Text of U.S. Gambling Ship Act, 18 U.S.C. 1081 4c3r3u

§ 1081. Definitions

As used in this chapter:

The term “gambling ship” means a vessel used principally for the operation of one or more gambling establishments. Such term does not include a vessel with respect to gambling aboard such vessel beyond the territorial waters of the United States during a covered voyage (as defined in section 4472 of the Internal Revenue Code of 1986 as in effect on January 1, 1994).

[[Internal Revenue Code Section 4472 provides: 

(A) In general

The term “covered voyage ” means a voyage of –

(i) a commercial enger vessel which extends over 1 or more nights, or

(ii) a commercial vessel transporting engers engaged in gambling aboard the vessel beyond the territorial waters of the United States, during which engers embark or disembark the vessel in the United States.

Such term shall not include any voyage on any vessel owned or operated by the United States, a State, or any agency or subdivision thereof.

(B) Exception for certain voyages on enger vessels The term “covered voyage” shall not include a voyage of a enger vessel of less than 12 hours between 2 ports in the United States.]]

The term “gambling establishment ” means any common gaming or gambling establishment operated for the purpose of gaming or gambling, including accepting, recording, or ing bets, or carrying on a policy game or any other lottery, or playing any game of chance, for money or other thing of value.

The term “vessel” includes every kind of water and air craft or other contrivance used or capable of being used as a means of transportation on water, or on water and in the air, as well as any ship, boat, barge, or other water craft or any structure capable of floating on the water.

The term “American vessel ” means any vessel documented or numbered under the laws of the United States; and includes any vessel which is neither documented or numbered under the laws of the United States nor documented under the laws of any foreign country, if such vessel is owned by, chartered to, or otherwise controlled by one or more citizens or residents of the United States or corporations organized under the laws of the United States or of any State.

The term “wire communication facility ” means any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission.

§ 1082. Gambling ships

 (a) It shall be unlawful for any citizen or resident of the United States, or any other person who is on an American vessel or is otherwise under or within the jurisdiction of the United States, directly or indirectly—

(1) to set up, operate, or own or hold any interest in any gambling ship or any gambling establishment on any gambling ship; or

(2) in pursuance of the operation of any gambling establishment on any gambling ship, to conduct or deal any gambling game, or to conduct or operate any gambling device, or to induce, entice, solicit, or permit any person to bet or play at any such establishment,

if such gambling ship is on the high seas, or is an American vessel or otherwise under or within the jurisdiction of the United States, and is not within the jurisdiction of any State.

(b) Whoever violates the provisions of subsection (a) of this section shall be fined under this title or imprisoned not more than two years, or both.

(c) Whoever, being

(1) the owner of an American vessel, or

(2) the owner of any vessel under or within the jurisdiction of the United States, or

(3) the owner of any vessel and being an American citizen,

shall use, or knowingly permit the use of, such vessel in violation of any provision of this section shall, in addition to any other penalties provided by this chapter, forfeit such vessel, together with her tackle, apparel, and furniture, to the United States.

§ 1083. Transportation between shore and ship; penalties

(a) It shall be unlawful to operate or use, or to permit the operation or use of, a vessel for the carriage or transportation, or for any part of the carriage or transportation, either directly or indirectly, of any engers, for hire or otherwise, between a point or place within the United States and a gambling ship which is not within the jurisdiction of any State. This section does not apply to any carriage or transportation to or from a vessel in case of emergency involving the safety or protection of life or property.

(b) The Secretary of the Treasury shall prescribe necessary and reasonable rules and regulations to enforce this section and to prevent violations of its provisions.

For the operation or use of any vessel in violation of this section or of any rule or regulation issued hereunder, the owner or charterer of such vessel shall be subject to a civil penalty of $200 for each enger carried or transported in violation of such provisions, and the master or other person in charge of such vessel shall be subject to a civil penalty of $300. Such penalty shall constitute a lien on such vessel, and proceedings to enforce such lien may be brought summarily by way of libel in any court of the United States having jurisdiction thereof. The Secretary of the Treasury may mitigate or remit any of the penalties provided by this section on such as he deems proper.

§ 1084. Transmission of wagering information; penalties

(a) Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

(b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.

(c) Nothing contained in this section shall create immunity from criminal prosecution under any laws of any State.

(d) When any common carrier, subject to the jurisdiction of the Federal Communications Commission, is notified in writing by a Federal, State, or local law enforcement agency, acting within its jurisdiction, that any facility furnished by it is being used or will be used for the purpose of transmitting or receiving gambling information in interstate or foreign commerce in violation of Federal, State or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or criminal, shall be found against any common carrier for any act done in compliance with any notice received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the right of any person affected thereby to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State or local tribunal or agency, that such facility should not be discontinued or removed, or should be restored.

(e) As used in this section, the term “State ” means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or a commonwealth, territory or possession of the United States.

Text of Transportation, Repair and Use of Gambling Devices Provision of Johnson Act, 15 USC 1175

Sec. 1175. Specific jurisdictions within which manufacturing, repairing, selling, possessing, etc., prohibited; exceptions

(a) General rule

It shall be unlawful to manufacture, recondition, repair, sell, transport, possess, or use any gambling device in the District of Columbia, in any possession of the United States, within Indian country as defined in section 1151 of title 18 or within the special maritime and territorial jurisdiction of the United States as defined in section 7 of title 18, including on a vessel documented under chapter 121 of title 46 or documented under the laws of a foreign country.

(b) Exception

(1) In general

Except for a voyage or a segment of a voyage that begins and ends in the State of Hawaii, or as provided in paragraph (2), this section does not prohibit –

(A) the repair, transport, possession, or use of a gambling device on a vessel that is not within the boundaries of any State or possession of the United States;

(B) the transport or possession, on a voyage, of a gambling device on a vessel that is within the boundaries of any State or possession of the United States, if –

(i) use of the gambling device on a portion of that voyage is, by reason of subparagraph (A), not a violation of this section; and

(ii) the gambling device remains on board that vessel while the vessel is within the boundaries of that State or possession; or

(C) the repair, transport, possession, or use of a gambling device on a vessel on a voyage that begins in the State of Indiana and that does not leave the territorial jurisdiction of that State, including such a voyage on Lake Michigan.

(2) Application to certain voyages

(A) General rule .  Paragraph (1)(A) does not apply to the repair or use of a gambling device on a vessel that is on a voyage or segment of a voyage described in subparagraph (B) of this paragraph if the State or possession of the United States in which the voyage or segment begins and ends has enacted a statute the of which prohibit that repair or use on that voyage or segment.

(B) Voyage and segment described.   A voyage or segment of a voyage referred to in subparagraph (A) is a voyage or segment, respectively –

(i) that begins and ends in the same State or possession of the United States, and

(ii) during which the vessel does not make an intervening stop within the boundaries of another State or possession of the United States or a foreign country.

(C) Exclusion of certain voyages and segments.   Except for a voyage or segment of a voyage that occurs within the boundaries of the State of Hawaii, a voyage or segment of a voyage is not described in subparagraph (B) if it includes or consists of a segment –

(i) that begins and ends in the same State;

(ii) that is part of a voyage to another State or to a foreign country; and

(iii) in which the vessel reaches the other State or foreign country within 3 days after leaving the State in which it begins.

(c) Exception for Alaska

(1) With respect to a vessel operating in Alaska, this section does not prohibit, nor may the State of Alaska make it a violation of law for there to occur, the repair, transport, possession, or use of any gambling device on board a vessel which provides sleeping accommodations for all of its engers and that is on a voyage or segment of a voyage described in paragraph (2), except that such State may, within its boundaries –

(A) prohibit the use of a gambling device on a vessel while it is docked or anchored or while it is operating within 3 nautical miles of a port at which it is scheduled to call; and

(B) require the gambling devices to remain on board the vessel.

(2) A voyage referred to in paragraph (1) is a voyage that –

(A) includes a stop in Canada or in a State other than the State of Alaska;

(B) includes stops in at least 2 different ports situated in the State of Alaska; and

(C) is of at least 60 hours duration.

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review

As part of United States Attorney General Robert F. Kennedy’s program to combat organized crime and racketeering, Congress enacted the Travel Act in 1961 as part of the same series of legislation as the Wire Act discussed above.[99] The Travel Act, which is aimed at prohibiting interstate travel or use of an interstate facility in aid of a racketeering or an unlawful business enterprise, provides as follows:

(a) Whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to –

(1) distribute the proceeds of any unlawful activity; or

(2) commit any crime of violence to further any unlawful activity; or

(3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity, and thereafter performs or attempts to perform –

(A) an act described in paragraph (1) or (3) shall be fined under this title, imprisoned not more than 5 years, or both; or(B) an act described in paragraph (2) shall be fined under this title, imprisoned not more than 20 years, or both, and if death results shall be imprisoned for any term of years or for life.

(b) As used in this section

(i) “unlawful activity” means

(1) any business enterprise involving gambling, liquor on which the Federal excise tax has not been paid, narcotics or controlled substances (as defined in section 102(6) of the Controlled Substances Act), or prostitution offenses in violation of the laws of the State in which they are committed or the United States,

(2) extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States, or

(3) any act which is indictable under subchapter II of chapter 53 of title 31, United States Code, or under section 1956 or 1957 of the titled and

(ii) the term “State” includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States.

(c) Investigations of violations under this section involving liquor shall be conducted under the supervision of the Secretary of the Treasury.[100]

“Unlawful activity,” as defined in subsection (b) refers to a business enterprise involving, among other things, illegal gambling. The Sectional Analysis of the House Report on Senate Bill 1653 specifically states that the term “‘business enterprise’ requires that the activity be a continuous course of conduct.” [101]

A conviction under the Travel Act necessitates a violation of either a state or federal law. [102] However, the government need not prove that the defendant specifically inte nded to violate state or federal law. [103]

The courts have determined that the use of the mail, telephone or telegraph, newspapers, credit cards and tickertapes is sufficient to establish that a defendant “used a facility of interstate commerce” to further an unlawful activity in violation of the Travel Act. [104]  It is important to note that the Travel Act “refers to state law only to identify the defendant’s unlawful activity, the federal crime to be proved in § 1952 is use of the interstate facilities in furtherance of the unlawful activity, not the violation of state law; therefore § 1952 does not require that the state crime ever be completed.”[105]

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End notes:

[99]  See Racketeering Enterprises – Travel or Transportation Act, Pub. L. No. 87-228, 75 Stat. 498, 561-562 (1961).
[100]  18 U.S.C. § 1952.
[101]  U.S. Code & Cong. News, 87th Cong. 1st Sess., 2666; see also United States v. Ruiz, 987 F.2d 243, 250-251 (5th Cir. 1993), cert. denied, 510 U.S. 855 (1993) (government is not required to prove that the defendant personally engaged in a continuous course of conduct, but rather the government must prove that there was a continuous business enterprise and that the defendant participated in the enterprise); United States v. Vaccaro, 816 F.2d 443, 454 (9th Cir.1987), cert. denied, 484 U.S. 914 (1987) (defendant’s involvement in three jackpot cheating incidents over a three-year period was sufficient to show a continuous and illegal conduct for a Travel Act conviction).
[102]  See 18 U.S.C. § 1952(b)(i).
[103]  See United States v. Polizzi, 500 F.2d 856, 876-877 (9th Cir. 1974), cert. denied, 419 U.S. 1120 (1975) (government need only show that the defendants had a specific intent to facilitate an activity they knew to be unlawful under law – i.e., carrying on a hidden ownership interest in the Frontier Hotel in violation of NRS 463.160).
[104]  See United States v. Heacock, 31 F.3d 249, 255 (5th Cir. 1994) (interstate mailings); United States .v Villano, 529 F.2d 1046, 1050-1051 (10th Cir. 1976), cert. denied, 426 U.S. 953 (1976) (interstate use of telephones for bookmaking); United States v. Erlenbaugh, 452 F.2d 967, 970-973 (7th Cir. 1971), aff’d 409 U.S. 239 (1972) (although exempt under 18 U.S.C. § 1953, “scratch sheets” from the Illinois Sporting News newspaper that were transported by train from Chicago to Indiana and used by customers of an illegal bookmaking operation constituted use of an interstate facility under the Travel Act); United States v. Campione, 942 F.2d 429, 435-436 (7th Cir. 1991) (use of interstate telephone facilities to secure credit card authorization was use of an interstate facility to promote an unlawful activity, such as prostitution); United States v. Miller, 379 F.2d 483, 485 (7th Cir. 1967), cert. denied, 389 U.S. 930 (1967) (use of a Western Union tickertape to post baseball scores in furtherance of an unlawful gambling activity under Indiana law constituted use of an interstate facility); see also United States v. Garner, 663 F.2d 834, 839(9th Cir. 1981), cert. denied, 456 U.S. 905 (1982) (evidence showed that defendant practiced a blackjack cheating scheme in California and Nevada that was later used at Harrah’s Lake Tahoe and the court held that the “government is not required to establish an interstate connection with respect to each defendant’s activity. . . only. . . that the scheme as a whole had substantial interstate connections”).
[105]  Campione, 942 F.2d at 434; see also United States v. Peskin, 527 F.2d 71, 79 n. 3 (7th Cir. 1975), cert. denied, 429 U.S. 818 (1976).

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review.

In 1961, Congress also enacted the Interstate Transportation of Wagering Paraphernalia Act. According to the House Report, the purpose of the statute was to criminalize the interstate transportation, except by common carrier, “of any record, paraphernalia, ticket, certificate, bills, slip, token, paper, writing, or other device used, or to be used, adapted, devised or designed for use in” bookmaking, wagering pools with respect to sporting events or a numbers, policy, bolita, or similar game.[106]

This statute [107] is designed to accomplish a very specific function. “It erects a substantial barrier to the distribution of certain materials used in the conduct of various forms of illegal gambling” by cutting off gambling supplies. [108] 108 By contrast, the Travel Act is not limited to illegal gambling, but rather addresses a much broader spectrum of “unlawful activity.” [109]  Unlike section 1953, the Travel Act does not concentrate upon any particular type of materials, but instead focuses on “the use of facilities of interstate commerce with the intent of furthering an unlawful ‘business enterprise.’” [110]

Many of the utilized in section 1953 are undefined words of general meaning, such as “paraphernalia,” “paper,” “writing” and “device.” Nevertheless, it appears that “Congress employed broad language to ‘permit law enforcement to keep pace with the latest developments . . .’ because organized crime has shown ‘great ingenuity in avoiding the law.’”[111]

Unlike the Travel Act that requires an intent to participate in an illegal business enterprise that is continuous or ongoing, section 1953 does not require specific intent to violate the law. [112]  In Mendelsohn, the defendants mailed a computer disk from Las Vegas to California for use in a bookmaking operation. [113]  The disk was encoded with a program called SOAP, or Sports Office ing Program. [114]  The program records and analyzes sports wagers. [115]  The Ninth Circuit held that the computer disk constituted a “device” within the meaning of the statute. [116]  Since section 1953 is not a specific intent statute but rather a general intent criminal provision, the court concluded that it was irrelevant whether the defendants knew that selling such a computer disk encoded with 17 SOAP outside of Nevada was illegal. [117]  As such, the government merely had to prove that the defendants knowingly (not by accident, mistake or ignorance) sent the disk in interstate commerce to be used in an illegal bookmaking operation. [118]  Therefore, if a subscriber to an on-line gaming site resides in a state without legalized gambling, sending of hardware and software through interstate commerce may, as some point out, [119] violate section 1953.

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End notes:

[106]    U.S. Code. & Cong. News, 87th Cong. 1st Sess., 2635.

107]    See 18 U.S.C. § 1953.

[108]    Erlenbaugh v. United States, 409 U.S. 239, 246 (1972).

[109]    See id.

[110]    Id.

[111]    United States v. Mendelsohn, 896 F.2d 1183, 1187 (9th Cir. 1990).

[112]    See Ruiz, 987 F.2d at 250-251; see also Marquez, 424 F.2d at 240.

[113]    See Mendelsohn, 896 F.2d at 1184.

[114]    See id.

[115]    See id.

[116]    See id. at 1187.

[117]    See id. at 1188.

[118]    See id.

[119]    See Nicholas Robbins, Baby Needs a New Pair of Cybershoes: The Legality of Casino Gambling on the Internet, supra, n. 97.  [2 B.U. J. Sci. & Tech. L. 7 (1996).]

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
pp. 8-13.  Courtesy of Liebert Publishing, Gambling Law Review

In 1970, as part of the Organized Crime Control Act, Congress ed the Illegal Gambling Business Act. The statute was aimed at syndicated gambling. [120]  Congress determined that large-scale, illegal gambling operations, like casino-type activities, including games such as blackjack, financed organized crime, which, in turn, has a significant impact on interstate commerce. [121]  As such, section 1955 is a direct exercise of Congressional power to regulate interstate commerce [122] and, specifically, the activities that substantially affect interstate commerce.[123]

In order to prove a prima facie case under this statute, [124] the government must establish that there is a gambling operation which (1) is in violation of state or local law where it is conducted, (2) involves five or more persons that conduct, finance, manage, supervise, direct or own all or part of the business and (3) remains in substantially continuous operation for more than thirty days or has a gross revenue of $2,000 in any given day. [125]

The first element requires a predicate state or local law violation. The second and third elements have been the subject of much discussion in our judicial system. As for the requirement of “five or more persons,” it was Congress’ intent to include all individuals who participate in the operation of an illegal gambling business, “regardless of how minor their roles, and whether they be labeled agents, runners, independent contractors or the like.” [126]  However, Congress did not intend for mere bettors to fall within the prosecutorial arm of the statute. [127]  The term “conduct” means “any degree of participation in an illegal gambling business, except participation as a mere bettor.” [128]  The term “participation” is limited to the performance of acts that assist in the gambling business. [129]  Therefore, the government need only show that the defendant was involved  in the illegal gambling business to be counted and not that the defendant knew the activity involved five or more persons. [130] “The jurisdictional five persons may include unindicted and unnamed persons.” [131]  Moreover, the government need not prove that the same five individuals were involved for the statutory 30-day period.[132]

As for the third element, “Congress did not purport to require absolute or total continuity in the gambling operations.” [133]  The term “substantially continuous” has been interpreted to mean an operation conducted with some degree of regularity. [134]

Given the minimal proof required to demonstrate a violation of the Illegal Gambling Business Act, some have argued that computer operators and maintenance crews, ants and owners may all be included within the ambit of the statute even though their participation may not relate to Internet gaming. [135]

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End notes:

[120]    See United States v. Sacco, 491 F.2d 995, 998 (9th Cir. 1974).

[121]    See id. at 998-1001; see also United States v. Lee, 173 F.3d 809, 810-811 (11th Cir.1999) (“if Congress, or a committee thereof, makes legislative findings that a statute regulates activities with a substantial effect on commerce, a court may not override those findings unless they lack a rational basis”)

[122]    See U.S. Const. art. I, § 8, cl. 7 (Commerce Clause).

[123]    See United States v. Zizzo, 120 F.3d 1338, 1350 (7th Cir. 1997), cert. denied, 522 U.S. 998 (1997).

[124]    See 18 U.S.C. § 1955.

[125]    See Sacco, 491 U.S. at 998.

[126]    United States v. Schullo, 363 F. Supp. 246, 249-250 (D. C. Minn. 1973), aff’d, 508 F.2d 1200 (1975), cert. denied, 421 U.S. 947 (1975).

[127]    See id.

[128]    Sanabria v. United States, 437 U.S. 54, 70-71, n. 26 (1978); cf. King, 834 F.2d at 113-114 (one isolated incident of laying off a bet with the illegal gambling business is insufficient in light of the Congressional intent to attack the revenue sources of organized crime and the policy of strict construction of criminal statues).

[129]    See United States v. DiMuro, 540 F.2d 503, 508 (1st Cir. 1976), cert. denied, 429 U.S 1038 (1977)

[130]    See United States v. Trupiano, 11 F.3d 769, 772-773 (8th Cir. 1993).

[131]    Id., at 772.

[132]    See United States v. Murray, 928 F.2d 1242, 1246 (1st Cir. 1991).

[133]    Trupiano, 11 F.3d at 773.

[134]    See id. at 773-774.

[135]    See Seth Gorman and Anthony Loo, Blackjack or Bust: Can U.S. Law Stop Internet Gambling?, supra, n. 93, at 676.  [16 Loy. L.A. Ent. L.J. 667, 671 (19

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review

In 1970, as part of the Organized Crime Control Act that included the Illegal Gambling Business Act discussed above, Congress, exercised its broad power once again under the Commerce Clause [136] and enacted RICO. [137]  Like the Illegal Gambling Business Act, RICO was intended to eradicate organized crime by attacking the sources of its revenue, such as syndicated gambling or bookmakers. [138]  RICO imposes both criminal (imprisonment from 20 years to life, depending on the racketeering activity involved) [139] and civil liability (including treble damages, costs and attorneys fees) [140] for those who engage in certain prohibited acts. Section 1962, sets forth the following prohibited activities:

(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer.

(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.[141]

Essentially, RICO is an aggressive initiative that is remedial in its purpose by supplementing old methods for fighting crime and providing “new weapons of unprecedented scope for an assault upon organized crime and its economic roots.” [142]  RICO was enacted, in large part, as a Congressional response to organized crime’s financial infiltration of legitimate business operations that affected interstate commerce. [143]  Congress wanted to remove the profit from organized crime and separate the racketeer from his or her revenue source. [144]  Yet, RICO makes no mention of “organized crime.” Instead, Congress chose to target “racketeering activity.” The provisions of RICO demand a liberal reading to effectuate this broad Congressional intent. [145]  Some courts have even interpreted RICO as legislation that ensures marketplace integrity. [146]

“Section 1962 establishes a threefold prohibition aimed at stopping the infiltration of racketeers into legitimate organizations.” [147]  Subsection (a) makes it unlawful to invest funds derived from a pattern of racketeering activity or collected from an unlawful debt. [148]  “Subsection (b) forbids acquiring or maintaining an interest in an enterprise which affects commerce through a pattern of racketeering activity or through collection of an unlawful debt; and subsection (c) forbids participation in the affairs of such an enterprise through those means.”[149]

Regardless of whether the action is criminal or civil, a violation of RICO “requires proof of (1) the existence of an enterprise, (2) either a pattern of racketeering activity or the collection of an unlawful debt, and (3) that the enterprise be engaged in or affect interstate commerce.” [150]  Section 1961 defines several key , such as “racketeering activity,” “enterprise,” “pattern of racketeering activity” and “unlawful debt” as follows:

“Racketeering activity” generally means (1) any act or threat involving, among other things, gambling, which is a felony under state law, or (2) an act which is indictable under certain provisions of Title 18, such as the Wire Act, the Travel Act, the Interstate Transportation of Wagering Paraphernalia Act, and the Illegal Gambling Business Act. [151]·

“Enterprise” is defined to include “any individual, partnership, corporation, association, or other legal entity, and union or group of individuals associated in fact although not a legal entity.” [152]·

“Pattern of racketeering activity” “requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.” [153]·

“Unlawful debt” generally means a debt that is incurred or contracted in a gambling activity or business in violation of federal, state or local law or is unenforceable, in whole or part, due to usury laws. [154]  Congress clearly intended that evidence proving the collection of an unlawful debt would substitute for a showing that two or more predicate offenses were engaged in forming a pattern of racketeering activity. [155]

In 1989, the United States Supreme Court rejected the Eighth Circuit’s test that a pattern of racketeering activity required proof of multiple illegal schemes. [156]  The term “pattern” requires a two-prong showing of a “relationship” between the predicate offenses and the threat of a “continuing activity.” [157]  A relationship is established where the conduct amounts to a pattern that embraces offenses having the same or similar purposes, results, participants, victims, or methods of commission, or were interrelated by distinguishing characteristics and not merely isolated events. [158]  Continuity will be found where the predicate offenses amount to or pose a threat of continued conduct. [159]  For example, since Congress was concerned with long-term activity, continuity may be demonstrated by a series of predicate offenses over a substantial period of time, rather than a few weeks or months with no threat of future conduct. [160]  Continuity may also be shown by a few predicate offenses within a short period of time with the threat of the acts extending indefinitely into the future. [161]

A predicate racketeering activity involving gambling could arise as either violations of a particular state statute or as one of the enumerated provisions in Title 18, such as the Wire Act, the Travel Act, the Interstate Transportation of Wagering Paraphernalia Act or the Illegal Gambling Business Act. [162]  In United States v. Tripp, the defendant argued that his activities did not constitute “gambling” under either Ohio or Michigan law, but rather larceny by trick since the poker games in question were rigged. [163]  The court rejected the defense’s argument and found that traditional gambling existed, because the poker games began honestly and subsequent thereto the dealer inserted a marked deck of cards. [164]  Even if the element of chance were eliminated, the court found that the conduct still fell within the parameters of the state statutes. [165]

In proving a nexus between the racketeering activity and interstate commerce, it is not necessary that the alleged acts directly involve interstate commerce. [166]  Thus, evidence that the supplies used in an illegal Maryland bookmaking operation originated outside the state was sufficient to show a nexus between the enterprise and interstate commerce to trigger RICO. [167]  Even minimal evidence is sufficient to demonstrate a nexus. [168]  Therefore, merely traveling between states in furtherance of an illegal gambling operation will establish a nexus to interstate commerce. [169]

In dismissing a RICO suit against a credit card company by a disgruntled Internet gaming patron, the federal district court in Jubelirer v. MaterCard Int’l, Inc., held that merely performing financial, ing or legal services for an alleged RICO enterprise, such as various on-line casinos, does not constitute involvement in that enterprise since the services fell short of participation in the operation or management of the enterprise. [170]

The First Circuit also addressed the requirement of an enterprise in United States v. London. [171]  The defendant, in London operated a bar in Massachusetts and a separate check cashing service in an enclosed area of the bar. [172]  The bar was organized as a closely held corporation and the check cashing service was a sole proprietorship. [173]  Frequently, the check cashing service cashed checks (that banks would not accept) from illegal bookmakers who patronized the bar. [174]  The defendant did not inquire about the checks he was cashing nor did he require the checks to be indorsed. [175]  Moreover, the defendant did not file cash transaction reports or CTRs notifying the Internal Revenue Service of his many currency transactions in excess of $10,000. [176]  These business practices, in turn, were enormously beneficial to the bookmakers who were able to accept more checks and increase their volume of business. [177]  The court of appeals found that two or more legal entities, such as a corporation and a sole proprietorship, could form or be a part of an association-in-fact to comprise a RICO enterprise. [178]  The court further held that the enterprise in question had a common shared purpose or relationship with those associated with it for which it acted in continuity (i.e., the economic gain of the defendant). [179]  Although a RICO defendant and a RICO enterprise cannot be one and the same, the court held that there was sufficient evidence showing separateness, given the fact that the check cashing service employed an additional person and the bar was incorporated and employed several individuals. [180]

The issue of separation was further addressed in In re MasterCard Int’l.  The district court relying on the Eighth Circuit’s test held that the alleged enterprise, consisting of an Internet casino, a credit company and an issuing bank, were separate and distinct from the alleged pattern of racketeering activity, Internet gambling. [181]

If Internet gambling is illegal under a particular state law and/or one of the enumerated provisions of Title 18 of the United State Code that have been discussed herein, then operators of such sites could face civil action or criminal prosecution under RICO.

---

End notes:

[136]    See United States v. Vignola, 464 F. Supp. 1091, 1098 (E.D. Pa. 1979), aff’d, 605 F.2d 1199 (3rd Cir. 1979), cert. denied, 444 U.S. 1072 (1980).

[137]    See Racketeer Influenced and Corrupt Organizations Act, Pub. L. No. 91-452, §901(a), 84 Stat. 941 (1970).

[138]    See Ante Z. Udovicic, Sports and Gambling a Good Mix? I Wouldn’t Bet on It, 8 Marq. Sports L.J. 401, 407 (Spring 1998).

[139]    See 18 U.S.C. § 1963.

[140]    See 18 U.S.C. § 1964.

[141]    18 U.S.C. § 1962; see also Salinas v. United States, 522 U.S. 52, 63 (1997) (unlike the general conspiracy principals applicable to federal crimes, section 1964(d) does not require the conspirator to commit an overt act – i.e., commit or agree to commit two or more predicate acts).

[142]    See 31A Am. Jur. 2d Extortsion, Blackmail, and Threats §128 (1989).

[143]    See id.; see also United States v. Cappetto, 502 F.2d 1351, 1358 (7th Cir. 1974), cert. denied, 420 U.S. 925 (1975)

[144]    See supra, n. 142.

[145]    See United States v. Forsythe, 560 F.2d 1127, 1135-1136 (3rd Cir. 1977).

[146]    See supra, n. 142.

[147]    S. 30, 91st Cong., 2nd Sess., 1 U.S. Code & Cong. News 4033.

[148]    See 18 U.S.C. § 1962(a).

[149]    Cappetto, 502 F.2d at 1358.

[150]    See supra, n. 142, § 138.

[151]    See 18 U.S.C. § 1961(1)(A), (B); see also United States v. Joseph, 781 F.2d 549, 555 (6th Cir. 1986) (conspiracy to commit a violation of state gambling laws constitutes racketeering activity).

[152]     18 U.S.C. § 1961(4).

[153]     18 U.S.C. § 1961(5).

[154]     See 18 U.S.C. § 1961(6).

[155]     See United States v. Bertolino, 964 F.2d 1492, 1496-1497 (5th Cir. 1992).

[156]     See H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 236-237 (1989).

[157]     See id. at 239

[158]     See id. at 240.

[159]     See id.

[160]     See id. at 242.

[161]     See id.

[162]     See 18 U.S.C. § 1961(1)(A), (B).

[163]     See United States v. Tripp, 782 F.2d 38, 42 (6th Cir. 1986), cert. denied, 475 U.S. 1128 (1986).

[164]     See id.

[165]     See id. at 43.

[166]     See United States v. Allen, 656 F.2d 964 (4th Cir. 1981).

[167]     See id.

[168]     See United States v. Mazzio, 501 F. Supp. 340, 342 (E.D. Pa. 1980), aff’d, 681 F.2d 810 (3rd Cir. 1982), cert. denied, 457 U.S. 1134 (1982).

[169]     See id.

[170]     See Jubelirer v. MasterCard Int’l, Inc., 68 F. Supp. 2d 1049, 1053 (W.D. Wis. 1999).

[171]     United States v. London, 66 F.3d 1227 (1st Cir. 1995), cert. denied, 517 U.S. 1155 (1996).

[172]     See id. at 1230.

[173]     See id.

[174]     See id.

[175]     See id.

[176]     See id.

[177]     See id.

[178]     See id. at 1243.

[179]     See id. at 1244.

[180]     See id.; see also 18 U.S.C. 1962(c).

[181]     See In re MasterCard Int’l, 132 F. Supp. 2d at 484-486; see also Handeen v. Lemaire, 112 F.3d 1339, 1352 (8th Cir. 1997) (to determine if an enterprise is separate and distinct from the pattern of racketeering activity, the court examines whether the enterprise would still exist if the predicate acts were removed from the analysis).

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review

Lotteries played a unique role in our country’s early history, which included “financing the establishment of the first English colonies.” [205] In the colonial-era, America funded public works projects through the use of lotteries. [206]  In the eighteenth century, lotteries were used to underwrite the construction of buildings on the campuses of Harvard and Yale. [207]  Following the Civil War, the Southern states utilized lotteries as a simple means by which to raise revenue. [208]  With the proliferation of state lotteries came an increase in the number of scandals, most notably the Louisiana State Lottery in the late nineteenth century. [209] In response to the public outcry, Congress made “a brief foray into the field of gambling legislation, . . . [then] resumed its hands-off approach to gambling.” [210]  During this period in 1890, Congress exercised its postal powers [211] and prohibited the use of the postal service for transportation of lottery paraphernalia. [212]  In 1895, Congress, acting under the Commerce Clause for the first time, extended the ban to all interstate commerce with the age of Federal Anti-Lottery Act. [213]  The Act was intended to:

[S]upplement the provisions of prior acts excluding lottery tickets from the mails and prohibiting the importation of lottery matter from abroad, and to prohibit the causing [of] lottery tickets to be carried, and lottery tickets and lottery ments to be transferred, from one State to another by any means or method. [214]

In 1909, the Act was revised and codified at 18 U.S.C. § 387. [215] In turn, the Act was replaced by 18 U.S.C. § 1301 in 1948. [216]

For a period of time state lotteries fell out of favor. In 1964, New Hampshire was the first state to reintroduce the state lottery to the American landscape. [217]  By 1999, thirty-seven states had followed New Hampshire’s lead. [218] In 1994, Congress made significant revisions to section 1301 in light of a federal district court ruling.

In Pic-A-State PA, Inc. v. Commonwealth of Pennsylvania, the federal district court held that a Pennsylvania statute that prohibited the selling of interests in another state’s lottery was unconstitutional under the Dormant [219] Commerce Clause. [220]  Subsequent to the district court’s decision, but prior to arguments before the Third Circuit, Congress amended 18 U.S.C. § 1301 [221] to close an apparent loophole [222] in the statute and preserve a state’s right to sell its own lottery tickets to the exclusion of other states. [223] As a result, the court of appeals reversed the district court and held that the Pennsylvania statute in question was constitutionally consistent with the newly enacted federal law that prohibited the interstate sale of lottery interests. [224]

As amended, section 1301 provides:

Whoever brings into the United States for the purpose of disposing of the same, or knowingly deposits with any express company or other common carrier for carriage, or carries in interstate or foreign commerce any paper, certificate, or instrument purporting to be or to represent a ticket, chance, share, or interest in or dependent upon the event of a lottery, gift enterprise, or similar scheme, offering prizes dependent in whole or in part upon lot or chance, or any ment of, or list of prizes drawn or awarded by means of, any such lottery, gift enterprise, or similar scheme; or, being engaged in the business of procuring for a person in 1 State such a ticket, chance, share, or interest in a lottery, gift, enterprise or similar scheme conducted by another State (unless that business is permitted under an agreement between the States in question or appropriate authorities of those States), knowingly transmits in interstate or foreign commerce information to be used for the purpose of procuring such a ticket, chance, share, or interest; or knowingly takes or receives any such paper, certificate, instrument, ment, or list so brought, deposited, or transported, shall be fined under this title or imprisoned not more than two years, or both. [225]

The 1994 amendment sought to expressly prohibit lottery ticket messenger services in the absence of a compact between the states in question. [226]

Pic-A-State involved a corporation that conducted business through retail stores in Pennsylvania, where customers participated in the legal and authorized lotteries of other states by placing orders for tickets. [227]  In turn, the retail stores transmitted the orders to purchasing agents in the other states by way of a computer terminal. [228]  The retail store charged one dollar for each ticket purchased and the customer received a computer-generated receipt, rather than a lottery ticket (i.e., no interstate transport of lottery tickets and thus, the pre-1994 loophole). [229]

In a subsequent challenge to the constitutionality of the 1994 amendment, the Third Circuit held that:

The Interstate Wagering Amendment regulates lotteries – an activity affecting interstate commerce. It rationally relates to Congress’ goals of protecting state lottery revenues, preserving state sovereignty in the regulation of lotteries, and controlling interstate gambling. The Amendment was a constitutional exercise of Congress’ power to legislate under the Commerce Clause. [230]

As one final point of interest, unlike PASPA, which permits its enforcement by professional and amateur sports organizations, there is no private right of action under section 1301 or the companion provisions of sections 1302 (mailing of lottery tickets), 1304 (broadcast of lottery information) and 1307 (exceptions for state lottery ments). [231]

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End notes:

[205]    National Gambling Impact Study Commission Report, ch. 2, at 2-1 (June 18, 1999).

[206]    See id.

[207]    See supra, n. 205.

[208]    See King, 834 F.2d at 111-112 (a historical perspective of gambling regulation); see also Kristen D. Adams, Interstate Gambling – Can States Stop the Run for the Boarder?, 44 Emory L.J. 1025, 1033-1034 (Summer 1995).

[209]    See e.g., id.

[210]    King, 834 F.2d at 111.

[211]    See U.S. Const. art. I, § 8, cl. 3 (Postal Clause).

[212]    See Act of September 19, 1890, ch. 908, § 1, 26 State. 465 (codified at 18 U.S.C. §1302).

[213]    See Act of March 2, 1995, ch. 191, § 1, 28 Stat. 963.

[214]    Champion, 188 U.S. at 354.

[215]    See Act of March 4, 1909, ch. 321, § 237, 35 Stat. 1136.

[216]    See Act of June 25, 1948, ch. 645, 62 Stat. 762; see also Kristen D. Adams, Interstate Gambling – Can States Stop the Run for the Boarder?, supra, n. 208, at 1033.

[217]    See Scott M. Montpas, Gambling On-Line: For a Hundred Dollars, I Bet You Government Regulation Will Not Stop the Newest Form of Gambling, 22 Dayton L. Rev. 163, 165-166 (Fall 1996).

[218]    See id.; see also supra, n. 205.

[219]    The Commerce Clause is generally referred to as the “Dormant Commerce Clause,” because states are prohibited from regulating in a particular area that discriminates against interstate commerce or unduly burdens interstate commerce, even though Congress has not seen fit to specifically exercise its power to enact a law. See Maine v. Taylor, 477 U.S. 131, 151-152 (1986); see also Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 431 (1946) (holding that the McCarran Act expressly authorizes states to regulate and tax the business of insurance, even though such regulation and taxation might burden interstate commerce); James E. Gaylord, State Regulatory Jurisdiction and the Internet: Letting the Dormant Commerce Clause Lie, 53 Vand. L.Rev. 1095, 1106-1109 (May 1999).

[220]    See Pic-A-State PA, Inc. v. Commonwealth of Pennsylvania, No. CV-93-0814, 1993 U.S. Dist. LEXIS 12790 at *9-10 (M.D. Pa. July 23, 1993).

[221]    See Violent Crime Control and Law Enforcement Act, Pub. L. No. 103-322, § 320905, 108 Stat. 2126 (1994).

[222]    See Wenner v. Texas Lottery Comm’n, 123 F.3d 321, 323 n. 2 (5th Cir. 1997) (for an analysis of the pre-1994 loophole in 18 U.S.C. § 1301).

[223]    See Kristen D. Adams, Interstate Gambling – Can States Stop the Run for the Boarder?, supra, n. 208, at 1052.

[224]    See Pic-A-State, 42 F.3d at 180.

[225]    18 U.S.C. § 1301.

[226]    See supra, n. 208, at 1056.

[227]    See Pic-A-State, 42 F.3d at 176-177.

[228]    See id. at 177; see also Pic-A-State, 1993 U.S. Dist. LEXIS, at *4-5.

[229]    See id.; see also Champion, 188 U.S. at 354 (carriage of lottery tickets between states by an independent carrier constitutes interstate commerce).

[230]    Pic-A-State PA, Inc. v. Reno, 76 F.3d 1294, 1304 (3rd Cir. 1996), cert. denied, 517 U.S.,1246 (1996).

[231]    See National Football League, 435 F. Supp. at 1388-1389.

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466,
Courtesy of Liebert Publishing, Gambling Law Review

[The text of the statute follows Mr. Rodefer’s comment]

Congress, concerned that those engaged in money laundering were using money transmitting services rather than traditional financial institutions, ed the Illegal Money Transmitting Business Act of 1992, [253] codified at 18 U.S.C. 1960.  The Act provides that it is a crime to conduct, control, manage, supervise, direct, “or own all or part of a business, knowing the business is an illegal money transmitting business.” [254] The term “illegal money transmitting business” is defined generally to mean a money transmitting business that affects interstate commerce in any manner and fails to comply with either state law or the registration requirements for such a business under 31 U.S.C. § 5330. [255] Possibly more troubling for the operators of on-line gaming is the definition of “money transmitting,” which “includes but is not limited to transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier.” [256]

---

End notes:

[253]    See Illegal Money Transmitting Business Act, Pub. L. No. 102-760, § 1512(a) (1992).

[254]    18 U.S.C. § 1960(a).

[255]    See 18 U.S.C. § 1960(b)(1).

[256]    18 U.S.C. § 1960(b)(2).

---

United States Code; Title 18  Part I  Chapter 95
Sec. 1960. – Prohibition of unlicensed money transmitting businesses

(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.

(b) As used in this section –

(1)  the term ”unlicensed money transmitting business ” means a money transmitting business which affects interstate or foreign commerce in any manner or degree and –

(A)  is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;

(B)  fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or

(C)  otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to be used [1] to promote or unlawful activity;

(2)  the term ”money transmitting ” includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and

(3) the term ”State ” means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States

——————————————————————————–

In 1951, Congress enacted the Transportation of Gambling Devices Act. [236] The Act, more commonly known as the Johnson Act, [237] which has been amended several times during the intervening years, makes it unlawful to knowingly transport a gambling device to a state where such a device is prohibited by law. [238] The manufacturers and distributors of gaming devices for interstate commerce must each year with the United States Department of Justice, and the devices must be appropriately marked for shipment. [239]

(a) The term “gambling device” means–

(1) any so-called “slot machine” or any other machine or mechanical device an essential part of which is a drum or reel with insignia thereon, and

(A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or

(B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property; or

(2) any other machine or mechanical device (including, but not limited to, roulette wheels and similar devices) designed and manufactured primarily for use in connection with gambling, and

(A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or

(B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property; or

(3) any subassembly or essential part intended to be used in connection with any such machine or mechanical device, but which is not attached to any such machine or mechanical device as a constituent part. [240]

The interstate shipment of hardware or software for use in connection with an Internet or Interactive gaming system may trigger the Johnson Act, as well as the Interstate Transportation of Wagering Paraphernalia Act discussed above. [241]

In 1970, Congress ed the Bank Records and Foreign Transaction Act, [242] which is better known as the Bank Secrecy Act (BSA). [243]  The BSA required “financial institutions” to report all currency transactions greater than $10,000 in effort to fight money laundering. This obligation was first limited to just banks. In 1985, the United States Treasury Department extended the requirement to casinos through the adoption of regulations. [244]  Nevada casinos enjoy an exemption from the CTR reporting requirements of the BSA. [245]

Internet or interactive casinos will certainly be subject to some form of currency reporting requirement whether it is the BSA or Nevada Gaming Commission Regulation 6A, or both.

In 1986, Congress enacted the Money Laundering Control Act, [246] codified at 18 U.S.C. §§ 1956, 1957. Section 1956 applies to the knowing and intentional laundering of monetary instruments. [247]  Section 1957 pertains to monetary transactions involving property that is “derived from specified unlawful activity,” which includes “racketeering activity” under RICO. [248]

In 1986, Congress enacted the Electronic Communications Privacy Act (EA), [249] codified at 18 U.S.C. § 2510 et seq. The legislation amended Title 18 of the United States Code to extend the prohibition against the unauthorized interception of communications from wire and oral communications to “electronic communications,” which are defined as:

“electronic communication” means any transfer of signs, signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole or in part by a wire, radio, electromagnetic, photoelectronic or photooptical system that affects interstate or foreign commerce, but does not include–

(A) any wire or oral communication;

(B) any communication made through a tone only paging device;

(C) any communication from a tracking device (as defined in section 3117 of this title); or

(D) electronic funds transfer information stored by a financial institution in a communications system used for the electronic storage and transfer of funds. [250]

The term “intercept” means “the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.” [251]

EA provides exceptions for the law enforcement to intercept communications where either (1) law enforcement is a party to the communication, or (2) where one of the parties to the communication has given prior consent to such interception. [252]  The Nevada Gaming Control Board and Nevada Gaming Commission could take advantage of this exemption and be excluded from the reach of EA either through the promulgation of a regulatory provision (i.e., that licensees will permit the Board and Commission to monitor all electronic communications with patrons) or by imposing conditions on the licenses of operators of Interactive gaming.