Federal Law Against Illegal Gambling 4,0/5 1592 reviews

They are investigated by federal law enforcement and prosecuted by United States attorneys in federal courts with federal judges. While many of these offenses are distinctive to the federal system, they also include crimes that would otherwise fall under state or local jurisdictions had they not occurred on U.S. Federal property or on an Indian. The Supreme Court released a landmark decision by striking down a federal law prohibiting sports gambling. The ruling gives individual states the go-ahead to allow betting on sports.

The general conspiracy statute, 18 U.S.C. § 371, creates an offense '[i]f two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose. (emphasis added). See Project, Tenth Annual Survey of White Collar Crime, 32 Am. Crim. L. Rev. 137, 379-406 (1995)(generally discussing § 371).

The operative language is the so-called 'defraud clause,' that prohibits conspiracies to defraud the United States. This clause creates a separate offense from the 'offense clause' in Section 371. Both offenses require the traditional elements of Section 371 conspiracy, including an illegal agreement, criminal intent, and proof of an overt act.

Federal and State Laws Gambling in the United States has laws regarding the games of chance regulated by both state and federal levels. Other than a few exceptions, the most legal governance occurs at the state level and will determine what lotteries and other games of chance are legal or illegal based on the legislation and administration at the time. Federal Laws On Gambling 18 U.S. Code section 1081: Definitions: This statute defines the key terms that are used throughout the rest of 18 U.S. Code section 1082: Gambling ships: According to 18 U.S. Code section 1082, it is unlawful for a U.S. Code section 1083.

Although this language is very broad, cases rely heavily on the definition of 'defraud' provided by the Supreme Court in two early cases, Hass v. Henkel, 216 U.S. 462 (1910), and Hammerschmidt v. United States, 265 U.S. 182 (1924). In Hass the Court stated:

The statute is broad enough in its terms to include any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of government . . . (A)ny conspiracy which is calculated to obstruct or impair its efficiency and destroy the value of its operation and reports as fair, impartial and reasonably accurate, would be to defraud the United States by depriving it of its lawful right and duty of promulgating or diffusing the information so officially acquired in the way and at the time required by law or departmental regulation.

Hass, 216 U.S. at 479-480. In Hammerschmidt, Chief Justice Taft, defined 'defraud' as follows:

To conspire to defraud the United States means primarily to cheat the Government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest. It is not necessary that the Government shall be subjected to property or pecuniary loss by the fraud, but only that its legitimate official action and purpose shall be defeated by misrepresentation, chicane or the overreaching of those charged with carrying out the governmental intention.

Hammerschmidt, 265 U.S. at 188.

The general purpose of this part of the statute is to protect governmental functions from frustration and distortion through deceptive practices. Section 371 reaches 'any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of Government.' Tanner v. United States, 483 U.S. 107, 128 (1987); seeDennis v. United States, 384 U.S. 855 (1966). The 'defraud part of section 371 criminalizes any willful impairment of a legitimate function of government, whether or not the improper acts or objective are criminal under another statute.' United States v. Tuohey, 867 F.2d 534, 537 (9th Cir. 1989).

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The word 'defraud' in Section 371 not only reaches financial or property loss through use of a scheme or artifice to defraud but also is designed and intended to protect the integrity of the United States and its agencies, programs and policies. United States v. Burgin, 621 F.2d 1352, 1356 (5th Cir.), cert. denied, 449 U.S. 1015 (1980); seeUnited States v. Herron, 825 F.2d 50, 57-58 (5th Cir.); United States v. Winkle, 587 F.2d 705, 708 (5th Cir. 1979), cert. denied, 444 U.S. 827 (1979). Thus, proof that the United States has been defrauded under this statute does not require any showing of monetary or proprietary loss. United States v. Conover, 772 F.2d 765 (11th Cir. 1985), aff'd, sub. nom. Tanner v. United States, 483 U.S. 107 (1987); United States v. Del Toro, 513 F.2d 656 (2d Cir.), cert. denied, 423 U.S. 826 (1975); United States v. Jacobs, 475 F.2d 270 (2d Cir.), cert. denied, 414 U.S. 821 (1973).

Thus, if the defendant and others have engaged in dishonest practices in connection with a program administered by an agency of the Government, it constitutes a fraud on the United States under Section 371. United States v. Gallup, 812 F.2d 1271, 1276 (10th Cir. 1987); Conover, 772 F.2d at 771. In United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990), the defendants' actions in disguising contributions were designed to evade the Federal Election Commission's reporting requirements and constituted fraud on the agency under Section 371.

The intent required for a conspiracy to defraud the government is that the defendant possessed the intent (a) to defraud, (b) to make false statements or representations to the government or its agencies in order to obtain property of the government, or that the defendant performed acts or made statements that he/she knew to be false, fraudulent or deceitful to a government agency, which disrupted the functions of the agency or of the government. It is sufficient for the government to prove that the defendant knew the statements were false or fraudulent when made. The government is not required to prove the statements ultimately resulted in any actual loss to the government of any property or funds, only that the defendant's activities impeded or interfered with legitimate governmental functions. SeeUnited States v. Puerto, 730 F.2d 627 (11th Cir.), cert. denied, 469 U.S. 847 (1984); United States v. Tuohey, 867 F.2d 534 (9th Cir. 1989); United States v. Sprecher, 783 F. Supp. 133, 156 (S.D.N.Y. 1992)(Ã¾it is sufficient that the defendant engaged in acts that interfered with or obstructed a lawful governmental function by deceit, craft, trickery or by means that were dishonest'), modified on other grounds, 988 F.2d 318 (2d Cir. 1993).

In United States v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990), cert. denied, 498 U.S. 1105 (1991), the defendants were convicted of conspiracy to defraud the government and other offenses in connection with a scheme to fraudulently obtain loan commitments from the Federal Housing Administration (FHA) or Veterans Administration (VA). The court held that the district court had properly instructed the jury that:

the Government must prove beyond a reasonable doubt the existence of a scheme or artifice to defraud, with the objective either of defrauding the FHA or the VA of their lawful right to conduct their business and affairs free from deceit, fraud or misrepresentation, or of obtaining money and property from the FHA by means of false and fraudulent representations and promises which the defendant knew to be false.

Madeoy, 912 F.2d at 1492.

Prosecutors considering charges under the defraud prong of Section 371, and the offense prong of Section 371 should be aware of United States v. Minarik, 875 F.2d 1186 (6th Cir. 1989) holding limited, 985 F.2d 962 (1993), and related cases. SeeUnited States v. Arch Trading Company, 987 F.2d 1087 (4th Cir. 1993). In Minarik, the prosecution was found to have 'used the defraud clause in a way that created great confusion about the conduct claimed to be illegal,' and the conviction was reversed. 875 F.2d at 1196. After Minarik, defendants have frequently challenged indictments charging violations of both clauses, although many United States Courts of Appeals have found it permissible to invoke both clauses of Section 371. Arch Trading Company, 987 F.2d at 1092 (collecting cases); see alsoUnited States v. Licciardi, 30 F.3d 1127, 1132-33 (9th Cir. 1994)(even though the defendant may have impaired a government agency's functions, as part of a scheme to defraud another party, the government offered no evidence that the defendant intended to defraud the United States and a conspiracy to violate an agency regulatory scheme could not lie on such facts).

In summary, those activities which courts have held defraud the United States under 18 U.S.C. § 371 affect the government in at least one of three ways:

[cited in JM 9-42.001]

They cheat the government out of money or property;
They interfere or obstruct legitimate Government activity; or
They make wrongful use of a governmental instrumentality.

There are actually several federal statutes that are targeted towards gambling in general and may also apply to online gambling as well. The real challenge with these laws is to first establish the criminality of the acts in question and then apply federal laws to punish certain aspects of them, such as the transmission of bets or financial transactions resulting from illegal gambling.

So when we look at these federal laws, it usually comes down to whether the gambling in question is legal or not in the first place, and we generally require a finding of criminality before the various acts kick in so to speak.

We do know that interstate commerce is under the domain of the individual states, and the federal government has power over interstate and foreign commerce, so if interstate or foreign means are used in gambling, this would put the activity under the purview of the federal government.

So in theory anyway, they could render illegal any gambling activity other than which occurs exclusively within one of the states. There’s only really been one attempt to render such a law, back in 1999, and if passed this would have made all interstate betting illegal, both the placing of bets by players and the operation of businesses taking these interstate bets.

What if the gambling in question was between two states where gambling was legal though, such as New Jersey and Nevada for instance? Well that wouldn’t matter, they could still make the exchange of betting between these states illegal, if they really wanted to that is.

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So the attempt to make interstate online gambling illegal was defeated, back in the early days of online gambling actually, and we haven’t seen any real attempt to try again, aside from the recent effort to restore the Wire Act, which isn’t even a restoration as the Wire Act never had such broad powers.

Some may want to make the argument that the internet itself is by its very nature purely under the federal domain, but these arguments are weak as if the transmissions are within a state, it’s hard to imagine how the federal government could be seen to have legal standing with them.

What Can The Federal Government Really Do?

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After very limited success in going after offshore gambling, some now want to go after the regulated online gambling that is emerging, with more on the horizon. The fact that pulling this off is really beyond their legal powers does not serve as much of a deterrent for some at least.

For now, the government is really limited to regulating activity that there are already laws on the books making them illegal, which from a federal perspective is limited to interstate sports betting. There’s a whole lot of interstate sports betting that goes on though, so the effect of these laws are quite limited indeed, in spite of some celebrated convictions years ago where the parties did not exercise appropriate caution.

In addition to the Wire Act, there are several other federal laws that may be invoked against online gambling, but all of them are dependent on the gambling in question being already illegal.

So these laws address not gambling, but illegal gambling, for instance the UIGEA’s prohibiting financial transactions related to illegal gambling.

Some Other Acts That May Apply To Online Gambling

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In a real sense, these other laws aren’t really required, given that the acts themselves are illegal, and must be found to be in order to proceed with these supplementary charges. However they can serve to broaden the scope of the actions taken, for instance in forming a legal basis for the seizing of funds that we have seen.

So in addition to the well publicized UIGEA, there’s also the Prohibition of Illegal Gambling Business Act of 1955, which prohibits the operation of illegal gambling businesses. This law is surely redundant though, as if the business already involves running illegal gambling, the law that rendered it illegal in the first place would be more than sufficient for a conviction, and this act adds nothing meaningful to the law.

This doesn’t stop federal authorities from invoking it though, like for instance in the actions known as Black Friday against several online poker sites, and this in fact was the prevailing federal law that was cited in the indictments. So it did serve a purpose, but not a legitimate one, but since they couldn’t cite the Wire Act since it doesn’t apply to poker, they had to cite something.

Occasionally, the Travel Act of 1952 is referenced in conjunction with online gambling, although this act is limited to either use of the mail or physical travel in conjunction with preexisting illegal activity. This could apply to the mailing of checks for withdrawals from gambling sites though if the gambling activity in question was illegal.

The Organized Crime Control Act of 1970 is felt by some at least to apply to online gambling organizations, and in some cases it might, but this again depends on a prior finding of illegality. So someone who is under the control of United States law who is found to be operating an illegal gambling operation could be charged under this act, although once again, laws like this are redundant really.

Federal Law Against Illegal Gambling Laws

There’s also a section of U.S. Code, specifically Title 18, Part 1, Chapter 95, Section 1960, which prohibits “illegal money transmitting businesses,” which third party processors could be held subject to, in spite of their being outside the scope of the UIGEA. This is limited to going after businesses which do not have the appropriate state license though, and therefore aims at purely criminal organizations and not the licensed processors that tend to be involved in gambling proceeds.

So there are several federal laws which authorities could potentially use to go after online gambling operators, to the extent that they find themselves or their funds within the reach of U.S. authorities, but the lack of this generally is the main stumbling block by far in these efforts.

Having these gambling operators residing in other jurisdictions with different laws and the fact that none of this is enforceable under international law or international treaties, which has been well established, ensures that any fight that the U.S. government takes on here will be one that is going to be pretty limited in scope.