During the late 1990s, online gambling gained popularity. In 1998, a Frost & Sullivan report estimated that online gambling revenues had reached $830 million. That year, there were more than fifteen gambling websites in operation.
The legality of online gambling remained in flux, with federal and state officials expressing concerns that the Internet could be used to transport illegal gambling into their jurisdictions. In response, the United States Department of Justice announced that all forms of Internet gambling will be subject to the Wire Act.
The law is based on the Commerce Clause, which states that “the Congress shall have power to regulate commerce among the several States, and with foreign nations.” It is important to note that this is a commercial nature of the gambling business, which seems to satisfy the Commerce Clause’s concerns.
There are also criminal statutes that are implicated by illegal Internet gambling. These include the Illegal Gambling Business Act, the Wire Act, and Racketeer Influenced and Corrupt Organizations (RICO) provisions.
A number of attacks on the legality of online gambling have been made on constitutional grounds, largely based on the First Amendment. However, these attacks have failed to gain much traction. In fact, some critics of the Justice Department’s action argue that the move has no legal basis.
In the case of United States v. K23 Group Financial Services, there was an investigation into a web site for online poker. The federal government charged the website operators with violations of the Unlawful Internet Gambling Enforcement Act (UIGEA) and money laundering.