The Legality of Online Gambling

Gambling online falls into a legal grey area. While it is technically illegal in most of the United States, the prosecution and conviction of individual players is very difficult because they're gambling from home. It is also illegal for a gambling Web site to operate within the United States, which is why the offices and servers of most online casinos are located in other countries. There are about 70 countries that allow online gambling sites to set up shop, including Australia, New Zealand, South Korea, Denmark, Finland, France, Germany, and some provinces of Canada.

When you register for an online casino, you are required to agree to the site's terms and conditions. Finding out whether or not gambling is legal where you live is your responsibility. You must also abide by any age limits set on gambling in your locality. If online gambling is illegal in your area, and authorities discover that you've won money, your winnings could be forfeit.

Photo courtesy Golden Palace Online poker

Issues of jurisdiction and sovereignty make gambling laws even murkier. The U.S. Wire Wager Act makes it illegal to use an electronic wire method (which courts generally agree includes the Internet) to transmit bets to places where gambling is not allowed. So a casino set up in the Netherlands is breaking U.S. law if a player in the U.S. plays their games. However, the U.S. doesn't really have the legal authority to prosecute someone in another country. Since players are almost never prosecuted either, we're left with an illegal act that generally goes unpunished. Of course, if an off-shore casino decides to cheat a player out of winnings, and online gambling is illegal in that player's locality, the player will have a difficult time suing the casino.

This brings us to the topic of regulation. Some of the countries that allow online casinos to operate have strict guidelines and regulations that make sure the casinos operate legitimately. They make sure the casino pays out when players win, and they ensure that published odds match the actual odds programmed into each game. Australian and Finnish online casinos are known for adhering to national standards. Some countries are not so strict about regulation and may be more interested in taxing the casinos than making sure that they play fair. There are many online casinos to choose from, and it pays to do some research into the regulations they must follow when you select one.

In the next section, we'll find out how players make their money available for online gambling.

Online Gambling Case Law In the 2001 case of the United States v. Jay Cohen, the U.S. prosecuted an American who set up an online sports betting operation in Antigua. Cohen took great care to consult with lawyers and accountants ahead of time to make sure that his operation was legal. However, he was prosecuted and successfully convicted on a technicality of the Wire Wager Act. This case is interesting because of the dissenting opinion of Justice James Oliver, who pointed out the inadequacies of current laws that deal with the Internet, the futility of trying to ban online gambling, and the mercurial tides of public and political opinion regarding gambling in general [ref]. The case of Thompson v. Handa-Lopez, Inc. revolved around a California-based online casino that refused to pay out the plaintiff's winnings. The casino operated legally in California because players earned game tokens called "Funbucks," which could be redeemed for prizes. This case is notable for two things: it is an oft-cited legal precedent for deciding the jurisdiction when a company operates a Web site in one place that is accessed by users in other places; and it shows that not all online casinos are reputable. [ref].