Unlawful Internet Gambling Enforcement Act of 2006

By Eric Goldman

No one is better at coughing up legislative hairballs than Congress. The Unlawful Internet Gambling Enforcement Act of 2006 (grafted to the end of the SAFE Port Act) was passed over 2 months ago, but my repeated attempts to blog on it have been stymied by its Byzantine drafting. If you want a flagship example of how special interest lobbying combined with legislative mumbling can produce an unreadable mess, check out this beauty.

The statute assumes that some gambling is unlawful under state/federal law, but it doesn’t say what. For example, there is a split of authority about whether the Federal Wire Act (18 USC 1084) already prohibited Internet gambling. This law doesn’t answer that question for us, although the statute (in response to special interest lobbying) “helpfully” excludes a number of specific gaming-related activities from its purview.

Because of the existing legal uncertainty and this statute’s deliberate decision not to address the uncertainty (see 31 USC 5361(b), saying that this law doesn’t change any state/federal/tribal law prohibiting or permitting gambling), no one knows with confidence what actually constitutes illegal Internet gambling. Despite this, Congress prohibits those engaged in the business of betting/wagering (an effectively undefined term) from accepting money in connection with illegal Internet gambling. In other words, Congress can’t figure out what’s illegal, but it’s happy to require some financial gatekeepers to make those decisions for it. There is some rulemaking to work out the procedures for how money should be blocked (AG Gonzales and the Federal Reserve Board get the pleasure of drafting those), so we’ll have to see what the rules say before we can tell how conservative financial gatekeepers will become.

To me, the more interesting piece relates to liability for interactive computer services. As a starting point, 47 USC 230 already immunizes ICSs from any liability based on state gambling laws or any federal civil laws related to gambling. However, 230 does not insulate ICSs against federal criminal laws. Thus, for example, if the Wire Act applies to Internet gambling, 230 would not apply, and ICSs could be criminally liable for third party gambling activity.

The statute partially reduces the 230 limitations by allowing the DOJ or state AGs to seek a court order requiring ICSs to take down a lawbreaking website. 31 USC 5365(c). Without this statutory exception, 230 should have barred any civil orders. At the same time, the statute appears to expand 230 protection to eliminate ICS liability under the Wire Act unless the ICS has “actual knowledge and control of bets and wagers” and owns or operates an illegal gambling website. I’m not exactly sure it means to have “actual knowledge and control of bets and wagers,” but my suspicion is that this defines a very narrow universe of activities. So, on balance, it looks like this law may have slightly expanded ICS immunization by providing some limits on ICS liability for third party criminal gambling activities.

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