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Online Gambling - Jurisdiction

A. Extraterritorial Jurisdiction

Applying International Shoe v. Washington, the seminal case on personal jurisdiction, to Internet off-shore Casinos poses the question of whether the gambling operations on the Internet constitute enough contact with the United States in general and a single State in particular to make exercise of jurisdiction fair. Special legislation does not currently exist regarding jurisdiction of Internet "contacts", and courts may apply existing personal jurisdiction doctrines to Internet contacts. Under the traditional notions of specific personal jurisdiction, a two-part minimum contacts and fairness insures a proper substitute for physical presence and gives defendants "fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign."

First, minimum contacts for specific jurisdiction may be achieved when the defendant has purposefully directed activities at the forum state. It is established that such contact must not be accidental or attenuated, but rather there must be substantial connection where the corporation or individual manifestly has availed himself of the privilege of conducting business there. Courts, however, appear to be split as to whether a certain Internet activity may constitute enough contacts to confer personal jurisdiction. For instance, a Connecticut court found that personal jurisdiction existed over a Massachussets corporation in a suit brought for trademark infringement, where defendant's use of an Internet website for advertising satisfied the minimum contact necessary. In contrast, a New York court found that a defendant's act of creating a website accessible from New York which advertised defendant's Missouri business was not sufficient to find that defendant purposefully availed himself of New York law. Instead, the court required more deliberate activities, such as actively seeking out New York customers and attempting to entice New York customers to access the website. In the same light, while Internet gambling may be accessible to those in the United States, there is an issue as to whether such mere accessibility is sufficient to confer jurisdiction on a particular U.S. court.

Although Internet sites or webpages are located on a server that has a physical location, they can be retrieved at any Internet-accessible computer throughout the world. In such scenario, the operators of the websites have absolutely no control over who can access the sites. To apply the minimum contacts requirement, one has to analyze the specific action in terms of how much knowledge and control the website operator had over the information of activity accessed. On-line gambling operators can hardly control who accesses their sites, and neither can they restrict access only to those users located in countries where such gambling is legal. To do so would only be possible, if at all, by incurring tremendous costs and additionally placing burdens on their Internet Service Providers. Second, the exercise of jurisdiction, particularly with respect to foreign defendants, must be reasonable. This inquiry can be phrased in terms of the foreseeability of being brought into the jurisdiction, and the alleged injury must proximately relate to these contacts. The question here is whether Internet gambling activities have enough effects within the United States to make the application of extraterritorial jurisdiction on off-shore casino operators reasonable.

The court in United States v. Moncini, affirmed the conviction of a defendant charged with mailing child pornography, even though the defendant was Italian and mailed the pornography from Italy (where such act was legal) to California. The court held that the act was in violation of the federal venue statute because "any offense, involving the use of the mails ... is a continuing offense." Robbins argues that like Moncini, If an Internet casino mails or sends software or gambling information "designed for use" in illegal gambling through the Internet to the United States, that use of interstate wire facilities should be a continuing offense which would make the exercise of extraterritorial jurisdiction reasonable. To avoid jurisdiction, off-shore casino operators will likely argue that there are no sufficient contacts and that the exercise of U.S. jurisdiction over them is unreasonable. They will argue that although it was foreseeable that some U.S.residents may access their gambling services, the operators have not directed their activities at the United States. The casino operators that particularly do not advertise in the United States, nor hire an agent to promote their services directly, appear to have a particularly strong argument. In addition, because Internet casino gambling targets the world, and the product is itself designed to accommodate this need, the reach of U.S. jurisdiction is highly questionable. Some argue that the United States has jurisdiction over Internet casinos because the connection of the casinos to the U.S. are substantial. They argue that in a casino game, the off-shore casino sends dozens of images to the user in the States and this constitutes interaction, back and forth communication in which each side responds and reacts to the other. They fail to address, however, whether such interactions are sufficient. Consider for example credit card transactions. When a purchase transaction takes place is one country and it is being authorized in another, there is clearly an interaction between the purchaser and the credit card issuer. However, bringing MasterCard or Visa within the jurisdictional grasp of a remote foreign court under these activities would clearly be unreasonable.

B. Enforcement

Even if the minimum contacts necessary for jurisdiction are established, the enforcement of such jurisdiction presents a separate problem. Since off-shore Internet gambling operations are located in other countries where they are lawfully licensed, the question remains whether United States laws apply extraterritorially. Within this query, there is yet another question of what happens when U.S. laws conflict with those of other sovereign nations. In fact, courts have traditionally abstained from hearing those cases which will call into question the wisdom or validity of a foreign sovereign's laws or protections. Every sovereign is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its territory. One way to enforce U.S. laws abroad is to strengthen physical presence abroad, through military build up. However, such approach has been historically done in attempts to fight more "severe" crimes such as drug trafficking, high tech smuggling and terrorism. For instance, the notable criminal prosecution of Manuel Noriega relied on extraterritorial jurisdiction to charge Noriega with several federal narcotics related offenses under the Comprehensive Drug Abuse Prevention and Control Act of 1970. Unlike the language in this Control Act, the language in Section 1084 and the ITWPA, for instance, do not expressly grant extraterritorial jurisdiction. Because Internet gambling presents other concerns far and away different than drug trafficking and terrorism, such militant approach is extremely unlikely to be taken by the United States. In addition, such approaches may often times lead to international destabilization of legal and commercial relations. In fact, the resulting clashes and possible retaliatory measures are the reasons why the U.S. has historically avoided interfering with the acts of sovereigns. Furthermore, even if a violation of federal law is proved and the jurisdiction issues are resolved, in reality, just because a court can establish extraterritorial jurisdiction over an off-shore Internet gambling operation does not mean that the government can necessarily reach the individual.

Questions remain as to whether foreign countries will willingly extradite profitable casino operators. In fact, a foreign State like the Caribbean island of Antigua, may be highly unlikely to cooperate in extradition requests by the United States of Internet casino operators, mainly because Antigua has legalized Internet gambling and it derives over $3 million in revenues annually from these casinos is the form of license fees. The problem is further exacerbated by the very nature of Internet gambling. As an Internet casino requires only a web site, the physical location of the hardware becomes less significant. Unlike traditional gambling operations, which require a secure and readily accessible location, Internet casino operations can move from country to country while maintaining the same Web site. Even after an operator is physically located, short of a United States raid on an off-shore Internet casino operator, or the operator visiting the country, the U.S. government appears to have very few options for shutting down Internet gambling operations that knowingly accept bets from the United States. Yet other enforcement difficulties that law enforcement faces are technological, which range from encryption to establishing anonymous numbered bank accounts, to use of electronic cash. Such technological barriers and off-shore banking laws make overall enforcement difficulty tremendous.