Cite As: Adrian Goss, Jay Cohen's Brave New World: The Liability of Offshore Operators of Licensed Internet Casinos for Breach of United States' Anti-Gambling Laws, 7 RICH. J.L. & TECH. 32 (Spring 2001), at http://www.richmond.edu/jolt/v7i4/article2.html.
A. Australian Regulatory Regime
B. U.S. Regulatory Regime
A. Locus of Activity
B. Power to Legislate Extraterritorially
C. Extraterritorial Application of Gaming Legislation
A. Long-Arm Statutes
{1} On February 28, 2000, Jay Cohen, co-owner of an Antiguan-based
Internet casino called World Sports Exchange, was convicted by
a U.S. District Court jury in Manhattan of breaching the Wire
Communications Act of 1961[1]
(hereinafter Wire Act).[2]
A New York federal judge subsequently fined Cohen $5,000 and sentenced
him to serve a twenty-one month jail term.[3] A few days prior to his conviction, Cohen's
lawyer stated that "Jay strongly believes that he did not
commit a crime, that he ran [World Sports Exchange] in a completely
legitimate manner."[4]
{2} Cohen's belief in the legitimacy of his licensed operation
is one shared by a number of licensed Internet gaming operators.
Commenting on Cohen's conviction, David Ohlson, Special Projects
Manager for Lasseter's Online, Australia's first licensed Internet
casino, stated that he was "not unduly worried" about
the court's decision even though Lasseter's Online transacts with
gamblers in the U.S.[5] Similarly,
giving evidence before Australia's Senate Select Committee on
Information Technologies on October 1, 1999, James Colquhoun,
Chairman of Canbet Pty Ltd, an Internet sports wagering business
licensed under the laws of the Australian Capital Territory, expressed
his view that "[t]he offer [of a wager] in the U.S. is a
perfectly legal offer and the acceptance of that offer by Canbet
under its license in the ACT [Australian Capital Territory] is
perfectly legal and therefore both ends of the contract are legal."
[6]
{3} This paper will consider the circumstances in which an Internet
casino that is operating under a valid offshore license and accepts
bets from people residing in the U.S. may contravene U.S. anti-gambling
laws.[7] In particular, it
will consider the operation of the Wire Act [8] and the proposed Internet Gambling Prohibition
Act of 1999.[9] It will conclude
that U.S. courts are likely to have jurisdiction to try actions
for breach of anti-gambling laws against offshore operators of
licensed Internet casinos that transact with U.S. residents, but
will have difficulty enforcing those laws against those operators.
{4} This paper will first contrast the regulatory environment
for Internet casinos in Australia and the U.S. Australia provides
an interesting counterpoint to the U.S. regulatory regime because
of the markedly different approach that it adopts to Internet
gaming and because, unlike some countries that currently license
Internet gaming operators, it is difficult to criticize the legitimacy
or sophistication of its licensing regime.
{5} Secondly, this paper will consider whether U.S. courts will
be competent to hear actions for breach of anti-gaming laws against
offshore Internet casinos; that is, whether those courts will
be able to assert the requisite "subject matter jurisdiction"
over those casinos.
{6} Thirdly, this paper will consider the jurisdictional reach
of U.S. anti-gaming laws over licensed operators of offshore Internet
casinos; that is, whether the necessary element of "personal
jurisdiction" will be present.
{7} Finally, this paper will address the issue of whether U.S.
anti-gambling laws will be enforceable against operators of licensed
offshore Internet casinos.
A. Australian Regulatory
Regime
{8} Historically, Australian gaming regulation has been the province
of the various Australian State and Territory Governments because
the Commonwealth Constitution does not give the Commonwealth power
in respect to gaming. The size and long history of gaming in Australia
have allowed each State and Territory to develop significant regulatory
regimes and a "high level of expertise across a range of
areas, including economic and social policy."[10]
{9} The existence of a well-established regime for regulation
of traditional forms of gambling facilitated Australia's rapid
and robust response to the development of Internet gaming. In
May 1997, gaming ministers representing each Australian State
and Territory released a draft model for regulating Internet gambling.[11] Subsequent to the release
of that model, five of Australia's eight States and Territories,
beginning with Queensland, whose Interactive Gambling (Player
Protection) Act of 1998 commenced operation on October 1, 1998,
have enacted comprehensive legislation regulating Internet gaming.
The Australian Internet gaming industry can be characterized as
being subject to stringent regulation by sophisticated and experienced
regulatory bodies. That regulation focuses on minimizing harm
to problem gamblers, and on ensuring that the industry operates
within the bounds of Australian laws which apply to traditional
casinos. Accordingly, "the companies are solvent, the games
are fair, and the winners can claim their loot."[12]
{10} The Commonwealth Government has, however, expressed "grave
concerns about the potential for online gambling to exacerbate
already high levels of problem gamblers in Australia."[13] Accordingly, on August
17, 2000, in reliance on its power to legislate with respect to
"postal, telegraphic, telephonic, and other like services,"[14] the Commonwealth Government
introduced the Interactive Gambling (Moratorium) Bill 2000 (Cth).
The intention of the Bill was to "pause the development of
the Australian-based interactive gambling industry while an investigation
into the feasibility and consequences of banning interactive gambling
is conducted."[15]
After intense political lobbying, the Bill finally passed the
House of Representatives on December 7, 2000. By that time more
than half of the moratorium period had already elapsed. Despite
the temporary cessation of licensing as a result of the passage
of the Bill, the Australian Internet gaming industry continues
to flourish.[16]
B. U.S. Regulatory Regime
{11} In contrast to the approach adopted in Australia, U.S. legislators
have, almost without exception, advocated prohibiting Internet
gambling. Joseph Kelly notes that, during the course of the Senate
debate over the introduction of the IGPA, "not one senator
suggested regulating, rather than prohibiting Internet gambling."[17] This strict approach
is consistent with the approach historically taken to regulation
of traditional forms of gambling.
{12} Numerous U.S. statutes potentially prohibit, either directly
or indirectly, Internet gambling. The U.S. Department of Justice
has claimed that Internet gambling is illegal under at least four
federal statutes.[18] To
name a few, the Interstate Transportation of Wagering Paraphernalia
Act,[19] Professional and
Amateur Sports Protection Act[20]
and the Interstate and Foreign Travel or Transportation in Aid
of Racketeering Enterprises Act,[21]
may all proscribe some aspect of the activities of an Internet
casino.
{13} The Wire Act is the most important legislative prohibition
on Internet gaming, however, and it is this Act that regulators
have primarily relied on to obtain the convictions of Internet
gaming operators. Similarly, a number of Bills which, directly
or indirectly, prevent Internet gambling are currently before
the U.S. Congress, but the most significant, and the one closest
to enactment, is the IGPA.
(i) The Wire Act
{14} The Wire Act potentially prohibits Internet gaming operators
from using the Internet for gaming. It provides, in relevant part,
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 . . . shall be fined under this title or imprisoned not more than two years, or both.[22]
The proscribed conduct is, therefore, the use of a wire communication
facility to facilitate betting by a person operating a gaming
business. A "wire communication facility" is defined
as a system that is used to transmit writings, pictures and sounds
"by aid of wire, cable or other like connection between the
points of origin and reception of such transmission."[23]
{15} Two significant issues arise in relation to the application
of the Wire Act to Internet gaming operators. First, it is arguable
that the Wire Act only applies to betting or wagering on sporting
events or sporting contests and, therefore, is inapplicable to
online casino games. No reported cases have directly addressed
the issue of whether the Wire Act relates to non-sport related
gambling.[24] In his Congressional
testimony in relation to the IGPA, the Deputy Assistant to the
Attorney General, Kevin Di Gregory, identified this issue as one
of the key problems with the Wire Act and urged that the Wire
Act be amended to eliminate any doubt about whether it only applies
to bets or wagers on sporting events or contests.[25]
{16} In one view, the word "sporting" is used as an
adjective to qualify both the words "event" and "contest,"
and the Wire Act is, therefore, confined to sporting events and
sporting contests. Olson argues that this view accords with "the
plain meaning of the statute."[26]
Alternatively, "sporting event" and "contest"
could be viewed as two separate references. If this is the case,
the Wire Act would apply to online games offered by Internet casinos.
{17} The legislative history of the Wire Act provides some assistance.
For instance, Congressional references to the Wire Act at the
time of its enactment focus specifically on sporting-related gambling
activity.[27] Moreover,
Congress was aware of other forms of gaming, including, for example,
the number's racket, which utilized telephone lines. Cabot argues
that, because Congress was aware of those other forms of gambling
and did not expressly address them, it must not have intended
that the Wire Act be interpreted broadly to apply to non-sport
related gambling.[28] In
contrast, Bruce P. Keller argues that, because Congress was aware
of other forms of gambling, the Wire Act should be interpreted
broadly as it would be unlikely that Congress would intend to
carve out those other forms of telephone-based gambling.[29]
{18} Proponents of Cabot's view submit that it is to be preferred
because it does not require imputing an intention to Congress
on the weak ground that it would have been obvious to include
something; therefore, Congress must have intended to include it.
Nevertheless, the uncertainty in this regard somewhat undermines
the potential to use the Wire Act to prosecute Internet casinos.
{19} The second interpretive issue in relation to the application
of the Wire Act to Internet casinos is whether the definition
of "wire communication facility" is broad enough to
cover all communications over the Internet. Again, Di Gregory,
in his testimony on the IGPA before Congress, identified this
as a significant issue requiring clarification by amendment to
ensure that even wireless Internet communications are covered
by the Wire Act.[30]
{20} Clearly, those Internet communications which are facilitated
by modem connections to copper wires will be covered by the Wire
Act. Radio, satellite, microwave and other wireless means of transmission,
however, may not be covered. An Internet gaming system which relies
on a wire-free communication system, for example by utilizing
Wireless Application Protocol or General Packet Radio Service
technology, appears, on the face of it, to fall outside the ambit
of the Wire Act.
{21} A defendant who utilizes a wireless means of communication,
and relies on that as a defense to an action for breach of the
Wire Act, however, will have a difficult argument to mount. First,
the Wire Act does not require that the entire communication be
conducted over wires or cables. Even if a small portion of the
communication utilizes wires or cables, the transmission will
fall within the scope of the Wire Act. Cabot argues that the very
operation of the Internet backbone, which underlies all Internet
communications, may constitute a "wire communication facility"
under the Wire Act.[31]
{22} Second, the reference in the Wire Act to "other like
connection" could be interpreted as indicating that wireless
forms of transmission, which utilize different media so as to
perform the same function, are sufficiently similar to wire or
cable connections to fall within the operation of the Wire Act.
The argument supporting this view indicates that Congress would
have intended the Wire Act to apply to new forms of communication
as they developed.[32]
{23} Despite the divergent views of commentators, the official
position as expressed by the Justice Department and several state
attorneys general is to treat the Wire Act as applying broadly
and covering all forms of Internet gaming.[33] Accordingly, the uncertainty in the application
of the Wire Act is unlikely to dissuade prosecutors from employing
it to bring actions against Internet casinos.
(ii) The Internet Gambling Prohibition Act
{24} The IGPA, first introduced into the Senate in 1995, passed
the Senate unanimously on November 19, 1999. On July 17, 2000,
however, the House version of the IGPA failed to achieve the two-thirds
majority vote required for it to become law. Although it was anticipated
that the House version would come up for another vote in September[34], at the time of writing
the September Congressional session had concluded without any
further action. At that time, it was unclear when the House would
next consider the IGPA or what support it would receive within
the newly elected Bush government.
{25} If and when it becomes law, the IGPA will add a new Section
1085 to Title 18 of the United States Code. The new section will
make it unlawful for any person engaged in a gambling business
to knowingly use the Internet to place, receive, or otherwise
make a bet or wager, or to send, receive, or invite information
assisting in the placing of a bet or wager.[35] The Bill imposes a penalty of up to four
years imprisonment, fines of up to $20,000 or both.[36] Further, the Bill gives a court the power
to issue a permanent injunction against a person who violates
the prohibition, preventing them from engaging in further betting
activity.[37] Similarly,
the Bill allows regulators to seek injunctions preventing Internet
Service Providers from hosting a gambling website.[38]
{26} The IGPA contains a number of exceptions. It does not apply
to state lotteries, parimutuel betting on certain types of computer
networks, horse and dog racing, fantasy sports leagues and certain
types of Indian gaming.[39]
{27} These exceptions have led some anti-Internet gaming activists
to condemn the IGPA. Conservative, anti-gambling Republican Chris
Cannon, for example, has commented that the IGPA "should
be called the Internet Gambling Preservation Act instead."[40] Similarly, Di Gregory
notes that, ironically, the IGPA "will allow gambling online
that currently is not allowed in the physical world."[41]
{28} Both the Wire Act and the IGPA, although limited in some
respects, have the potential to be used to prosecute offshore
Internet casinos. The next question is whether United States courts
will have jurisdiction to hear actions brought under those legislative
provisions against licensed offshore Internet casinos.
{29} For a United States court to exercise jurisdiction over an
offshore Internet casino, the court must be satisfied that it
has both subject matter jurisdiction and personal jurisdiction.[42] Subject matter jurisdiction
refers to the competency of the court to adjudicate the matter
before it.
{30} This section will first consider instances where an Internet
gambling transaction with a United States' resident takes place.
If the transaction takes place within the country's borders, United
States courts will have subject matter jurisdiction. Second, this
section will consider whether, if the transaction takes place
outside the United States, the relevant anti-gaming laws apply
extraterritorially.
A. Locus of Activity
{31} United States courts have not yet established the criteria
for determining where an offense committed "in cyberspace"
actually occurs.[43] The
question is significant because it presents a critical policy
choice between the rights of consumers of Internet content and
the rights of providers of Internet content.[44]
{32} Jack Goldsmith has correctly asserted that Internet transactions
"involve people in real space in one territorial jurisdiction
transacting with people in real space in another territorial jurisdiction
in a way that sometimes causes real-world harms."[45] Elements of an Internet gambling transaction
are likely to occur across a number of jurisdictions, however,
and identification of a specific jurisdiction in which the act
of infringement actually occurs must, to some extent, be artificial.
{33} An Australian Internet casino licensed under the laws of
the State of Queensland, for example, is likely to have a server
located in the state in which the information relating to the
transaction is processed. The casino's website may be hosted in
another Australian state or in another country. Information passing
between the casino and a gambler in the United States is likely
to pass through servers in a number of jurisdictions before reaching
the Internet Service Provider of a gambler in the United States.
That gambler's Internet Service Provider may be located in a national
or state jurisdiction distinct from the one in which the gambler
who transacts with the casino is located.
{34} In gaming cases, United States' courts have tended to identify
the place of infringement as the place of downloading. In Vacco
v. World Interactive Gaming,[46]
for example, the court rejected World Interactive Gaming's argument
that it did not violate New York law because the gambling over
its website occurred in Antigua, where the computer servers were
located. The court, focusing on the gamblers rather than the casino,
held that "[t]he acts of entering the bet and transmitting
the information from New York via the Internet [were] adequate
to constitute gambling activity within New York state."[47] Clearly, such an approach
favors the interests of gaming regulators.
{35} Furthermore, in Vacco the court was explicit about
the policy considerations underlying its findings. The court asserted
that "[a] computer server cannot be permitted to function
as a shield against liability."[48]
The court's view echoes the view of enforcement agencies, as expressed
by United States Attorney General, Janet Reno, that "the
Internet is not an electronic sanctuary for illegal betting."[49]
{36} At least one case, however, has adopted the contrary approach.
In U.S. v. Truesdale[50]
the court considered an action for, among other things, illegal
gambling in violation of Section 1995 of Title 18 of the United
States Code. The case involved defendants who operated an Internet
sports betting site called World Sports Book from offices in the
Dominican Republic and Jamaica. The court, focusing on the actions
of the casino, stated that "it is irrational to conclude
beyond a reasonable doubt that after having gone through the effort
of fully equipping, staffing and widely advertising the Caribbean
offices, the appellants, nevertheless, illegally accepted bets
in the United States."[51]
Kelly notes that the result may have been different if the defendants
had been charged with a violation of the Wire Act.[52] Nevertheless, Truesdale indicates
that there may be an argument that, where an offshore Internet
gaming operation transacts with a United States' resident, the
transaction does not occur within the United States.
{37} If United States courts take the view, of the Truesdale
court, that the place at which the proscribed activity takes place
is the server of the offshore Internet casino, they will have
to apply the relevant anti-gaming laws extraterritorially. Accordingly,
a court will need to determine whether such extraterritorial application
is congressionally mandated and complies with the "effects
test."[53] The legality
of the activity will be irrelevant to this inquiry.
B. Power to Legislate Extraterritorially
{38} It is well established that the United States Congress has
the power to enact laws that operate extraterritorially.[54] The Commerce Clause is the basis of that
power. It authorizes Congress "[t]o regulate Commerce with
foreign Nations, and among the several States, and with the Indian
Tribes."[55]
{39} Although a superior Federal court is yet to rule on the matter,
it is likely that the extraterritorial power of Congress extends
to the regulation of Internet gaming. In Champion v. Ames,
[56] the Supreme Court
established that the Commerce Clause gives Congress power to legislate
with regard to illegal gambling generally between the United States
and a foreign location. Furthermore, the recent Supreme Court
decision in United States v. Edge Broadcasting[57] removes any doubt that the Commerce
Clause extends to transactions over the Internet. Because the
Commerce Clause gives Congress power to legislate extraterritorially
with respect to both gaming and commerce over the Internet, it
should be concluded that Congress has the power to regulate Internet
gaming.[58]
C. Extraterritorial Application
of Gaming Legislation
{40} United States courts apply a two-part test to determine whether
they have subject matter jurisdiction over acts occurring outside
the United States. First, they ask whether there is a congressional
intent that the statute in question should apply extraterritorially.
Second, they ask whether the effect of the proscribed conduct
on the United States justifies the exercise of jurisdiction.
(i) Congressional Intent
{41} The reference in the Wire Act to prohibiting "communication
in interstate or foreign commerce" suggests that Congress
must have intended that courts have extraterritorial jurisdiction
to enforce it. This view is supported by the decision of the court
in Vacco v. World Interactive Gaming.[59] In that case, the court held that its jurisdiction
under the Wire Act "clearly extends to the transmission of
betting information to a foreign country."[60]
{42} In contrast to the Wire Act, the IGPA, in its current form,
makes no reference to its possible jurisdictional reach. Notably,
earlier versions of the IGPA expressly stated that "[i]t
is the sense of the Senate that the Federal Government should
have extraterritorial jurisdiction over" Internet gaming.[61] This provision was removed
in response to Department of Justice concerns over extraterritorial
enforcement.[62] In the
absence of an express statement as to legislative intent, the
court will attempt to impute an intention to Congress and will
regard "the purpose of Congress as evinced by the description
and nature of the crime."[63]
{42} The inherently cross-jurisdictional nature of the Internet
suggests that Congress must intend the IGPA to apply to gambling
activity occurring in places outside the United States. Arguably,
the ease of operating websites from locations that are far removed
from the website's intended audience means that the IGPA would
be virtually meaningless unless there was some potential for it
to apply extraterritorially. This issue was acknowledged by the
court in Vacco. That court asserted that not having extraterritorial
jurisdiction in relation to a breach of the Wire Act occurring
outside the United States would "severely undermine [New
York's] deep-rooted policy against unauthorized gambling, it also
would immunize from liability anyone who engages in any activity
over the Internet which is otherwise illegal."[64]
{43} It is arguable that the removal of an express reference to
extraterritorial operation from the IGPA suggests that Congress
did not intend that the IGPA would apply extraterritorially. However,
the policy reasons discussed above, which suggest that the IGPA
should apply extraterritorially, outweigh any argument supporting
a Congressional intent that the operation of the Act be restricted
to the United States.
(ii) Effects Test
{44} The second prong of the test of whether a court will have
subject matter jurisdiction is the effect of the proscribed conduct
on the United States. The court in United States v. Aluminum
Company of America established that United States courts could
exercise jurisdiction over proscribed conduct that results in
a demonstrated, actual or presumed effect in the United States.[65]
{45} There are a number of bases on which it is arguable that
offshore Internet gaming has an effect on the United States that
is sufficient to justify the exercise of extraterritorial jurisdiction.
First, Internet gaming has the potential to exacerbate social
problems associated with gambling. This aspect of Internet gaming
has been the source of much rhetorical excess among anti-gaming
advocates. Senator Jon Kyl (R-AZ), for example, classifies Internet
gaming as the "crack-cocaine of gambling."[66] Similarly, Keller describes "awestruck
teenage techno-junkies or their gambling-addicted parents pounding
the keyboard at unpoliced Internet gambling sites twenty-four
hours a day."[67]
{46} Despite the rhetorical excess, there is no doubt that increased
access to Internet gambling may increase participation in and
addiction to gambling and the consequential economic and emotional
harm that can stem from gambling. The costs associated with remedying
this harm will be borne, to some extent, by federal and state
governments.
{47} Secondly, online gaming hurts traditional brick-and-mortar
gaming businesses. Traditional gaming is a significant business
in some states. A 1996 estimate indicated that $482 billion is
spent annually on legalized gambling in the United States.[68] One analyst indicated
that Americans spent 1.2 billion on online gambling in 1999 and
that figure will grow to 3 billion in the year 2001.[69] To the extent that online gaming threatens
the viability of a significant industry that employs large numbers
of Americans and generates considerable profits, such gaming has
a significant effect in the United States.
{48} A third, related effect of online gaming is its potential
to undermine the tax revenue base of the States. Forty-eight states
and the District of Columbia permit some form of legalized gambling.[70] In People v. Kim,
in which the court was asked to consider whether a purchasing
service for out-of-state lottery tickets violates New York anti-gaming
laws, the court noted that the New York State lottery "has
become a fund-raising device of real importance to the state."[71] The same is likely to
be true in many states. As people move from traditional to online
gaming, there is likely to be a decrease in taxation revenue generated
by gaming unless technology or regulation makes online tax collection
possible.
{49} For the above reasons, there is a strong argument that the
effect of offshore Internet gaming is sufficiently significant
to justify its extraterritorial regulation.
(iii) Legality in Another Country
{50} A separate, but related, matter that is relevant to the assertion
of subject matter jurisdiction in respect to Internet gaming laws
is that the legality of the activity in another country is irrelevant
to a U.S. court's jurisdiction over that activity. Internet gaming
businesses appear to operate under the misapprehension that legality
in one country will act as a shield against prosecution under
the laws of another. Cohen's attorney, for example, argued that
because "[i]t is no crime in Antigua to accept a bet,"
Cohen could not be found guilty of breaching the Wire Act.[72]
{51} The argument that legality in a country provides a defense
to a breach of United States gaming laws was soundly rejected
by the court in Vacco v. World Interactive Gaming.[73] The court found nothing in the record or
the law to support [World Interactive Gaming Corporation's] contentions
that federal statutes cannot apply to an Internet casino licensed
by a foreign government.[74]
Schwarz, reviewing the relevant gaming legislation, reached a
similar view, asserting that "Congress has clearly chosen
to exclude extraterritorial gambling from breaching our borders,
and no foreign governmental licensing agency can, or should, alter
that."[75]
{52} Accordingly, even if the gaming activity is deemed to occur
outside the United States, in relation to both the Wire Act and
the IGPA, the test of legislative intent and the effects test
are likely to be satisfied. A court will, therefore, be justified
in asserting extraterritorial jurisdiction. Furthermore, legality
in another country will not provide a valid argument against the
exercise of that jurisdiction.
{53} In addition to establishing subject matter jurisdiction,
a United States court will have to determine whether it has personal
jurisdiction over the operators of an offshore Internet casino.[76] Personal jurisdiction
refers to the court's capacity to exercise authority over a defendant.
For example, a United States court will engage in a specific analysis
to determine if it has personal jurisdiction over an Australian
operator of an Internet casino licensed in Australia. Under this
analysis, the court must be satisfied that this exercise of personal
jurisdiction not only complies with the relevant state's "long-arm"
statute, but also satisfies the requirements of the Due Process
Clause of the Fourteenth Amendment.[77]
The law of personal jurisdiction in Internet-related matters,
however, remains in a state of flux and development. This section
of the paper will address the application of state long-arm statutes
and the Due Process Clause to Internet gaming as well as review
the case law relating to the issue of personal jurisdiction in
the context of Internet gaming.
A. Long-Arm Statutes
{54} The long-arm statutes of each state set out the jurisdictional
limits imposed on that state's courts. Because the terms of the
long-arm statutes of each state vary, the first requirement will
not be considered in detail in this paper. The requirement for
some minimum contact between the business and the forum state
is significant, however, because it will apply to both state and,
in most cases, federal actions.[78]
The requirement for courts to comply with long-arm statutes is
unlikely to severely limit the capacity of United States regulators
to prosecute Australian Internet casinos. Many state long-arm
statutes apply very broadly and allow courts to exercise jurisdiction
to the full extent allowed by the Due Process Clause.[79]
{55} Because Internet casinos are likely to transact indiscriminately
with people located in the United States, these casinos could
be made a party to an action brought in a number of concurrent
jurisdictions.[80] As a
result, prosecutors are likely to choose a jurisdiction with a
favorable long-arm statute. Because these prosecutions are often
brought as a result of regulators posing as gamblers, those regulators
may choose to operate from states with favorable long-arm statutes.
Accordingly, "forum shopping" by regulatory agencies
is likely to occur.
1. Due Process
{56} In International Shoe Co v. Washington,[81] the Supreme Court established the modern
rule for compliance with the Due Process Clause of the Fourteenth
Amendment by enunciating "the minimum contacts test."[82] The Court stated that
"due process requires only that . . . if [the defendant]
be not present within the territory of the forum, he must have
certain minimum contacts with it such that the maintenance of
the suit does not offend 'traditional notions of fair play and
substantial justice.'"[83]
{57} In subsequent cases, the Court has expanded upon the minimum
contacts test. In World-Wide Volkswagen v. Woodson,[84] the Court found that
a corporate defendant must "purposefully avail itself"
of the privileges and benefits of the forum state so that the
defendant will have notice that it may be sued in that forum.[85] A further qualification
to the test was made by the Court in Burger King v. Rudzewicz.[86] In that case, the Court
asserted that the exercise of jurisdiction must be fair and reasonable.[87] The Court listed a number
of factors which may be relevant to the fairness and reasonableness
of the exercise of jurisdiction and stated that "[o]nce it
has been decided that a defendant purposefully established minimum
contacts with the forum State, these contacts may be considered
in light of [those] factors."[88]
Accordingly, fairness and reasonableness will not be decisive
factors, but may affect whether or not the defendant's contacts
are sufficient for the court to exercise personal jurisdiction.
{58} The most useful analytical framework in considering the application
of traditional jurisdictional principles to the Internet is provided
by the District Court of Pennsylvania in Zippo Manufacturing
v. Zippo Dot Com.[89]
In that case, Zippo Manufacturing, a Pennsylvanian corporation,
attempted to sue Zippo Dot Com, a Californian corporation that
operated a website called "Zippo Dot Com," for breach
of trademark under Pennsylvania law.[90]
Zippo Dot Com's only contacts with Pennsylvania were through the
website, but the court held that it had personal jurisdiction.[91] In making this finding,
the court stated that the likelihood that personal jurisdiction
can be exercised "is directly proportionate to the nature
and quality of the commercial activity that an entity conducts
over the Internet."[92]
The court then reviewed relevant precedent, concluding that the
ability of a court to gain personal jurisdiction over an entity
solely based on Internet presence can be determined by dividing
the entity's use of the Internet into three categories. The first
category comprised "situations where a defendant clearly
does business over the Internet."[93]
For example, websites through which people enter into contracts
or transmit files fall into this category. The second category
included passive websites which only provide information and do
not allow any interaction between the site and its users.[94] Falling between these two categories is
a third category in which users can exchange information with
the website. When websites fall into the third category, the court
concluded that "the exercise of jurisdiction is determined
by examining the level of interactivity and commercial nature
of the exchange of information that occurs on the Web site."[95] Thus, Zippo established
a "'spectrum' consisting of two polar opposites and a broad
middle ground."[96]
The analytical framework identified in Zippo has been relied
on heavily in the few cases that have considered Internet gaming.
{59} Courts have considered the issue of personal jurisdiction
in relation to website operators running Internet gaming businesses
on a number of occasions. Those decisions suggest that courts
are likely to determine that they have personal jurisdiction over
an offshore Internet casino that transacts with United States
residents. Considering the three part test in Zippo, this
result should not be surprising. The nature of Internet gaming
involves frequent contacts and high levels of interactivity and
commercial transacting between the players and the site. Accordingly,
Internet casinos are likely to fall into the category of websites
"where a defendant clearly does business."[97]
{60} The decision of the court in Humphrey v. Granite Gate
Resorts, Inc. is significant because it is one of the few
decisions in which jurisdiction has been found based on a passive
website.[98] In that case,
the Minnesota Attorney General sued Granite Gate Resorts, a Nevada
corporation, for "deceptive trade practices, false advertising,
and consumer fraud."[99]
The court in Granite Gate Resorts acknowledged that the
case was the "first in which a Minnesota court [had] addressed
the issue of personal jurisdiction based on Internet advertising,"[100] but expressed its belief
that "established legal principles provide adequate guidance."[101]
{61} Granite Gate provided Internet advertising services, which
included advertising an online wagering service called WagerNet.
The WagerNet site, which had not commenced operations at the time
the action was brought, had been designed by Granite Gate's president,
Kerry Rogers. The site stated that WagerNet was owned by a company
based in Belize and that it provided people with a legal way to
bet on sporting events from anywhere in the world.[102]
{62} The WagerNet site invited people to put themselves on a mailing
list to receive more information about the service. It gave a
toll-free telephone number and a Nevada telephone number to call
for more information. Users of the page were advised to consult
with local authorities regarding restrictions on offshore sports
betting by telephone before registering with WagerNet and the
terms and conditions stated that any claims against WagerNet could
only be brought in Belize.[103]
{63} The court relied on a number of factors to justify the exercise
of personal jurisdiction. First, it found that during a two-week
period, at least 248 Minnesota computers accessed Granite Gate's
website, and that at least one Minnesota resident was on Granite
Gate's mailing list. Second, it found that the quality of Granite
Gate's contacts with Minnesota were significant. In so finding,
the court relied on a number of decisions, including Maritz,
Inc. v. Cybergold, Inc.[104]
and Playboy Enterprises v. Chuckleberry Publishing[105] to support the view that advertising
on the Internet is not a passive activity. The court found that
"[a]dvertising in the forum state, or establishing channels
for providing regular advice to customers in the forum state,
indicates a defendant's intent to serve the market in that state."[106] In support of this
conclusion, the court pointed out that Granite Gate had chosen
to use English on the website and had provided a United States
toll-free number. Both of these factors pointed to an intention
to target the United States market, including Minnesota. Thus,
the court found that the advertisements should have put Granite
Gate on notice that it may be sued in Minnesota, and thus, that
the purposeful availment test was satisfied.[107]
{64} The decision in Granite Gate Resorts has been criticized
as setting too low a threshold on the contacts necessary to support
the exercise of personal jurisdiction. For example, Felix Pelzer,
writing in the South Carolina Law Review, notes that the
rule promulgated in Granite Gate Resorts allows for an
interpretation "that would virtually destroy the traditional
requirements for a court's exercise of jurisdiction over a defendant."[108] It is significant
that this extreme interpretation of the law occurred in the context
of a consideration of Internet gaming. In reaching its decision,
the court pointed to Minnesota's interest in regulating gambling
as supporting "the exercise of jurisdiction over a nonresident
defendant when viewed in light of the . . . factors for evaluating
whether minimum contacts exist."[109]
The decision, therefore, suggests that policy reasons relating
to regulation of gaming may encourage courts to assert jurisdiction
over Internet gaming operators in situations where they may not
otherwise do so.
{65} Another interesting point to arise from the decision in Granite
Gate Resorts is that the court disregarded the disclaimer
on the WagerNet website. For an Australian Internet casino hoping
to limit its exposure to prosecution under United States gaming
laws, the court's approach is significant. The court found that,
although the disclaimer may be relevant to the consumer fraud
action brought against Granite Gate, Granite Gate's "clear
effort to reach and seek potential profit from Minnesota consumers
provides minimum contacts of a nature and quality sufficient to
support a threshold finding of personal jurisdiction."[110] The court's decision
suggests that a disclaimer will not provide a shield to liability
if other elements of the relevant website satisfy the purposeful
availment test.
{66} In Thompson v. Handa-Lopez, the Texas District Court
also considered the application of traditional personal jurisdiction
rules to Internet gaming operators.[111]
In that case Thompson, a resident of Texas, brought an action
in Texas to recover winnings from Handa-Lopez Inc., a California
corporation that operated an Internet casino called "Funscape's
Casino Royale."[112]
Players on the Funscape site purchased game tokens with their
credit cards and played casino games using those tokens.[113] The tokens could be redeemed for either
prizes or money.[114]
The court noted that "[b]uried within the contract was an
inconspicuous provision which provided that any disputes . . .
shall be governed by the laws of the State of California . . .
and shall be resolved exclusively by final and binding arbitration
in the City of San Jose, County of Santa Clara, State of California,
USA."[115]
{67} Handa-Lopez sought, among other things, a motion to dismiss
the action before the Texas court for lack of personal jurisdiction.[116] In considering Handa-Lopez's
motion to dismiss, the court restated the traditional jurisdictional
principles relating to due process and affirmed the three-category
test in Zippo.[117]
Relying on the decisions in Maritz[118] and Inset Systems, Inc. v. Instruction
Set, Inc.,[119] the
court held that Handa-Lopez made sufficient minimum contacts with
players on the Funscape site to satisfy the Due Process Clause.[120]
{68} The court noted that the Funscape site's presence on the
Internet meant that it had directed the advertising of its casino
to all states.[121] The
court was persuaded by the reasoning in Inset that the
Internet is designed to communicate with thousands of people and
that advertisements on it represent a stronger "contact"
with the forum state than traditional advertisements because they
"are available continually to any Internet user."[122] In contrast to Granite
Gate Resorts, however, the court, in support of its exercise
of jurisdiction, was also able to rely on the fact that Handa-Lopez
"indiscriminately responded to every user"[123] and "continuously interacted with
casino players, entering into contracts with them as they played
the various games."[124]
Accordingly, the court was able to identify advertising to Internet
users and continuous and indiscriminate contracting and communication
with players as giving rise to the minimum contacts necessary
to establish proper exercise of personal jurisdiction.
{69} The court's reasoning is similar to the reasoning in Granite
Gate Resorts in two significant aspects. First, the court
was persuaded by Texas's "strong interest in protecting its
citizens by adjudicating disputes involving the alleged breach
of contract, fraud, and violations of the Texas Deceptive Trade
Practices Act by an Internet casino on Texas residents."[125] Second, the court
found that the clause purporting to be a forum selection clause
did not prevent the filing of a lawsuit outside California and,
even if it did, that Thompson was not given proper notice of the
clause.[126] Again, the
fact that the subject matter of the action involved gaming was
considered a relevant factor in exercising jurisdiction and the
forum selection clause did not provide grounds upon which to dismiss
for lack of jurisdiction.
{70} The most recent case to consider the issue of personal jurisdiction
over Internet gaming operators is Vacco v. World Interactive
Gaming.[127] The
central issue addressed by the court was whether the State of
New York could enjoin a foreign corporation that was legally licensed
to operate an offshore casino from offering gambling to Internet
users in New York.[128]
World Interactive Gaming Corporation was a Delaware corporation.
Its wholly owned subsidiary, Golden Chips Casino Inc., was an
Antiguan corporation that had acquired a license from the government
of Antigua to operate an Internet casino.[129] World Interactive Gaming sought to have
the petition for injunctive relief dismissed on the ground that,
among other things, the court lacked jurisdiction over either
World Interactive Gaming or Golden Chips Casino.
{71} The court found that Golden Chips Casino promoted its Internet
gaming operation on its website, on the Internet, and in a national
gambling magazine.[130]
The court also considered the way in which the casino operated.
In this respect, it found that users of Golden Chips Casino were
required to wire money to a bank account in Antigua and to download
additional software from Golden Chips Casino's website.[131] In order to do so, users were required
to submit a permanent address.[132]
Significantly, if an address in a state that did not permit gambling,
such as New York, was entered, the user was denied access to the
site's gambling facilities.[133]
{72} As with both Granite Gate Resorts and Handa-Lopez,
the court commenced its discussion of the personal jurisdiction
issues by reasserting the relevance of traditional jurisdictional
issues.[134] In regard
to World Interactive Gaming's contacts with New York, the court
found that World Interactive Gaming was "clearly doing business
in New York for purposes of acquiring personal jurisdiction."[135] In reaching this conclusion,
the court relied on, among other things, the fact that World Interactive
Gaming operated its business from its corporate headquarters in
Bohemia, New York, worked with a New York graphics company to
design the website and received telephone calls from New Yorkers
through its New York headquarters. [136]
Again, the court also found it significant that World Interactive
Gaming had engaged in an indiscriminate advertising campaign all
over America with the knowledge that their ads were reaching New
Yorkers.[137]
{73} Having established that the exercise of personal jurisdiction
over the Delaware corporation was justified, the court then considered
whether it could exercise jurisdiction over World Interactive
Gaming's Antiguan subsidiary, Golden Chips Casino.[138] The relevant test to be applied to determine
whether to pierce the corporate veil in this case was whether
Golden Chips Casino "was so controlled by [World Interactive
Gaming] as to be a mere agent, department or alter ego" of
World Interactive Gaming.[139]
Reviewing the relevant factual circumstances, the court answered
the question in the affirmative and found that exercise of personal
jurisdiction over Golden Chips Casino was justified. [140]
{74} To the extent that the exercise of personal jurisdiction
was only required to be justified with reference to Golden Chips
Casino's relationship with its parent company, this case does
not represent a true exercise of anti-gaming laws to a foreign
entity operating an Internet casino. However, the case does provide
a further example of the fact that the activities normally carried
on by Internet casinos will be sufficient to give rise to the
exercise of personal jurisdiction over those casinos.
{75} Another significant element of the case is that the court
dismissed Golden Chips Casino's attempt to prevent users from
jurisdictions in which it was illegal to gamble from accessing
the site. The court accepted evidence that "because the software
does not verify the user's actual location, a user initially denied
access, could easily circumvent the denial by changing the state
entered to that of Nevada, while remaining physically in the State
of New York."[141]
No consideration was given to technical limits on the capacity
of the software to accurately ascertain the actual location of
the user or the capacity of a user to circumvent such attempts.
The court did pose the question of whether Golden Chips Casino's
exclusion of users with addresses in certain jurisdictions "constitutes
a good faith effort not to engage in gambling in New York"
but made no attempt to answer that question or to indicate what
might constitute such a good faith attempt.[142] This aspect of the case should raise
significant concerns for licensed Australian Internet casinos
which legitimately attempt to exclude users in jurisdictions that
do not permit gambling from accessing their sites. Such attempts
should be relevant to the issue of whether an entity has purposefully
availed itself of the privilege of doing business in a jurisdiction
such that it could expect to be amenable to the courts of that
jurisdiction.
{76} As already noted, United States courts may not consider disclaimers
relating to the legality of gaming in each user's jurisdiction
to be persuasive in determining whether to exercise personal jurisdiction.
In view of Vacco v. World Interactive Gaming, it appears
that imposing technical limitations on access may also not be
sufficient to prevent a court from exercising personal jurisdiction.
It is unclear, therefore, what steps an Internet casino will be
required to take to prevent itself from being amenable to the
jurisdiction of a United States court. At some point, however,
attempts to exclude users in a particular jurisdiction must demonstrate
that an Internet casino has not availed itself of that jurisdiction.
{77} With regard to the way courts have applied traditional
jurisdictional principles to the Internet, and, in particular,
to cases involving Internet gaming, it can be concluded that United
States courts are likely to have the subject matter and personal
jurisdiction necessary to hear actions against operators of offshore
Internet casinos. Accordingly, those operators will be amenable
to prosecution for breach of United States anti-Internet gaming
laws such as the Wire Act and, perhaps in the future, the IGPA.
{78} Moreover, United States regulatory bodies have evinced a
willingness to pursue convictions and a commitment to minimizing
the effects of offshore Internet gaming on the U.S. Cohen was
only one of twenty-two operators of offshore Internet gaming operations
against whom the U.S. Attorney from the Southern District of New
York filed a criminal complaint.[143]
Furthermore, former U.S. Attorney General, Janet Reno, has expressed
the official view that "[y]ou can't hide online, and you
can't hide offshore."[144]
{79} Significantly, however, regulatory efforts to date have focused
on U.S. citizens operating offshore. For example, Australian operators
of licensed Australian Internet casinos can take some comfort
from the fact that United States gaming regulators are unlikely
to be able to enforce judgements against them. Unless an Australian
operator of a licensed Australian Internet casino voluntarily
submits to the jurisdiction of the United States, enforcement
of anti-Internet gaming legislation against that operator would
require the Australian Government's cooperation in extraditing
that operator. Extradition could be sought on two bases. First,
this could be done under The Treaty on Extradition between
Australia and the United States of America,[145] which, pursuant to the Extradition
(United States of America) Regulations (Cth), is enforceable
in Australia under the Extradition Act 1988 (Cth). Second,
the United States could attempt to employ the doctrine of "comity"
which refers to "diplomatic niceties performed by countries
out of a sense of international etiquette rather than binding
obligation."[146]
{80} Any attempt to affect extradition of the operator of a licensed
Australian Internet casino is likely to fail because of the principle
of "double criminality." Double criminality refers to
the requirement that the crime in respect to which extradition
is sought is a crime in both countries. In relation to extradition
pursuant to a treaty, the double criminality requirement is expressly
stated in the Extradition Act 1988 (Cth).[147] In relation to extradition under the
doctrine of "comity," it is difficult to imagine the
Australian Government agreeing to extradite a person for conducting
an activity expressly licensed by it. Accordingly, extradition
is not a realistic enforcement option for United States regulators
attempting to prosecute operators of licensed Australian Internet
casinos.
{81} Nevertheless, unenforceability does not prevent United States
regulators from issuing warrants for the arrest of offending operators.
In a real sense, such a warrant makes that person a fugitive from
the law and prevents him from traveling to the United States.
In countries such as Australia where holders of Internet gaming
licenses are required to pass police checks to ascertain that
they are "of good character," the issue of a warrant
may affect their continued ability to hold a license. The simple
power to issue warrants should, therefore, be cause for some trepidation
among operators of licensed offshore Internet casinos. Further,
to the extent that any operator of an offshore Internet casino
has assets within the United States, those assets may be liable
to seizure.
{82} In addition, United States' regulators may be able to employ
a range of indirect enforcement measures against offshore Internet
casinos. The capacity for regulators to prosecute gamblers rather
than gambling businesses or to prevent United States Internet
Service Providers or financial institutions from facilitating
the activities of an Internet gambling service may inflict significant
financial harm on an Internet gaming business.[148]
{83} The operation of a licensed offshore Internet casino that transacts with U.S. residents is likely to contravene U.S. anti-gaming laws. In particular, it is likely to contravene the Wire Act and, if enacted, the IGPA. U.S. courts are likely to be able to exercise jurisdiction over operators of Internet casinos licensed under the laws of another country for those contraventions. Although U.S. regulators have expressed and demonstrated a willingness and a commitment to prosecuting operators of offshore Internet casinos, they are unlikely to be able to enforce judgements against offshore operators unless those operators voluntarily submit to the jurisdiction of United States courts. For example, as Internet gaming is legal in Australia and is conducted under government licenses, Australia is unlikely to agree to extradite operators of licensed Internet casinos to the United States. However, regulators have the capacity to issue warrants against and, in some circumstances, to seize the assets of operators of licensed offshore Internet casinos, as well as to employ indirect means of enforcement. Accordingly, an offshore Internet gaming license provides Internet casinos and their operators with no guarantee of immunity from United States gaming regulators.
[*] Adrian Goss is a lawyer at Holding Redlich, Lawyers and Consultants in Melbourne, Australia. The author wishes to thank Dr. Dan Hunter of the Wharton School, University of Pennsylvania for his advice and encouragement in relation to the preparation of this paper.
[1] 18
U.S.C.S. § 1084 (1994 & Supp. 2000).
[2]
See, e.g., Landmark Conviction in Web Gambling, AP NEWSBRIEFS,
Feb. 28, 2000, available at 2000 WL 15784143; Chris Jenkins,
Web Gambling Cases Could Be Far Reaching, USA TODAY,
Feb. 22, 2000, at 8C, available at 2000 WL 5769972.
[3] See,
e.g., Scheherazade Daneshkhu
et al., Online Betting Operator Jailed, FINANCIAL TIMES
(London), Aug. 11, 2000, at 8.
[4] Jenkins,
supra note 2.
[5] David
Higgins, Betting Law Applied to Antigua Operation, SYDNEY
MORNING HERALD, Mar. 1, 2000, available at 2000 WL
14583637.
[6] Senate
Select Committee on Information Technologies: Online gambling
in Australia: Discussion, Oct. 1, 1999, available at
http://www.aph.gov.au/senate.
[7] Unless
stated otherwise, this paper will use the term"casino"
to refer to all forms of Internet gaming, including sports betting,
lotteries, and other games of chance in which money is risked
for financial gain. Similarly, the words"betting", "gambling",
and "wagering" will be used interchangeably.
[8] 18
U.S.C. § 1084 (1994).
[9] S.
692, 106th Cong. § 1085 (1999) (hereinafter IGPA).
[10] Senate
Select Committee on Information Technologies, supra note
6, at 21.
[11] Draft
Regulatory Control Model for New Forms of Interactive Home Gambling,
(proposed May 23, 1997), http://www.qogr.qld.gov.au/inthogam.html.
[12] Mark
Blandford's Got a Couple of Bets Going at the Same Time. Like
. . . , RED HERRING,
Apr. 1, 2000, available at 2000 WL 22831152.
[13] Simon
Johansson, Online Casino Threatens to Move Offshore, THE
AGE
ONLINE,
Sept. 22, 2000, http://www.theage.com.au/c...rsion.pl?story=20000922/A12515-2000Sep22
(last visited Mar. 19, 2000).
[14] AUSTL .
CONST .
ch. I, pt. V, § 51(v).
[15] Interactive
Gambling (Moratorium) Bill 2000: Explanatory Memorandum, Commonwealth
of Austl. Senate (circulated by Senator Richard Alston, Minister
for Communications, Information Technology and the Arts), available
at http://www.aph.gov.au/senate.
[16] See,
e.g., CBT, AAP NEWSFEED,
Jan. 10, 2001 (reporting that Canbet reported a 427% increase
in turnover comparing Dec. 1999 to Dec. 2000).
[17] Joseph
M. Kelly, Internet Gambling Law, 26 WM. MITCHELL
L. REV.
117, 142 (2000).
[18] Yee
Fen Lim, Internet Gambling US Perspective, 1 INTERNET
L. BULL. 114 (1998).
[19] 18
U.S.C.S. § 1953 (1991 & Supp. 2000).
[20] 28
U.S.C.S. § 3702 (1994 & Supp. 2000).
[21] 18
U.S.C.S. § 1952 (1991 & Supp. 2000).
[22] 18
U.S.C. § 1084 (1994).
[23] 18
U.S.C. § 1081 (1994).
[24] Anthony
N. Cabot, Internet Gambling in the Information Age, NEV.
LAW.,
Mar. 1999, at 21-22.
[25] The
Internet Gambling Prohibition Act of 1999:
Hearing on H.R. 3125, 106th Cong. (2000) (statement of the
Hon. Kevin V. Di Gregory).
[26] Scott
L. Olson, Betting No End to Internet Gambling, 4 J. TECH.
L. & POL'Y 2, 18 (1999).
[27] Bruce
P. Keller, The Game's the Same, 108 YALE L.J. 1569,
1583 (1999).
[28] Anthony
N. Cabot, The Gaming Industry: Current Legal, Regulatory and
Social Issues, A.L.I.-A.B.A. Course of Study Materials, Course
No. SE81, at 189 (Mar. 16, 2000).
[29] See
Keller, supra note
27, at 1583.
[30] See
Di Gregory, supra note
25.
[31] See Cabot, supra note 28, at 188.
[32] See id.
[33] See Keller,
supra note 27, at 1583.
[34] Tom
Mainelli, Online Gambling: Luck Runs Out for Virtual Casinos?,
PC WORLD , Oct., 2000, available at http://www.pcworld.com/news/article/0,aid,18091,00.asp.
[35] Internet
Gambling Prohibition Act of 1999, S. 692, 106th Cong. § 2(b)(1)
(1999).
[36] See
id. § 2(b)(2).
[37] See
id. § 2(c).
[38] See
id. § 2(b)(1).
[39] See
id. § 2(d)(1).
[40] Lee
Davidson, Cannon Full of Surprises on Net Gambling, DESERT NEWS,
Oct. 4, 2000, at A15.
[41] See
Di Gregory, supra note
25.
[42] Ins.
Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guince,
456 U.S. 694, 701 (1982).
[43] For
a discussion of cyberspace jurisdiction relating to intellectual
property rights, see JAMES
FAWCETT
& PAUL TORREMANS,
INTELLECTUAL PROPERTY
AND PRIVATE
INTERNATIONAL
LAW
160-161 (1998).
[44] See
id.
[45] Jack
L. Goldsmith, Against Cyberanarchy, 65 U. CHI.
L. REV.
1199, 1200 (1998); cf. David Johnson & David Post,
Law and Borders, 48 STAN. L. REV. 1367 (1996) (arguing that cyberspace transmissions
operate independent of physical boundaries, and, therefore, should
be treated differently from "real-world" transactions).
[46] 714
N.Y.S.2d 844 (N.Y. Sup. Ct. 1999).
[47] Id.
at 850.
[48] Id.
[49] Justin
Ware, Trouble in Paradise, YAHOO! INTERNET LIFE FROM ZD WIRE, Oct. 29, 1999, 1999 WL 14789099 (quoting
then-U.S. Atty. General Janet Reno).
[50] 152
F.3d 443 (5th Cir. 1998).
[51] Id. at 448.
[52] See
Kelly, supra note 17,
at 152.
[53] See U.S. v. Aluminum Co. of Am. cited
infra note 65.
[54] See
Church v. Hubbart, 6
U.S. 187, 234 (1804); EEOC v. Arabian American Oil, 499 U.S. 244,
246, 248 (1991).
[55] U.S.
CONST.
art. 1, § 8, cl. 3.
[56] 188
U.S. 321 (1903).
[57] 509
U.S. 418 (1993) (arguing that any restraint imposed on commercial
speech is outweighed by governmental interest in the regulation
of gambling, thus giving government broad authority to restrain
communications that facilitate gambling).
[58] See Keller, supra note 27, at 1587.
[59] 714
N.Y.S.2d 844 (N.Y. Sup. Ct. 1999).
[60] Id. at 860.
[61] Internet
Gambling Prohibition Act of 1997, S. 474, 105th Cong. (1997).
[62] See Kelly, supra note 17, at 141.
[63] United
States v. Bowman, 260 U.S. 94, 97-98 (1922).
[64] Vacco, 714 N.Y.S.2d at 860.
[65] United
States v. Aluminum Co. of Am., 148 F.2d 416, 443-444 (2d Cir.
1945).
[66] Wayne
Coffey, AN OFFSHORE THING: Antigua is Home for Internet Sports
Betting, Where Dollars Come in Faster than a Mouse Click,
N.Y. DAILY NEWS, Mar. 26, 2000, at 102, available at
2000 WL 15915659.
[67] Keller,
supra note 27, at 1592.
[68] Richard
Raysman & Peter Brown, Cybercasinos: Gambling Meets the
Internet, at http://www.brownraysman.com/publications/techlaw/cllj897.html,
at ¶1 (last visited Mar. 15, 2001).
[69] See Coffey, supra note 66.
[70] Raysman,
supra note 68, at ¶ 5.
[71] New
York v. Kim, 585 N.Y.S.2d 310, 313 (N.Y. Crim. Ct., 1992).
[72] Stephen
Williams, Old Federal Law Hits New Technology, NEWSDAY,
Feb. 28, 2000, at A27.
[73] 714
N.Y.S.2d 844, at 850.
[74] Id. at
851.
[75] Joel
Michael Schwarz, The Internet Gambling Fallacy Craps Out,
14 BERKELEY TECH. L. J. 1021, 1043 (1999).
[76] Id. at 1041.
[77] Id.
at 1039, 1041.
[78] In
relation to the latter, and for a more detailed consideration,
see John Rothchild & Gregory M. Silverman, Cases and Materials
on the Law of Electronic Commerce (1999) (unpublished draft
version included in material prepared June15, 2000 for 'Electronic
Commerce Law' subject taught at The University of Melbourne).
[79]
See Schwarz, supra
note 75, at 1042 (arguing that jurisdiction can be asserted by
the state where the transaction occurs, where significant effects
of the transaction are felt, and the jurisdiction where the regulated
parties exist).
[80]
See Goldsmith, supra note 45, at 1200.
[81]
326 U.S. 310 (1945).
[82] Id.
at 316.
[83] Id. (quoting Miliken v. Meyer, 311 U.S. 457,
463 (1940)).
[84] 444
U.S. 286 (1980).
[85] Id. at 297; see also Hanson v. Denckla,
357 U.S. 235, 263 (1958).
[86] 471
U.S. 462 (1985).
[87] See
id. at 476. The Court states
that a defendant who has "availed himself of the privilege
of conducting business" in the forum state, then requiring
the defendant to litigate in that forum is "presumptively
not unreasonable." Id.
[88] Id.
[89] 952
F.Supp. 1119 (W.D. Pa. 1997).
[90] Id. at 1121.
[91]
Id. at 1121, 1124.
[92] Id. at
1124.
[93] Id.
[94] See id.
[95] Id.
[96] Rothchild
& Silverman, supra note 78, at ¶ 9.
[97] Zippo
Mfg. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D.Pa.
1997).
[98] 568
N.W.2d 715 (1997).
[99] Id. at 717.
[100] Id.
at 718.
[101] Id.
[102] Id. at
717.
[103] Id.
[104] 947 F. Supp 1328, 1333 (E.D.Mo. 1996).
[105] 939
F. Supp. 1032, 1044 (S.D.N.Y. 1996).
[106] Granite Gate Resorts, 568
N.W.2d at 719.
[107] Id. at
720.
[108] Felix
C. Pelzer, Unchartered Territory: Personal Jurisdiction in
the Information Age, 51 S.C. L. REV. 745, 753 (2000).
[109] Granite Gate Resorts, 568
N.W.2d at 721.
[110] See id
at 720.
[111] Thompson
v. Handa-Lopez, Inc., 998 F. Supp. 738 (W.D. Tex., 1998).
[112] Id. at 741.
[113] See id.
[114] See id.
[115] Id.
[116] Id.
[117] See id. at
742-43.
[118] Maritz,
Inc. v. Cybergold, Inc., 947 F. Supp. 1328, 1333-1334 (E.D. Mo.
1996).
[119] 937
F. Supp. 161, 164-165 (D. Conn. 1996).
[120] Handa-Lopez,
998 F. Supp. at 743-44.
[121] Id. at
743.
[122] Id. (citing
Inset Systems, 937 F. Supp at 163).
[123] Id. at
743-44 (quoting Maritz, 947 F. Supp. at 1333-1334).
[124] Id. at
744.
[125] Id. at
745.
[126] Id. at
745-46.
[127] 714
N.Y.S.2d 844 (N.Y. Sup. Ct. 1999).
[128] Id.
[129] See id. at
846.
[130] Id. at
858.
[131] Id. at
855.
[132] Id.
[133] Id.
[134] Id. at
857 (citing People v. Lipsitz, 663 N.Y.S.2d 468, 475 (1997).
[135] Id.
[136] See id.
at 858.
[137] See id.
[138] See id. at
858-59.
[139] Id. at
858.
[140] Id. at
859.
[141] Id. at
855.
[142] Id.
[143] See Kelly,
supra note 17, at 150.
[144]
Ware, supra note 49.
[145] Treaty
on Extradition , May 14, 1974, U.S.-Austl., 27 U.S.T. 957 (entered
into force May 8, 1976), amended by Protocol Amending the
Treaty on Extradition Between the United States of America and
Australia, September 4, 1990.
[146] John
T. Fojut, Ace in the Hole, 8 DEPAUL-LCA J. ART
& ENT. L. &
POL'Y 155,
170 (1997) (quoting Brian Pearce, The Comity Doctrine as a
Barrier to Judicial Jurisdiction, 30 STAN. J. INT'L.
L. 525, 527 (1994)).
[147] Extradition
Act, 1988, § 19(2)(c) (Austl.).
[148] See generally
Schwarz, supra note 75, at 1050-68 (discussing indirect
enforcement measures employed by U.S. regulators to prevent unauthorized
online gambling).
(1) http://www.law.berkeley.edu/journals/btlj/articles/14_3/Schwarz/html/text.html THE INTERNET GAMBLING FALLACY CRAPS OUT. By concentrating on cutting off access to the Internet gambling website and rendering the Internet gambling operators unable to secure funds from United States citizens, Joel Michael Scwarz argues that law enforcement can in fact stem the offering of illegal Internet gambling within the United States.
(2) http://www.salon.com/tech/log/1999/10/22/net_gambling
GAMBLING ON THE NET -- OR NOT? - Article addresses fact that as
the country undergoes an anti-gambling backlash, Congress again
attempts to restrict wagering online. However, because gambling
laws vary from state to state and many online casinos are based
offshore, critics say it would be easier to try to regulate online
gambling than ban it outright.
(3) http://www.osga.com/Cohen.htm
INTERNET NEWS STORIES RELATING TO THE JAY COHEN CASE - The following
stories are reprints of internet news articles.
(4) http://washingtonpost.com/wp-srv/national/longterm/intgambling/overview.htm
THE ODDS ON PROHIBITING WEB BETS - Tim Ito and Sharisa Staples
discuss the expansion in recent years that has alarmed opponents
and put increased focus on the laws that govern Internet gambling.
(5) http://www.wired.com/news/politics/0,1283,2691,00.html
ACLU: GAMBLING BILL WOULD TURN ISPS INTO COPS - Ashley Craddock
criticizes how making service providers responsible for providing
access to Web sites places them in the position of policing content
rather than simply acting as carriers.
(6) http://www.brownraysman.com/publications/techlaw/nylj0500.htm CONGRESS
MAY PLAY ITS HAND WITH INTERNET GAMBLING LAW - Richard Raysman
and Peter Brown explore several recent developments that may change
the legal status of on-line gambling ventures or related enterprises.
(7) http://commdocs.house.gov/committees/judiciary/hju65222.000/hju65222_0.htm
HEARINGS BEFORE THE SUBCOMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES
(8) http://www.library.ca.gov/CRB/97/03/crb97003.html
GAMBLING IN CALIFORNIA - this article by Roger Dunstan gives an
excellent history of the regulation of gambling in the United
States.
(9) http://www.venable.com/Internet/gaming.html GAMING
ON THE INTERNET - This article by Melissa Landau Steinham discusses
the status of gambling on the Web.
(10) http://seattletimes.nwsource.com/news/sports/html98/gamb_012499.html#background
BORDERLESS BETTING: THE EMERGENCE OF ONLINE GAMBLING - Elliot
Almond's article discusses how, even with the potential safeguards,
confusion reigns over what can be done to stop or limit Internet
gambling.
(11) http://www.zolatimes.com/v3.11/internet_gambling.htm INTERNET
GAMBLING: POPULAR, INEXORABLE, AND (EVENTUALLY) ILLEGAL - This
article, by Tom W. Bell, describes the powerful demand for Internet
gambling, analyzes the forces arrayed against it, and argues against
its prohibition.
(12) http://www.iworldinteractive.com/article/new_page_16.htm
INTERNET LAWS - This article, by Kenneth Freeling, gives an overview
of recent cases involving the court's treatment of Internet Gambling.
(13) http://www.virtualrecordings.com/wagering.htm
WAGERING ON THE WEB - Robin Gross discusses how the future of
online gambling, like many new legal issues raised by the Internet,
such as privacy and jurisdiction, will likely take shape in the
courts.
(14) http://www.pcworld.com/resource/article.asp?aid=18091 ONLINE
GAMBLING: LUCK RUNS OUT FOR VIRTUAL CASINOS? - Tom Mainelli's
article gives an excellent overview of positions taken by opponents
and proponents of anti-gambling legislation.
(15) http://study.haifa.ac.il/~bbornfel/Casino/legal.html#56
LEGAL STATUS OF INTERNET GAMBLING - Article asserts how consumer
demand for Internet gambling and the states' demand for tax revenue
will create enormous political pressure for legalization.
(16) http://www.thestandard.net/article/display/0,1151,4387,00.html
GABLING ONLINE? YOU BET! - This article explains when famous
names and established companies get involved, opposition to Internet
gambling is appearing to crumble. It includes a table titled Internet
Gambling Worldwide, Past and Future which illustrates the increase
in gambling online.
(17) http://asia.cnn.com/2001/WORLD/asiapcf/auspac/03/27/australia.gambling.law/
AUSTRALIA SEEKS TO BAN CYBER-GAMBLING - This CNN March 27, 2001
article explains how Australia's conservative government wants
to prohibit Internet gambling.