Illegal or Legal???

[HotPants]

By Andy Vuong
Denver Post Business Writer

Sunday, April 07, 2002 - Although no federal law specifically prohibits operating a gambling website in the country, the U.S. government has used the Wire Wager Act to charge people associated with those businesses.
The Wire Wager Act states that it is illegal to take sports bets across state lines through the telephone. A bill pending in Congress sponsored by Rep. Bob Goodlatte, R-Va., would update the act to include the Internet and casino-style bets, such as blackjack and poker. But Goodlatte's bill is a long shot for passage.

The U.S. government used the Wire Wager Act to charge 21 people for their association with online sports books in 1998, and 13 have pleaded guilty. Only Jay Cohen, co-founder of the World Sports Exchange, has stood trial on the charges, making him one of the most closely watched figures in the industry.

Although his business is based in Antigua, Cohen chose to return to the U.S. to face the charges. He was convicted in February 2000 under the Wire Wager Act because the World Sports Exchange accepted bets from Americans through the telephone. Cohen argued that because his customers deposit their money in accounts in Antigua before betting, the transaction takes place there and not in the U.S.

Cohen lost his appeal and was sentenced to 21 months in prison. He is trying to get the Supreme Court to hear his case.

"Cohen's case is very important in that it does establish the precedence that the Wire Act applies to Internet gambling," said Mark Balestra, an analyst with The River City Group, an Internet gaming consultancy and research firm. "But it would be huge if it were overturned."

Meanwhile, Cohen's three business partners stayed in Antigua and continue to operate the World Sports Exchange site. Four others who were charged also remain fugitives.

Credit firms weigh in

Despite the government's efforts, the online gambling industry's biggest opponent could be credit card companies.

MasterCard and Visa last year began rejecting online gambling transactions because of the difficulties they have had in collecting debts racked up by customers who refuse to pay their bills.

In 1998, the two companies sued California resident Cynthia Haines for more than $70,000 in online gambling debt. Haines filed a countersuit claiming Visa and MasterCard were at fault for letting her use their credit cards to gamble, citing California state law that bars credit card loans for gambling. The companies settled the countersuit by agreeing to clear Haines' credit without making her pay the debt.

Still, MasterCard and Visa's actions are just a bump in the industry's road to growth. Some credit card transactions at gambling sites are still processed, and customers have other ways to deposit money, most notably through online-payment service company PayPal. For a fee, PayPal processes credit card and other payment transactions for businesses and consumers.

The big players

With marquee names such as MGM Mirage entering the online gaming business, many expect the industry to overcome the credit card hurdle.

Last year Playboy Enterprises became the first major U.S. company to jump on board when it joined England-based gambling company Ladbrokes to open an online casino and sports book.

The Playboy gambling site doesn't accept wagers from U.S. residents. It is licensed and operated out of Gibraltar, one of more than 50 jurisdictions around the world that issue licenses for operating an online casino.

MGM Mirage, which has received an online gambling license from the Isle of Man, a jurisdiction off the coast of England, said in March that it could open an Internet casino within a year.

England is the first world power to embrace the activity. Keith Morrow, a Colorado native who moved to Costa Rica to start an online lottery business, said in an e-mail interview that he believes the U.S. will follow suit.

"We believe that the U.S. government will embrace online gaming in the future," Morrow said. "Gambling is one of the oldest forms of entertainment, and people will gamble no matter what part of the world (companies) reside in."

[HotPants]

UPDATE

The Supreme Court will hear Jay Cohen's case. This is a big step because the Supreme Court has the right to pick and choose which cases it takes on.

[Dragon]

It's a long shot at best that they overturn the original ruling. Online gambling is similar to prohibition. Someday people will look back and say can you believe they used to put people in jail for this?

[HotPants]

The ruling probably will not be overturned. The Supreme Court is probably taking the case to make an example. It is just like prohibition, maybe worse. The government just supports the gambling it gets a piece of. If they'd spend some time on some decent regulations for the LEGALIZATION of the industry, they could have a piece of a very lucrative pie. AND weed out a lot of the bad seeds.

The fact the Supreme Court decided to hear the case means they think it has some merit or importance. The government may actually be starting to take the industry into consideration.

[HotPants]

News Article Announcing Intent to appeal

Wednesday, February 27, 2002

A Supreme Case for Cohen?

by Anne Lindner

Jay Cohen, the only person in America to go to trial over criminal charges relating to Internet gambling, has petitioned to bring his case to the Supreme Court.

Cohen, who filed a petition Feb. 22 for a writ of certiorari with the Supreme Court, is seeking to overturn a judgment rendered July 31 by the U.S. Court of Appeals for the Second Circuit. The appeals court upheld Cohen's March 28, 2000, conviction in a New York federal court for one count of conspiracy and seven counts of violating the Interstate Wire Act of 1961.

Cohen was sentenced to 21 months in prison, two years of supervised release, a special assessment of $800 and a fine of $5,000. He is presently free on bond pending certiorari.

Ian Gershengorn, a lawyer for the Washington, D.C. law firm Jenner and Block, said the U.S. government has 30 days to file a response to the petition. After that, Cohen's side, which consists of Gershengorn and Donald B. Verrilli of Jenner and Block as well as Benjamin Brafman, Mark M. Baker and Melinda Sarafa of the New York law firm Brafman and Ross, has ten days to reply government's filing.

Four of the nine Supreme Court justices will need to vote in favor of certiorari for the case to be heard. If the case is granted consideration, it will take a vote of five justices to overturn Cohen's conviction. Gershengorn said it's hard to predict whether a case will be taken up by the court.

"The Supreme Court is always a long shot, but we think there are compelling issues in this case that have tremendous impact on the gambling industry and obviously on Jay personally, and we think it would be a good case for the court to take," he said.

Sarafa said that, although it's always difficult to persuade the Supreme Court to take case, the issues brought up in the appeal would be of interest to the court and should be decided once and for all by the court.

"One of the issues goes to the heart of conspiracy law, and that's whether someone has to have a corrupt motive that is innocent by itself but corrupt by statute," she said.

There are four reasons the Supreme Court should grant certiorari, Gershengorn said. First is the lower court's interpretation of the Wire Act. The court "rewrote the statute to cover a range of conduct that Congress didn't want to cover," Gershengorn said.

"It eliminated the distinction between bets and information relating to bets, which was a critical distinction in the statute--one that the off-track betting industry, for example, relies on extensively," the attorney said.

Second, Gershengorn said, the Second Circuit's interpretation of the Wire Act is insensitive to the interests of state of foreign governments. The interpretation, he said, criminalizes the passage of information about a bet between jurisdictions where betting is legal.

"Even if both those places didn't want to criminalize the conduct, you still have violated a federal criminal statute, which is a fairly surprising holding," he said.

Third, the Second Circuit court said it was irrelevant that Cohen, who launched an online wagering company called World Sports Exchange in 1997 in Antigua, tried to pattern his business after legal operations. The court should have taken note of Cohen's desire to run a legal business in a jurisdiction that permits it, Gershengorn said. The final reason asserted in the petition, he said, is that Cohen's conviction affects the offshore gambling and off-track betting industries, both of which rely on account wagering.

Should the case be reviewed by the Supreme Court, the justices' ruling could potentially have an explosive impact on the legislative environment surrounding Internet gambling. In Congress, three bills seeking to make online gaming illegal in the United States are awaiting consideration. Sarafa said it's too soon to tell exactly how much of an impact the petition will have. "It could potentially have an enormous effect, but it depends on which issues the court chooses to hear and how the court decides them," she said. Gershengorn said that, while a Supreme Court decision overturning Jay Cohen's conviction could drastically alter gaming legislation, the prime effect of such a decision would be to clarify the Wire Act.

"I think the principle effect would be to restore what Congress had intended in the first place, by making (it) clear that account wagering is legal," he said. "But there's no doubt that a Supreme Court reversal of the conviction would have important ramifications for the industry, and that Congress would likely take notice."

[Checkers]

cohen goes to jail while clarence 'big lips' thomas whacks off to porn and smokes dope and gets on the supreme court