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The Mouthpiece: Cross-border iGaming—why not?

TAGs: New Jersey Online Gambling, the mouthpiece, United States

“We are defined,not by our borders but by our bonds.”

– Barack Obama

New Jersey’s Division of Gaming Enforcement has just confiscated the funds of Vinh Dao, a California resident. By placing online bets at the Borgata and Caesar’s Atlantic City from out of state, he violated New Jersey law. So the Garden State emptied his ADW accounts at both places, a seizure totaling $90,000.

The Mouthpiece: Cross border i-gaming-why not?It is unclear how he managed to evade New Jersey’s geolocation software, which is supposed to prevent non-residents from playing remotely in Atlantic City casino games. To be fair, he didn’t get away with it for long. Dao’s activities were spotted in late 2014, after the software’s initial teething troubles had been worked out.

But the real mystery is this: if Mr. Dao had been betting on horse races, there would have been no problem at all, even though he does live in California. A network of interstate horse racing bets has been a fact of American life for decades now. If he had been playing online poker from California, that would have been a violation of New Jersey law as well. But if he had been from Nevada, or Delaware, that would have been fine.

Why should that be so? If the whole idea of gambling law is to protect online gamblers against the wiles and excesses of the gambling operators, why do online horse bets and poker get a pass, while playing blackjack online remains an offense? Certainly no credible authority on problem gambling would say that this sort of gambling over here is dangerous per se and has to be restricted and supervised, while that sort of gambling over there is no problem. There are too many variables, too many differences between the inclinations and temperaments of individual bettors.

Or again, money can be lost on DFS fantasy sports—but that isn’t considered “gambling” at all by New Jersey. The “lootbox” features on multiplayer video games (MMOs) have been accused of being gambling on the sly—but only by some. Belgium and the Netherlands swear up and down that they are gambling. The United Kingdom says they ain’t. Here in the USA, Washington State says they’re gambling devices; Hawaii looked at the idea but is not yet decided. And as usual, the vast majority of gambling authorities, both here and abroad, haven’t even taken up the issue.

So who’s on first?

Jurisdiction again

And, while we’re at it, where is first base located? One of the most confusing effects of the digital revolution is that someone can, essentially, be in two places at the same time. Let’s take an example. Alice, who lives in Atlantic City, can use her laptop to bet on an NBA basketball game but she flew to Cleveland, so she would not be able to bet. That’s against Ohio law.

Or is it?

Ohio law, like the laws of every other U.S. state, extend only to the state borders, absent unusual circumstances. If Alice, while in Cleveland, places a bet via her smart phone with the New Jersey operator that is supposedly a violation. But the question is, is the gambling taking place in Cleveland or in Atlantic City? Atlantic City is where the gambling server is located. It is where the odds are calculated, where the value of Alice’s bet is set aside from her ADW account. It is where the gambling event is transacted, where the winnings are paid and losses collected. The fact that Alice sent her message while physically located in Ohio is mere happenstance, and has nothing to do with bet placing, collections or payouts. A gambling transaction is essentially a contract, and contract law says the same thing: where the location of the contract is not stated, the contract is deemed to take place where it becomes executory—that is, capable of being carried out. And for this example, that can only be New Jersey.

It is not illegal for Alice to phone a friend in Atlantic City to make the bet for her, so long as she does not make it a business. But it is against the law for her to place it personally, online.

Of course Ohio is entitled to outlaw that gambling if it so desires. If Alice were to take or transmit bets from people in Ohio, that would violate Ohio law. But the aim of state gambling law is to protect the betting public of that state from the risks of gambling. And, of course, to enhance revenue through taxes and fees.

In the case of Alice, the law does neither. It is not protecting Ohio residents from illegal gambling because Alice is not an Ohio resident. She is not offering the gambling to anybody else. In fact, if she were to even allow someone else to use her account, that would be grounds for the gambling operator to close that account. It does not take any revenue away from the Ohio state government, because Alice does not owe them anything. And in any case, Ohio has no duty to protect people who live in New Jersey from the hazards of gambling.

In that case, why should Ohio, or any other state, worry about bettors like Alice, who are after all just passing through? Why should New Jersey be forced to shut her out of online gambling until she returns? And above all, why should an exception be allowed for certain gambling formats interstate, while others are shut out?

Privacy and free speech?

The new reality of gambling—digital, global, and online—has caused a fundamental shift in the way gambling is offered, and consequently, what the regulatory authorities are obliged—or even able—to do about it.

Alice would of course be in trouble if she brought a roulette wheel into Ohio. Even if no Ohio residents actually gambled at it, the sight of Alice placing her bets could be construed as detrimental, encouraging or even advertising gambling. But on a laptop? A smart phone? People would have to be intrusive to even find out what Alice was doing, and they wouldn’t be able to participate anyhow. It is no small irony to note that the digital age has made the public expansion of gambling into a private matter.

And the subject of privacy brings us to a closely related topic, free speech.

After all, what is a bet except an opinion backed up with a few dollars? Alice would be perfectly at liberty to spend her money on erotic literature online, as much as she liked. Even though a fixation on pornography is believed to be a bona fide addiction by a number of psychiatric authorities.

Distress signals are almost identical to those posted for so-called gambling addiction—an urge that can’t be controlled, that can interfere with work and relationships, not to mention undermining society’s morals.

Yet even the raunchiest publications claim freedom of the press and free speech. Gambling, however, cannot. The Rehnquist Supreme Court, in what is known as the Posadas case declared that there was no such thing as a right to gamble.1 Although Posadas itself was later overruled, the idea of there being no right to gamble has lingered on.

And nobody has really explained why. It is certainly at odds with the ever-expanding current definition of freedom and liberty. In fact it contradicts one of the central beliefs of the American constitutional system. Because if Alice is so foolish or so weak that she cannot be trusted with a few dollars of her own money and a few hours of her own time (but only as regards certain games), how can she be allowed to vote?

1      Posadas de Puerto Rico Associates v. Tourism Company of Puerto Rico, 478 U.S. 328,106 S. Ct 2968 (1986)


Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009); Associate Editor, Gaming Law Review & Economics; Contributing Editor, TSN. Comments/inquiries welcome at [email protected].

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