Written By: Online-Casino-Newsroom.com
Is gambling illegal? The short answer is; it depends on where you live. Your country determines what is gambling, and whether it is legal or illegal. For example, in some countries, casino games played in a land-based casino are legal, but not when played online. It is even possible that a country declares online gambling as legal if operated in the country and illegal if the operator resides offshore. In this article, I’ll talk more about the various legal issues with gambling in different countries, so that you can make wise decisions about where you choose to gamble.
What is Gambling?
There is no definition of gambling accepted universally. However, it is mostly agreed that gambling is a ‘game of chance’ offering an opportunity in form of wagering to win a prize, money or material. But, what is a game of chance? Is it a game of chance, if a person X who has no knowledge of the oil industry buys shares of an oil company? In this case, he has the chance of winning money if the share goes up due to some political turmoil, which was not predictable? Is he gambling?
The legal advisors of any state in the world would say, no, he is not gambling, because it is not chance, but skill, the knowledge of the oil market, that has brought him profit or loss. If you would argue that this person understands nothing about the oil industry, the legal expert would shoot back: “Doesn’t matter, he gets all expertise he needs from his bank!” If you then ask the same expert, whether he would accept poker as a game of skill because also a poker player needs plenty of knowledge about the strategy of a poker game, he would very likely say, “No, poker is a game of chance and, therefore, gambling!” However, whether this legal expert would declare poker as illegal, will depend on the country whose government he advises.
When is Gambling Illegal?
If you live in Las Vegas, you can play poker at dozens of poker rooms. Harrah’s Las Vegas Poker Room hosts the famous World Series of Poker (WSOP) championship, which is, of course, a legally endorsed event. But, suppose you live in California. The California Penal Code §330 makes participation in any “banking or percentage game”, which specifically includes poker, illegal. In California, a “percentage game” means any game where the operator takes a percentage of the amounts bet or won, So, playing a poker game where the operator rakes the pot is a criminal act. But it is not a crime to buy a lottery ticket in California. In fact, one can even play poker online legally for money as long as it is not a percentage game. The situation is different in case of operators of poker sites. According to the California. Penal Code §337j, it is illegal to „deal, operate, carry on, conduct, maintain, or expose for play in this state any controlled game.” Poker is a controlled game. But, is it illegal if an Internet operator offers such a “controlled game” to Californians from outside? This remains an open question.
Now, what’s the situation in Europe?
In Germany, according to the criminal code (§§ 284 ff. StGB), gambling is formally forbidden, but the German States (Länder) are allowed to issue licenses only to gambling houses. The game of poker is gambling and ,therefore, allowed only in such localities . Anyone operating a poker game openly without a license can be jailed up to two years.
In Great Britain, under the UK Gambling Act 2005, effective since 1 September 2007, a gaming license, which can be acquired by both land-based and remote (online) gambling operators, automatically allows the licensee to offer all kind of casino games, including poker.
Most of the European Union Member States have their national gambling laws. In some cases, gambling is by default prohibited, except where the law provides exception. This is true of Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Luxembourg, the Netherlands and Slovakia. In some cases, certain games are excluded from their gambling laws, thus making them by default legal, as listed below:
- In Luxembourg - sports betting
- In Belgium - card games played outside casinos and games offering low prizes
- In Finland, France, Luxembourg and Sweden - commercial contests
- In Luxembourg and UK - free commercial contests
- In Estonia and Latvia - gaming using a machine as long as only free games can be won
When is Online Gambling illegal?
A more precise question would be: where and under what circumstances is online gambling illegal?
In case of Internet gambling, it is not possible to define precisely this WHERE? Does this where mean, in case of a gambling operator, the location where the company is incorporated (e.g. in Costa Rica), or where the server of their website is located (e.g. in Canada or India), or where they have received a license for operating online casinos (e.g. in Costa Rica or Canada or Malta). The only reasonable answer to this WHERE is CYBERSPACE.
It is equally difficult to define what aspect of online gambling is illegal. Are we talking about a) wagering b) accepting and organizing bets like a bookie c) offering an infrastructure for wagering like an online gaming site d) offering services for monetary transactions between gaming sites and players e)advertising for online gaming or f) accepting advertising for online gaming?
The answer to each of these six questions may vary from country to country as well as from wagering type to wagering type.
In Costa Rica, e.g. it is allowed to operate an online gambling site, but it is illegal for the citizens of the country to gamble online. The reason for this contradiction is the desire of the government, on the one hand, to earn revenues through an offshore gambling industry, and on the other, to protect its citizens from the negative effect of gambling, like becoming addicted to it.
The situation is perhaps most complicated in the USA, especially after the passage of the Federal Act known as UIGEA (Unlawful Internet Gambling Enforcement Act 2006) which was signed by President Bush in 2006. According to this Act, it is illegal for US financial institutions to process any transactions in which any online gambling operator is involved. However, this Act makes exceptions for gambling on horse racing, state-run lotteries and fantasy sports! Even some forms of financial transactions have been exempted from the application of the Act, without however naming them specifically.
The UIGEA states:
The Secretary and the Board of Governors of the Federal Reserve shall…
exempt certain transactions or designated payment systems from any requirement imposed under such regulations, if the Secretary and Board jointly find that it is not reasonably practical to identify and block, or otherwise prevent or prohibit the acceptance of such transactions.
The financial institutions are totally confused because of these exceptions and the fact that the regulations to guide the institutions in implementing the UIGEA Act in their daily business, to be prescribed by the Department of Treasury together with the Board of Governors of the Federal Reserve System and the Department of Justice, are still not there.
This law is creating serious implementation problems because it does not try to define unlawful Internet gambling, forcing the financial institutions to decide when and where to apply the law. The institutions are, of course, not ready to play the role of police and FBI to find out which of their merchants are acting unlawfully and for which part of their business. According to Wayne Abernathy, a senior executive of the American Bankers Association, ABA, the banks may overreact, in order not to risk any penalties, by not processing any payments to anything that might look like a betting activity.
At the same time, the UIGEA does not prohibit Internet gambling at all! It can also be said that the UIGEA does not make anything illegal which has not been illegal before. Internet Gambling is illegal, for example, in Illinois, Indiana, Louisiana and Nevada due to existing State laws prohibiting Internet Gambling. In other states, Internet Gambling is not prohibited by law. But there is no guarantee that an online gambler will not be charged for a criminal offense. Besides, an online gambler in USA may have problems in finding a payment processor due to the obstacles created by the UIGEA.
In Europe, the Commission of the European Union has a clear and liberal position related to online gambling. Online gambling is defined as a service, and all member states of the EU are bound to accept interstate transfer of services and goods. In other words, according to the EU Commission, any provider of online gambling service of any kind can offer his service in all member states. This is, however, not accepted by many of the member states, and they are now supported by a decision of the European Court of Justice declaring that each state has the right to decide whether online gambling is legal or not.
There is only one state of the EU, Great Britain, where gambling is regulated since September 2007, when UK Gambling Commission began to implement the Gambling Act 2005, with the threefold objective of keeping gambling crime free, making it fair and open, and protecting children and vulnerable people (the so-called ‘problem gamblers’) from exploitation through gambling. From 1 September 2007 anyone wanting to provide online gambling to UK citizens must obtain a license of the UK Gambling Commission and abide by the codes of practice outlined by the Commission.
There is now a tendency in various member states of the EU to follow the example set by UK, but they are still far of from regulating online gambling. In Netherlands, for instance, online gaming sites are legal, but it is illegal for Dutch nationals to play at online gaming sites whose operators do not have a Dutch gambling license. This kind of protectionism, which violates the EU principle of free trading across the member states, is quite common in many of the EU countries. To prevent such discriminatory measures, the EU commission has filed suits against various member states. For example, against Spain, France, Germany and Sweden.
However, EGBA (European Gaming and Betting Association), a very prominent lobbying organization for the European online betting industry, has serious doubts whether the Commission is in a position to enforce the free trade principles of the Union by bringing the non-compliant states to the European Court of Justice. This is perhaps a too pessimistic view of a lobbying organization. It cannot be overlooked that several EU states, including Spain, France, Poland, Bulgaria, Denmark, Sweden and Italy, are undertaking significant steps towards licensing online gaming operators and legalizing online gaming.
One country which is not moving even an inch, is Germany. The reason is their reluctance to give up the state monopoly of lottery and other forms of gambling. It is always argued that the monopoly is essential for social protections of the citizens, but in reality it amounts to protecting the gigantic revenue the 16 German states derive from lottery, football betting etc.
Although the online gaming providers are struggling against the state monopoly in almost all EU member states, with the exception of UK, all governments are ready to tolerate the online gambling activities of their citizens. The interest in online gambling in Europe has now a rapid and sustained growth. This is without doubt one of the motors behind the legalizing activities in various EU states. They are realizing that regulated gaming could produce significant revenue for the states.
Some interesting developments in legalizing online gambling is also taking place in South Africa, where the Parliament has recently approved an internet gambling law. In Asia, online gambling is tolerated in almost every country with the exception of Islamic nations where gambling is prohibited by the religion.
Why is Gambling illegal?
There are three main reasons for gambling being illegal:
- Religious prohibition in the Islamic countries
- Unfavourable social impact of gambling on children and those who tend to get addicted to gambling (‘problem gamblers’)
- Protectionism of governments in the form of state monopoly (What is not under the control of the government is illegal).
What do you think about the legality of gambling? Feel free to post your comments and questions about live and online gambling.
