• Gambling Portals May Be Targeted With Federal Subpoena
  • October 23, 2003
  • Law Firm: Hall Dickler LLP - Office
  • Online gambling portals may be the targets of an unannounced federal investigation reportedly coming out of Missouri. On September 30, 2003 Interactive Gaming News (IGN) reported that it had obtained a copy of a subpoena served on a portal site operator. IGN reported that the subpoena called for testimony to be given before a grand jury on October 29, 2003, and demanded commercial and financial information related to the advertisement of online casinos and sports books going back to January 1, 1997.

    The industry press has reported rumors that an investigation is being launched by the U.S. Attorney for the Eastern District of Missouri. That same prosecutor's office brought a case last year against PayPal for allegedly unlawfully processing online gambling services. In November 2002, PayPal agreed to cease processing online gambling transactions and pay a $10 million fine.

    The government may be searching for a way to take the offensive on online gambling despite the debate as to whether online gambling violates any federal law (Congress keeps attempting to legislate in this area). The feds make their point by accompanying the subpoena with a letter sent to the National Association of Broadcasters on June 11, 2003 by Deputy Assistant Attorney General John G. Malcolm of the Justice Department's Criminal Division. The letter asserts that Internet gambling and offshore sportsbook operations that accept bets from customers in the United States violate Sections 1084, 1952, 1955 of Title 18, a class E felony. It also notes that anyone found guilty of aiding and abetting those operations may be punished as a principle violator of those statutes.

    Why This Matters: Fear of a grand jury investigation may accomplish more for the Justice Department than any subsequent prosecutions, given the government's questionable legal authority for a criminal conviction. The belief that the law does not currently regulate Internet gambling has led to the ongoing Congressional battle between those who would ban, and those who would regulate. Whichever approach prevails, any bill engenders complex legal issues, and jurisdictional questions in particular. What if a U.S. cardholder resides out of the country when he or she connects to a gambling site? Does U.S. law follow the user, regardless of location? How is the credit card company to know the nationality of the holder? Is the way around the law simply a matter of getting a credit card issued by a foreign bank? And, if credit card companies can be brought into the enforcement web, why not also telephone companies or ISPs that carry questionable content?