There are two statutes which presently form the foundation of law relating to online poker: the Interstate Wire Act of 1961 and the Unlawful Internet Gambling Enforcement Act of 2006.
The Interstate Wire Act states in relevant part, “whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest…” While it is largely agreed that the act, though enacted well before any thought of the internet in the modern sense, does apply to internet transmissions as well as telephone transitions , there is a strong disagreement between the executive branch and the judiciary as to the type of gambling that the act prohibits.
The Department of Justice takes the view that the act prohibits all forms of online gambling, including games of skill like poker, games of chance like roulette, and all sports betting. Specifically, the department has said that “all forms of Internet gambling, including sports wagering, casino games and card games, are illegal.” This was further emphasized in a 2002 letter from Michael Chertoff, Assistant U.S. Attorney General to Dennis Neilander, Chairman of the Nevada Gaming Control Board, that stated, “[t]he Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling… [a]dditionally, it is the department’s view that the gambling activity occurs both in the jurisdiction where the bettor is located and the state or foreign country where the gambling business is located.”
Significantly however, while the Department of Justice has stated this, it has never brought a lawsuit against any individual for internet gambling, and has in fact only rarely done anything to limit the ability of online poker operators to maintain their company’s websites. In order to limit the amount of advertising money these sites were able to receive, in 2003, “the DOJ issued letters to the National Association of Broadcasters and other media groups advising that providing advertising…may be considered aiding or abetting illegal gambling operations.” More recently, the United States Attorney for the Southern District of New York (one of the more influential districts in the country, as it includes Manhattan) seized $30 million of internet gambling payments held in U.S. banks scheduled to be dispersed to U.S. players. The Justice Department claimed that the frozen funds were considered “property involved in money laundering transactions and illegal gambling offenses" and that the banks should “treat the funds as legally seized by the FBI…[as] the government has probable cause that the gambling payments of U.S. residents had been directed to offshore illegal Internet gambling businesses.” However, neither the Justice Department nor the U.S. Attorney ever received a warrant to seize these funds, and they have made no statements since the seizure stating what their justification was or from where they received the authority to do such an action.
Conversely, the U.S. Court of Appeals for the 5th Circuit has recently upheld a lower court’s determination that “[A] plain reading of the statutory language [of the Wire Act] clearly requires that the object of the gambling be a sporting event or contest” and as such games such as poker would not fall under the purview of that law. Here, the 5th Circuit clearly viewed the word “sporting” as a description for “event or contest” and therefore determined that non-sports gambling was not covered by the act. This interpretation can be supported by a number of reasons. First, other statutes passed with the act in 1961, such as the Interstate Transportation of Wagering Paraphernalia Act and the Illegal Gambling Business, Act clearly spell out what gambling activities are prohibited, including slot machines, roulette wheels or dice tables. Because the Wire Act only refers to sporting events or contests, it seems apparent that Congress intentionally meant for the act to only cover sports, not all gambling. Second, the working name of the legislation was actually “Sporting Events – Transmission of Bets, Wagers, and Related Information.” As Jeffrey Rodefer stated in an article for the Gaming Law Review, “Congress’ use of these different terms reflect its knowledge of the various forms of gambling, including traditional casino games or games of chance and specifically limited the Wire Act’s application to sporting events or related contests.” Additionally, the Department of Justice has made one statement which implied that the 5th Circuit’s position may be accurate when it wrote in a 1999 letter to Senator Patrick Leahy that stated, “[w]e do recognize, however, that the Internet has allowed for new types of electronic gambling, including interactive games such as poker and blackjack, that may not clearly be included within the types of gambling currently made illegal by [the Wire Act].”
In addition to the Interstate Wire Act, the Unlawful Internet Gambling Enforcement Act (better known as UIGEA) also addresses the legality of online gambling. In short, the UIGEA has made it unlawful for any U.S. banking institution to process financial transactions with an online gaming company. First, the UIGEA makes it illegal for any person or enterprises in the business of Internet gambling to accept money transfers for the purpose of "unlawful Internet gambling”. This basically allows the Department of Justice to have greater access to seize money and indict companies that are related to internet gambling. Second, it forces U.S. banks to adopt a number of new guidelines, including: adopt a UIGEA compliance policy, develop a due diligence process at account opening to determine whether a commercial customer presents anything more than a minimal risk of engaging in Internet gambling, and develop procedures (by payment system) for responding when your bank becomes aware of restricted transactions.
Noticeably, this law only prohibits money transfers in furtherance of “unlawful Internet gambling.” As discussed above, there is no federal law that explicitly makes internet gambling illegal, and there is only one state (Washington State) that does so ; the only law that could possibly apply is the Wire Act, which has already been shown to be ambiguous, at best.
Ultimately, there is a valid question of whether online poker is legal or illegal, though it is clear that online sports betting is illegal. Make your own decision knowing all the facts. HTH.