The Virtual Lawyer - Life on the Barbary Coast

by David Crocker

Published 1999-02-01    Printer-friendly version

Straight flush. Full house. Lucky seven. Snake eyes. One-armed bandits. The list goes on and on. Yessiree, gambling is big. Whether it's casinos, lotteries, or granny's bingo game, Americans spent nearly half a trillion bucks last year on games of chance. Although you wouldn't know it in today's go-go gambling world, gaming has been marked by cycles of prohibition and promotion. As early as 1776, for instance, the Continental Congress created a national lotto to fund the war with Britain. By the early 20th century, however, most states had banned gambling altogether in the face of endemic corruption. Now, forty-eight states permit some form of gambling, with the proceeds being used to fund a starving welfare state. Given the current gaming mentality, could the Web be far behind? Now there's a stupid question.

The Land of Cyberdonia

Who says space is the final frontier? The real frontier is the land of Cyberdonia, a browser-driven Barbary Coast where vice is only a mouse-click away. Yes, gaming is booming on the Web. Any search will bring up numerous gaming sites ranging from sports betting, horse and dog racing to more conventional casino fare. In fact, Cyberdonia has its own currencies, compliments of DigiCash and CyberCash, which provide gamblers with anonymous mazuma to feed the cyber-slots. Real countries have taken up residence in Cyberdonia. Liechtenstein, for instance, has legalized virtual gaming and even runs its own cyberlotto, which is supervised by, of all folks, Coopers and Lybrand AG. Cyberdonia, by the way, has become a true hacker's paradise, providing rich pickings in credit card fraud, game-tilting and general mischief.

Uncle Sam vs. Cyberdonia

Stuffy old Sam doesn't like gambling, at least not over interstate wires. The so-called Wire Act specifically penalizes any person "engaged in the business of betting or wagering knowingly us[ing] a wire communication in interstate or foreign commerce" to transmit wagering information. Note, however, that individual gamblers are not "engaged in business" so Sam cannot tag them, even when they flee into Cyberdonia. This may be changing, however: in 1997, Senator Kyl of Arizona introduced the Internet Gambling Prohibition Act, which, as the title suggests, would ban Internet-gaming and criminalize the activities of operators and individual gamblers alike. ISP's would also be subject to injunctions if they fail to block gaming sites. The Senate passed an amended version of the bill last summer. Final action is wanting, however, and in the meantime the states have not been idle.

Jurisdiction Over Cyberdonia?

All law is territorial. Municipalities, states and the fed all pass ordinances. Alas, these laws are usually limited by the particular real estate they cover. What if you are a foreign-based gambling site accessible to residents of a state and you thoughtfully provide a toll-free number for direct contacts? Can that state's courts claim jurisdiction over the site? Remember, in Cyberdonia, truth is always stranger than fiction. Minnesota sued Granite Gate Resorts, Inc., a Nevada corporation, whose sole activity was to operate a gambling site in Belize, of all places.

The defendants promptly moved for dismissal, arguing that the Minnesota State court had no "personal" jurisdiction over Granite Gate's activities. Au contraire, said the court. The fact that the defendant's WagerNet site was available to computers in Minnesota, contained solicitations to viewers to use the site and provided a toll-free line was a sufficient contact with Minnesota real estate to assert jurisdiction.

Cyberdonia Contacting Minnesota?

Minnesota used a typical "contacts test", evaluating the (1) quantity and (2) nature and quality of Granite Gate's contact with Minnesota, and (3) the connection of the contacts with the state's "cause of action." The court analogized the defendant's actions in providing the site to publication in a national newspaper or magazine, which would, under existing law, subject them to Minnesota's courts. Likewise, the use of toll-free numbers is the equivalent of national solicitation. In spite of Minnesota's action, however, cyber-gaming goes on. Cyberdonians are counting on shoddy enforcement and they are becoming wiser in their activities by moving all operations offshore. So, in the meantime, roll 'em boys.

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Clarion Magazine ISSN 1718-9942