Jacob Sullum

On Oct. 20, one week after President Bush signed the Unlawful Internet Gambling Enforcement Act, the Australian company Betcorp announced the sale of its online casino and sports betting operations in Antigua and Toronto. Because of the new law, the company said, "it is no longer possible" to serve U.S. residents, who represented 85 percent of its customers.

Yet the company that bought Betcorp's business, the Costa Rica-based Bodog Entertainment Group, continues to offer Americans the opportunity to bet on sports, play poker or try their luck at various casino games. "It will likely take months to fully understand what, if any, ramifications there are from this new law," says Bodog CEO Calvin Ayre. "Our customers may take comfort in knowing that Bodog.com is structured in such a way that we're well situated to adapt to any changes in the online gaming environment."

Contrary to early press reports, Congress has not banned online gambling. Instead it has opted to maintain an uncertain legal environment in which businesses that cater to Americans' taste for betting run the risk of harassment and prosecution by overzealous Justice Department officials who twist the law to fit their moral views.

The Unlawful Internet Gambling Enforcement Act, which was tacked onto a bill dealing with port security right before Congress adjourned for the elections, makes it a federal crime, punishable by up to five years in prison, to receive a payment in connection with "unlawful Internet gambling." It also mandates regulations requiring financial institutions to block such payments.

But the act defines "unlawful Internet gambling" as online wagering that is already prohibited by state or federal law. It explicitly does not expand the category of forbidden gambling.

The new law therefore leaves untouched the Wire Act of 1961, which prohibits using a "wire communication facility" to help people place bets "on any sporting event or contest." Although the Justice Department maintains that the Wire Act covers all online gambling, the law's text and history indicate that it applies only to sports betting, a reading the U.S. Court of Appeals for the 5th Circuit endorsed in 2002.

Jacob Sullum

Jacob Sullum is a senior editor at Reason magazine and a contributing columnist on Townhall.com.
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