It is important to be clear on the extent of state and federal power when it comes to jurisdiction over gambling, and what the limitations are on each. This is an area where there is quite a bit of confusion about, even by some people who certainly ought to know better, such as politicians with a legal background or even practicing lawyers.
Many of the issues surrounding gambling law in the United States are fairly complicated, and even very complicated, but the division of powers between governments is not one of them.
Anti gambling laws are part of criminal law, and while the federal government does have jurisdiction over certain areas of criminal law, its powers here are very limited. You may have heard some crimes referred to as federal crimes, almost all crimes are governed by state law though by virtue of their own state criminal statues.
These state statues cover a wide variety of crimes, including crimes against the person, crimes against property, and so called vice crimes or so called crimes against public morals, which includes gambling.
So there’s no question as to who has the jurisdiction here where gambling crimes are concerned. When it comes to regulation, states also have the power to regulate commerce within their own state, this is actually another matter, and pertains to regulation rather than criminality.
So while the Commerce Clause of the U.S. Constitution gives states the power to regulate intrastate commerce, and with the federal government overseeing interstate commerce, as it must, because the states themselves could not possibly have jurisdiction over this, this isn’t the basis for the gambling laws we have.
The right to regulate businesses operating within its state does allow them to permit and set conditions where companies within the state can be licensed, which is the basis for the regulated online gambling that we see in some states now, in addition to the land based gambling regulation that almost all states have now, as they do with all businesses operating within their states.
The federal government does have jurisdiction over Indian lands though and this is the reason why federal law has permitted Indian tribes to operate gambling on their reservations in spite of how the states where they are located in may feel about it.
It’s Mostly About The States Though
A lot of focus, both with prohibition and regulation, has been placed upon the federal government, and a lot of this focus is misplaced. In looking at the legal landscape of gambling in the United States, it is vital that we understand who decides what, otherwise we can get confused and think that Barney Frank has really been on a mission to legalize gambling in the U.S., or that their refusal to do so will somehow prevent this from being so.
The federal government does not have the power to make gambling legal or illegal in areas where they have no jurisdiction to do so, other than on Indian lands, and they especially do not have the power to legalize it. The most they can do is look to regulate the part of gambling that involves interstate actions, such as the transmitting of bets that the Wire Act sought to prohibit, or the proceeds of illegal gambling that is the focus of the UIGEA.
There are many areas referenced here that merit further discussion, which we will pursue in later articles, but for now it’s important to realize what the limitations of each jurisdiction actually is, so we don’t get lost in discussions that really have limited application in practice.
For the most part though, each individual state has domain over the actual gambling that goes on within it. There is a fair bit of uncertainty as to whether online gambling involves any gambling within the state. If it doesn’t, then it’s outside both state and federal jurisdiction and is subject to the jurisdiction where the gambling servers are located, where it is legal.
If the U.S. Department of Justice is correct in their view that it occurs in both places, then it occurs both in the state and in the foreign jurisdiction, but this would then place the gambling itself under state jurisdiction, because they have dominion over all gambling occurring in their state.
So What Can The Feds Do Here?
Given that online gambling that occurs between players in a certain state and servers outside the state is not an intrastate affair, wouldn’t the federal government have jurisdiction over that? Well they have some, but here’s the rub. They only have jurisdiction over interstate commerce, and this has nothing to do with bettors themselves, who are not engaged in interstate commerce or commerce at all for that matter.
There’s some question as to who they would be going after actually with laws like this. If we look to the Federal Wire Act, it prohibited those in the business of gambling to transmit wagers or related information outside the borders of the state whey are located in. Players are neither engaged in business or in transmitting.
How would this apply to online gambling? Well, the information in this case is transmitted by way of the internet, and none of the parties involved could really be seen as engaging in the business of gambling. This law was written to go after organized crime, bookies operating in several states, and it’s difficult to see how this even pertains to today’s methods of such information being transmitted.
Here’s the big part though. Is it even possible for the Federal Wire Act or any other similar act to make the act of gambling itself illegal? The answer is, no. Only the states have this power, and the most that these federal laws can do is make certain aspects of betting illegal, such as the transmission of betting information, and not the betting itself.
This is an important distinction, especially when we start looking at other laws such as the UIGEA, which prohibits financial transactions related to illegal gambling, and the view is that the Wire Act somehow made gambling illegal, which it did not and could not.