help strengthen the Wire Act. The main dispute is that the Wire Act was intended exclusively for placing bets on the phone to bookmakers for sports events, and was largely put in place by then Attorney General, Robert F. Kennedy, in order to discourage organized crime and bookmaking. Whether the law now applies to communication between a home computer and an establishment or casino not located in the U.S. still remains a gray area.

But in the era of industrial globalization, it appears that firms such as Goldman Sachs & Co., Merrill Lynch & Co. and Fidelity Investments are willing to risk the vagueness of the law in order to make investments on behalf of their clients by way of stocks and mutual funds. By providing financing for offshore casinos the question remains whether they are skirting the law as well as whether they are making reliable investments for their clients, for whom most have no idea that their mutual funds are involved in such ventures.

It is now commonplace for American firms to invest in overseas corporations, even those which may be considered illegal under U.S. federal law, such as those manufacturers utilizing sweatshops and child labor or by outsourcing business to countries which do business with other countries sanctioned by the U.S. government. However, the issue of online gaming is perhaps just the latest industry in worldwide commerce in which laws and customs have not yet caught up to it, given the sophistication of the technology involved.

The argument is whether someone who generates a gambling transaction from their living room to a country outside of the U.S. qualifies as an illegal U.S. transaction and whether or not it can be reasonably policed beyond U.S. shores. In addition to the Wire Act, the Professional and Amateur Sports Protection Act was enacted in 1992, which banned all wagering on sports events in all states except those with pre-existing operations in the states of Nevada, Oregon and Delaware. That was followed by both President Clinton’s administration as well as the present President Bush’s administration both of which conveyed that the Wire Act applied to all forms of internet gambling and therefore illegal under existing law.

 

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