According to the Wire Act, one is not permitted to make use of a wire
transmission for the purpose of placing a bet. The Wire Act clearly
states that "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, or for the transmission of a wire communication which
entitles the recipient to receive money or credit as a result of bets or
wagers, or for information assisting in the placing of bets or wagers,
shall be fined under this title or imprisoned not more than two years,
or both."
While some may argue that the Wire Act pertains to all forms of
online gambling, others believe that it only refers to sports betting and
wagering on sports events. Interpreting the Wire Act to mean that all
forms of online gambling are illegal, many banks and financial
institutions decided to block online gambling transactions that make use
of credit cards. Other online financial services such as paypal.com
ceased to process gambling related transactions and most of the major
search engines such as yahoo.com and google.com stopped accepting
gambling related advertisements.
Although the Department of Justice managed to put a significant dent in
the advertising and banking operations of the online gambling industry
in the United States, there are currently thousands of online gambling
websites operating legally outside the U.S. Furthermore, since most of
the online casinos accept numerous offline and online payment methods,
one does not require a credit card to play at an online casino.
According the latest online gambling figures, most online casino players
are from the United States, and the online gambling industry is
continuing to grow at a phenomenal rate from 1.5 billion dollars in 2000
to a projected growth estimate of well over 10 billion dollars for the
year 2005. In order for the Department of Justice to make a truly
serious dent in the online gambling industry, they would need to
convince foreign bodies such as the government of Antigua and Barbuda (a
tiny country that processes 25% of online gambling transactions) that
online gambling is illegal.
Taking the matter all the way to the World Trade Organisation, the tiny
island of Antigua and Barbuda argued that the United States trade policy
does not prohibit cross border gambling operations. It also argued that
the U.S would be hypocritical to do otherwise since it wants to allow
U.S. casinos to operate land-based and Internet-based units overseas.
Meanwhile, the United States argued that regulation was not a viable
alternative for prohibition due to five major risks: underage gambling,
compulsive gambling, money laundering, possible abuse by organized
crime, and the risk of fraud.
On the 7th of April, 2005, the World Trade Organization ruled in favor of Antigua and Barbuda.
"The WTO has now found U.S. prohibitions on Internet gambling improper
and discriminatory under global trade rules," Paulsen said. "This WTO
ruling means the U.S. will need to regulate, rather than prohibit
Internet gaming. It's clear that this will require Internet gaming
companies seeking to do business with U.S. consumers to have adequate
protections for consumers in place, to deal with such problems as the
risk of underage gaming, fraud, and money laundering. The good news is
that there are now solutions in the payment system to do just that."
Kobus Paulsen, CEO of the UC Group, said on April 7, 2005.
Thus according to the World Trade Organisation, gambling at licensed
online casinos and sportsbooks is not illegal. Rather than waging war
against the online gambling industry, governmental bodies hostile to
online gambling should work towards the regulation and taxation of the
online gambling industry, while searching for possible solutions
regarding the problems of underage gambling, compulsive gambling, money
laundering, possible abuse by organized crime, and the risk of fraud.