Internet poker bill: Feds say it's illegal

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Supporters of making North Dakota the first U.S. home for Internet poker sites face a difficult hurdle - the federal Justice Department believes the idea is illegal.

In letters to Nevada and the U.S. Virgin Islands, Justice Department attorneys have said they believe Internet gambling runs afoul of federal laws against using wire communications to place bets.

The agency responded when legislatures in Nevada and the Virgin Islands approved bills to authorize and regulate Internet casinos.

"Moreover, the federal money laundering statutes are applicable to unlawful Internet gambling businesses," Michael Chertoff, then an assistant U.S. attorney general, said in an August 2002 letter to the Nevada Gaming Control Board.

Chertoff is now head of the federal Department of Homeland Security.

Rep. Jim Kasper, R-Fargo, is sponsoring legislation that would authorize North Dakota's attorney general to license and regulate Internet poker sites, and the players that patronize North Dakota-based sites.

No other state licenses Internet poker sites. They are now based in several countries, including Costa Rica and Antigua, a Caribbean island nation.

Kasper's legislation, which was narrowly approved in the House, is getting its first Senate hearing Tuesday. Kasper said he has consulted attorneys about whether his bill would violate federal law, and he believes the issue is not as clear-cut as the Justice Department believes.

"A lot of these things are veiled threats … to try to stop something that they know if it goes through, will ultimately not be what they want," Kasper said. "It probably is bluffing, and I believe the stakes are high enough that the state of North Dakota, and the people of our state, need to call their bluff."

Supporters of the legislation point to a November 2002 ruling by the 5th U.S. Circuit Court of Appeals in New Orleans, in which a three-judge panel concluded a federal anti-gambling law, called the Wire Act, did not apply to all Internet gambling. It was intended to target sports wagering, the judges said.

The appeals court's ruling came on an appeal of a lawsuit filed by two men who lost more than $8,500 gambling at Web casino sites. A federal judge in New Orleans, Stanwood Duval Jr., made the initial ruling on the lawsuit, which consolidated a number of cases filed in New York, California, Illinois and Alabama.

Robert Bennett, an assistant North Dakota attorney general, said in a memo to Kasper last month that federal courts have concluded the Wire Act applies to bookmaking and other gambling businesses rather than social betting.

"In addition, lower court case law also indicates that the object of the activity prohibited by the (Wire Act) relates to a 'sporting event or contest,' and may not be extended to other forms of gambling activity," Bennett wrote.

He cautioned that federal prosecutors, not the North Dakota attorney general's office, would decide whether to prosecute an Internet gambler.

"It will be the determination of federal authorities, and not state officials, as to whether specific conduct would fall within the criminal prohibitions of this federal law," Bennett wrote.

Allyn Jaffrey Shulman, an attorney who is an owner of Card Player magazine and chief executive officer of CardPlayer.com, a poker Web site, believes the Justice Department's position is weak.

Since the first online casino began operating in 1995, "there has not been one single judicial ruling that online poker playing violates any federal law whatsoever," Shulman said.

Members of Congress have introduced several bills to outlaw Internet gambling and extend the Wire Act to Internet casinos, which would not be necessary if existing federal law already applied, she said.

"There is no doubt that both the Clinton and Bush administrations take the position that online poker is illegal," Shulman said. "They allude to the Wire Act and other federal laws, but upon careful analysis, not one legal expert agrees."

David Nissman, U.S. attorney for the Virgin Islands, sent a letter similar to Chertoff's last December to the head of the territory's Casino Control Commission, in response to an Internet gambling regulation bill approved by the territorial legislature.

"We believe that the acceptance of wagers by gambling businesses located in the Virgin Islands … would itself violate federal law," Nissman wrote.

The reasoning would apply if bets were placed either by people outside the Virgin Islands or within the territory, if the communications were routed outside the country, his letter said. He disputed the 5th Circuit federal appeals court's conclusions.

Earlier, William Moschella, a U.S. Justice Department assistant attorney general, said in a July 2003 letter to Rep. John Conyers, D-Mich., that the agency believed the ruling was wrong, and that "the court did not consider other federal gambling statutes."

"In addition to believing that this case was wrongly decided on the law, the United States was not a party in that case, and does not believe that it would constitute binding precedent in other (appeals courts)," Moschella wrote.

A Justice Department spokesman could not be reached for further comment, despite repeated attempts.

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