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(by A.D. Pruitt, WSJ.com) NEW YORK — In a decision handed down Tuesday, the U.S. Court of Appeals for the Third Circuit rejected a claim by New Jersey-incorporated Interactive Media Entertainment & Gaming Association that current laws aimed at cracking down on online gambling are too vague, unconstitutional and infringe on an individual’s right to privacy. The decision comes amid a struggle between the Justice Department, which wants to shut down the online-gambling industry, and several members of Congress who are advocating legalization and view it as a potentially important revenue generator.
The court’s decision upheld the Unlawful Internet Gambling Enforcement Act of 2006, which banned credit-card companies or other institutions from processing payments for online betting.
“We’re disappointed that the court didn’t overturn the law,” said Joe Brennan Jr., chairman of Interactive Media, which sued the Justice Department, the Federal Reserve and the Federal Trade Commission. But, he said that language in the decision appearing to place the issue under state jurisdiction was a silver lining.
“We lost the decision,” he said. “But the court gave us an awful lot to work with going forward.”
The court said, “It bears repeating that the Act itself does not make any gambling activity illegal. Whether the transaction in Interactive’s hypothetical constitutes unlawful Internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet.”
Mr. Brennan said there are six states where Internet gambling would violate state laws. Thus, “There are 44 states where this is an opportunity for Internet gaming to become regulated and normalized,” he said.
A few months ago, federal authorities in New York froze bank accounts holding $34 million belonging to 27,000 online-poker players, and last September the state of Kentucky received a court order to seize more than 100 Internet-gambling sites that it said were operating illegally.
Opponents of online gambling say such activity would promote gambling addictions and attract minors. However, critics of the ban say the laws remain murky and are sometimes contradicted by state laws.
The casino industry is also divided on the issue. The American Gaming Association is neutral on online gambling “due to the divergent views of our members. There is not a consensus,” said Holly Thomsen, director of communications for the trade group, noting that Harrah’s Entertainment and MGM Mirage had expressed some interest in Internet gambling.
In May, Rep. Barney Frank, chairman of the House Financial Services Committee, proposed legislation to legalize and regulate Internet gambling so that revenue could be taxed and consumers would have some protections. The legislation is pending in the committee.
-Tamara Audi contributed to this article.
Write to Angela Pruitt at angela.pruitt@dowjones.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved. Reprinted here for educational purposes only. Visit the website at wsj.com.
Questions
1. On what grounds did the Interactive Media Entertainment & Gaming Association challenge the law on internet gambling?
2. Why are several Congressmen working toward legalizing internet gambling?
3. What does the “Unlawful Internet Gambling Enforcement Act of 2006” actually prevent?
4. Why is Joe Brennan of the gambling group Interactive Media happy even though he lost his case?
5. What arguments do opponents and supporters of online gambling use to defend their positions on the issue?
6. a) Which Democratic Congressman is leading the fight to legalize online gambling? Why is he doing so?
b) Do you support his efforts? Why or why not?
7. Until recently, when a person wanted to engage in conduct that is considered anything from entertaining to a bad habit to a vice, they had to actually travel to a physical location. Now they can win or lose hundreds or thousands of dollars from their home.
What negative effects does gambling (and internet gambling) have on a society? Is gambling in any way beneficial to a society?
Should the government ban internet gambling? Why or why not?
Resources
Visit the Gamblers Anonymous website at gamblersanonymous.org.
Go to wikipedia.org for an explanation of the U.S. Court of Appeals system.
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