Is
it legal for websites to advertise online
gambling?
by GamblingAds.com • Updated December
2007
It is probably completely legal for
U.S. citizens to advertise many forms of online gambling on
their websites. It's probably not legal in
every case. It's like asking, "Is it legal to have a
gun?" Under certain circumstances it's perfectly legal, in
others it's not. So let's take a look at what's okay and
what might not be okay. But first, a disclaimer:
- I'll consider only the United States, and even there
I'll look mostly at federal law, and not much at
individual state laws.
- The law and the enforcement is constantly changing,
and what's true today could be different tomorrow.
- I don't guarantee to have heard of every relevant
case, or to even have gotten every fact correct.
- I'm a layperson, not a lawyer, and god help
you if you rely on this article instead of seeking
appropriate legal counsel for your situation.
Online gambling laws & how they pertain to
webmasters
To know whether you're
legal, you first have to know what laws are on the book.
There are three laws we're concerned with:
- The federal Wire Act, which prohibits
taking sports bets over the phone. Most legal
observers feel this applies to the Internet, too. But
note that this is limited to sports bets, and doesn't
cover casino, poker, or bingo.
(BusinessWeek)
- The federal Unlawful Internet Gambling
Enforcement Act (UIGEA) of 2006, which makes it
illegal to move gambling money through the U.S.
banking system.
- Individual state laws. States that have
outlawed online gambling are reportedly Illinois,
Indiana, Louisiana, Michigan, New Jersey, New York,
Nevada, Oregon, South Dakota, Washington State, and
Wisconsin. (I haven't verified this list and of all
the things on this page, it's probably the most
subject to change.)
There's nothing in federal law that says you can't
advertise online casinos or sportsbooks. What's
potentially illegal is your relationship to them if
they're doing something illegal.
Below is how a webmaster carrying
gambling ads might be considered to be breaking the
law. Note that this is all theoretical,
because so far as we know no U.S. webmaster has ever been
charged or convicted of any of these.
- Affiliation. If you're an affiliate
receiving a percentage of player losses, the feds
could theoretically consider you a de facto operator
or partner of the online gaming company. So if they're
guilty of taking sports bets or taking player money
from U.S. banks, in theory you could be just as
guilty.
- Aiding & Abetting. Just by carrying any
advertising for an online gaming outfit, if they're
breaking one of the laws above, then in theory you
could be charged as an accessory to their crime --
i.e., aiding and abetting their illegal activity.
If you combine each law with
each kind of crime, you get six different possible
violations:
- Affiliation with a company that takes sports bets,
by taking your payments as revenue-sharing.
- Affiliation with a company that takes player money
from U.S. banks, by taking your payments as
revenue-sharing.
- Affiliation with a company that takes bets from a
player in one of the states where online gambling is
illegal.
- Aiding & abetting a company that takes sports
bets, by having any kind of link to them.
- Aiding & abetting a company that takes player
money from U.S. banks, by having any kind of link to
them.
- Aiding & abetting a company that takes bets
from a player in one of the states where online
gambling is illegal.
You can likely remove your affiliation liability (#'s
1-3) by having the gaming site pay you a flat rate per
month for the ad space, rather than a percentage of the
profits. Payment for each player referred (CPA) might
work too, but is probably slightly more risky. From
lowest risk to most risk, we have flat rate, CPA, and
then revenue-share.
While changing your payment method might help with the
affiliation problem, it won't help with the aiding &
abetting problem (#'s 4-6), which is theoretically
possible no matter how you advertise an online gambling
site. And here again the emphasis is on the word
theoretical. When Casino City sued the DoJ, the
court said that simply carrying advertising did
not constitute aiding & abetting.
(GPWA,
post #53)
Note that for you to be breaking
the law, even in theory, the company you link to has to
be breaking the law. If the outfit you link to
doesn't take sports bets, doesn't take player money from
U.S. banks, and doesn't take players from states that
have outlawed online gambling, then there shouldn't be
any problem. There is no U.S. law that prevents companies
from operating online casinos and poker rooms, provided
that:
- They're based outside the U.S.
- They don't take player money from U.S. banks.
- They don't take sports bets.
- They don't take players from states that have
outlawed online gambling.
The first one is easy. All online gambling
outfits are located outside the U.S.
The second one is trickier. Most online gaming outfits
don't take player money directly through U.S. banks
already anyway, but some of them currently accept
deposits in the form of "online checks". That will
probably change soon in light of the new U.S. law,
though.
The third item is also tricky. Many online casinos
have sportsbooks attached, and advertising the casino or
poker side only might not be enough to avoid
culpability.
The last item could be the most problematic. Most
online gambling outfits take U.S. players, and to my
knowledge if they do so then they take all U.S.
players, and don't exclude players from those specific
states where online gambling is outlawed. Some operators
have pulled out of the U.S. market as a result of the
UIGEA, removing that last legal issue, but the problem in
advertising such companies from the webmaster's
perspective is that the adspace can't be sold for very
much. Once you eliminate the biggest chunk of the market
then you make a lot less money, whether you're an
operator or an advertiser. Of course, there are still
opportunities here for webmasters who already exclusively
target specific non-U.S. markets (or are prepared to do
so), but that's not most of them.
Moving player money through U.S. banks
Our reading is that this means accepting player
money directly from a U.S. financial institution, such as
a bank (by credit card, check, online check, or wire),
Western Union, or some similar. It likely does not
include Neteller, because Neteller is a foreign company
and should be beyond the reach of U.S. law. Even if
player money starts at a U.S. bank before going to
Neteller, that shouldn't count, because it wasn't direct.
[Update, Feb. 2007: Well, U.S.
authorities have arrested the Neteller founders and
seized players' funds at Neteller. Observers are
calling the Justice Department's efforts "legally
shaky", but that's not stopping them. The U.S.
administration's disregard for the rule of law is
pretty shocking. Creator]
Most or all U.S. banks stopped allowing their credit
cards to be used for online gambling years ago already.
Some online gaming sites allow U.S. players to make
deposits with "online checks", or electronic checks, and
that wouldn't be kosher. Those companies will likely stop
doing so soon.
Evaluating your risk
So we've seen ways you might get charged with a
crime, in theory. But it's very theoretical because to
date, to our knowledge, no U.S. website owner has ever
been convicted of carrying online gambling ads. Let's
take a look at who's actually been affected and how.
- Operators. In 2006 a couple of foreign
sportsbook operators were arrested when visiting
the U.S. These weren't publishers, these were the online
gaming sites themselves. And these companies were taking
sports bets, not just casino/poker. The first, David
Caruthers of BetOnSports, seems to have been arrested
because his company was taking sports bets over the
phone, not just over the Internet. His company was
also big potatoes, taking in $4.6
billion in wagers from 2001 to 2005. The second,
Peter Dicks of Sportingbet, was arrested because the
state of Louisiana put out a warrant for him for
violating their
state law against Internet gambling. Both operators
were arrested when visiting the U.S. In Dicks' case, the
state of New York refused to extradite him to Louisiana,
and he returned home, and the case is apparently closed,
as long as he doesn't return to the U.S. Caruthers is
awaiting trial. Many think Caruthers was targeted because
he has been a very vocal opponent of U.S. efforts to
criminalize online gambling. Note here three things:
- Neither person was arrested for breaking federal
Internet gambling laws (Caruthers' company took bets
over the phone, and Dicks was the target of state law,
not federal law).
- The charge against Dicks didn't even stick.
- Both were operators, not webmasters.
- Major Media. In 2003 the U.S. Dept. of Justice
sent letters to some major media outlets (e.g., Google,
Yahoo, Microsoft, The Sporting News) warning them that
accepting ads for online gambling was illegal. (Most
observers think it's not, unless it violates one of the
provisos mentioned above, but the DoJ was being very
aggressive.) In 2006 and 2007 they were fined, which
basically amounted to just forfeiting the money they'd
received for the ads. They didn't face any criminal
prosecution. In 2005 the DoJ sent a warning to Esquire
magazine for advertising Bodog. Again, no charges, and
Esquire probably won't be advertising online gaming again
any time soon.
- Small Webmasters. Small webmasters haven't
faced any heat, to date. In 2004 a webmaster was
convicted of helping players make bets, but that's
because he apparently took money from would-be players
directly in order to facilitate their betting. Even so,
his sentence was light: the eight days he'd already
served in jail, $1330 in fines, and 90 days of community
service. (more from Gambling
911, iGamingNews)
What all this means is that a webmaster would be
likely to get a warning letter before being charged with
any actual crime, and would likely have time to come into
compliance before any charges would be filed.
Some might say, "Yes, there haven't been charges
against webmasters to date, but that's because the UIGEA
is brand-new and they haven't had a chance to charge
webmasters yet." I don't feel that this is a strong
argument, since the Wire Act has been on the books for
years and webmasters haven't faced any heat as a
result.
For a U.S.-based webmaster advertising an online
casino that could be in violation (takes sports bets,
takes player money through U.S. banks, or takes players
from a prohibited state), here's my summary:
- If the webmaster is breaking the law, it's in
theory. There's nothing specifically in federal
law that outlaws online gambling advertising. If
they want to get us, they'll have to say we're
affiliated/partnered with our advertiser or charge us
with aiding & abetting.
- Although any charges are theoretical, the
potential exists, and it exists even if your site is
hosted outside the U.S. and even if you get paid on a
monthly or CPA basis, rather than revenue-share.
- The emphasis on the theoretical charges is on
"theoretical". Most observers seem to think
that it would be a stretch that that the government could
make such a charge stick. No webmaster has ever
been charged with such a second-hand crime before, and in
the Casino City case, the court said specifically that
advertising did not constitute aiding & abetting.
- The webmaster would likely get a warning letter
before any action were taken, and if they got
penalized the penalty likely wouldn't include jail
time. The only publisher that ever had to pay a
fine (a magazine) did get a waning letter first.
Their problem was that they waited six months to act on
that warning. Because they dragged their feet they got
fined, though the fine was simply equal to the online
gambling ad revenue they'd received.
Further help
Please don't ask me for advice, I'm not a
lawyer. I've also shared absolutely everything I know
about this subject. If I knew any more, it would be
listed in this article. (I do have an article about
online gambling law in general,
not just for publishers, which has some more detail and
more references. Here's also an old article on Internet
gaming law by lawyer K.
Kyros )
Here are a few other analyses of the new
UIEGA:
And here are overviews of the U.S. situation in
general:
Here are a couple of attorneys available for
consulting on Internet gambling law. The rates listed are
what they quoted me in October 2006. (I ultimately did
not retain their services and they did not inform the
writing of this article in any way.)
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