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 significant amount of attention, regarding both prohibition and regulation, has been centered on the federal government, and much of this focus is misplaced. In examining the legal landscape of gambling in the United States, it is crucial that we comprehend who decides what, otherwise we can get perplexed and assume that Barney Frank has truly been on a mission to legalize gambling in the U.S., or that their refusal to do so will inexplicably prevent this from happening. However, the reality is different.
The central government lacks the authority to make gambling legal or illegal in regions where they have no jurisdiction to do so, other than on Indian lands, and they particularly do not possess the authority to legalize it. The most they can accomplish is attempt to regulate the aspect of gambling that involves interstate activities, such as the transmission of bets that the Wire Act aimed to prohibit, or the income of illegal gambling that is the subject of the UIGEA. It becomes more evident as we explore these acts.
There exist many topics referenced here that warrant further discussion, which we will follow in subsequent articles, but for now, it’s important to recognize what the limitations of each jurisdiction truly are, so we don’t become lost in discussions that genuinely have limited relevance in practice. It's essential to stay focused on what matters.
In most cases, however, each specific state has authority over the actual gambling that occurs within its borders. There exists a fair bit of doubt as to whether online gambling entails any gambling within the state. If it does not, then it operates outside both state and federal jurisdiction and falls under the jurisdiction where the gambling servers are situated, where it is approved. This remains a complex issue.
If the U.S. Department of Justice is accurate in their standpoint that it takes place in both locations, then it occurs both in the state and in the international jurisdiction, but this would then assign the gambling itself under state jurisdiction, because they possess dominion over all gambling taking place within their state. This highlights the complex nature of jurisdictional power.
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.