Internet Gambling: Overview of Federal Criminal Law
Congressional research reportNov 29, 2004
Ask Donna
What actually matters in this document.
Text
Order Code 97-619 A
CRS Report for Congress
Received through the CRS Web
Internet Gambling: Overview
of Federal Criminal Law
Updated November 29, 2004
Charles Doyle
Senior Specialist
American Law Division
Congressional Research Service ˜ The Library of Congress
Internet Gambling: Overview
of Federal Criminal Law
Summary
This a brief summary of the federal criminal status implicated by conducting
illegal gambling using the Internet. It also discusses some of the constitutional issues
associated with prosecuting illegal Internet gambling.
Gambling is primarily a matter of state law, reinforced by federal law in
instances where the presence of an interstate or foreign element might otherwise
frustrate the enforcement policies of state law. State officials and others have
expressed concern that the Internet may be used to bring illegal into their
jurisdictions.
Illicit Internet gambling implicates at least six federal criminal statutes. It is a
federal crime to (1) conduct an illegal gambling business, 18 U.S.C. 1955; (2) use the
telephone or telecommunications to conduct an illegal gambling business, 18 U.S.C.
1084; (3) use the facilities of interstate commerce to conduct an illegal gambling
business, 18 U.S.C. 1952; (4) conduct the activities of an illegal gambling business
involving either the collection of an unlawful debt or a pattern of gambling offenses,
18 U.S.C. 1962; (5) launder the proceeds from an illegal gambling business or to
plow them back into the business, 18 U.S.C. 1956; or (6) spend more than $10,000
of the proceeds from an illegal gambling operation at any one time and place, 18
U.S.C. 1957.
There have been suggestions that enforcement of these provisions against illegal
Internet gambling raises constitutional issues under the Commerce Clause, the First
Amendment's guarantee of free speech, and the Due Process Clause. The
commercial nature of a gambling business and the reliance of the Internet on
telephone communications seems to satisfy doubts under the Commerce Clause. The
fact that illegal activities enjoy no First Amendment protection appears to quell free
speech objections. The due process arguments raised in contemplation of federal
prosecution of offshore Internet gambling operations suffer when financial
transactions with individuals in the United States are involved.
A bibliography, citations to state and federal gambling laws, and the text of the
statutes cited above are appended. This report appears in abridged form, without
footnotes, full citations, or appendices, as CRS Report RS21984, Internet Gambling:
An Abridged Overview of Federal Criminal Law. Alse see CRS Report RS21487,
Internet Gambling: A Sketch of Legislative Proposals in the 108th Congress.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Federal Criminal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Wire Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Illegal Gambling Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Travel Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Racketeer Influenced and Corrupt Organizations (RICO) . . . . . . . . . . . . . . 17
Money Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Laundering the Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Concealment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tax evasion, smurfing and international laundering . . . . . . . . . . . . . . 24
Spending the Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Constitutional Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Commerce Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
First Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Personal jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Subject matter jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
I. State Anti-Gambling Laws: Citations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
II. Federal Anti-Gambling Laws: Citations . . . . . . . . . . . . . . . . . . . . . . . . . 33
III. Selected Federal Anti-Gambling Laws: Text . . . . . . . . . . . . . . . . . . . . . 34
V. Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Internet Gambling: Overview
of Federal Criminal Law
Introduction
This is examination of some of the federal criminal laws implicated by Internet
gambling and of a few of the constitutional questions associated with their
application.
American law has always reflected our ambivalence towards gambling. Antigambling laws were common in colonial America, yet even in the Northeast where
they were perhaps most numerous the lottery was a popular form of public finance.1
A majority of states continue to outlaw most forms of gambling, but most also
continue to employ a lottery as a means of public finance and to allow several other
forms of gambling as well. In fact, at least forty-six states permit charitable bingo;
forty-three allow parimutuel betting; thirty-seven have lotteries; twenty-nine have
Indian gambling establishments; and thirteen allow casino or riverboat gambling.2
Americans spend almost $73 billion a year on legalized gambling.3 Estimates on the
amount Americans spend on illegal gambling vary widely, ranging from over $30
billion to over $380 billion a year.4
There are many federal gambling laws, most enacted to prevent unwelcome
intrusions of interstate or international gambling into states where the activity in
question has been outlawed.5 They generally deal with lotteries, “numbers” or
1
For a detailed history of gambling at common law and colonial America, see CORNELL
UNIVERSITY LAW SCHOOL, THE DEVELOPMENT OF THE LAW OF GAMBLING: 1776-1976
(1977).
2
General Accounting Office [now the Government Accountability Office], Money
Laundering: Rapid Growth of Casinos Makes Them Vulnerable 38 (GAO/GGD-9628)(January 1996); citations to the various state anti-gambling statutes are appended; an
examination of their content is beyond the scope of this report.
3
Christiansen Capital Advisors, GROSS ANNUAL WAGER OF THE UNITED STATES, Table
4, 2003 Gross Gambling Revenues by Industry and Change from 2002 (Dollars in Millions),
available on Nov. 15, 2004, at www.cca-i.com.
4
Blackjack or Bust: Can U.S. Law Stop Internet Gambling?, 16 LOYOLA OF LOS ANGELES
ENTERTAINMENT LAW JOURNAL 667, 668 n.9 (1996); The Offshore Quandary: The Impact
of Domestic Regulation on Licensed Offshore Gambling Companies, 25 WHITTIER LAW
REVIEW 989, 989 (2004). The estimates for illegal gambling are necessarily speculative and
consequently creditable estimates may vary considerably.
5
Citations to federal gambling statutes are appended.
CRS-2
betting on races and other sporting events, but several were written with sufficient
breadth to cover casino or other kinds of gambling.
Then there is Internet gambling. The Internet is a worldwide network, made up
of thousands of individual computer networks that enables millions of individual
computer users to “visit” a virtually unlimited number of “locations.”6 The Internet
is tied together by telephone communications. Access to the Internet is ordinarily
accomplished through a large computer or series of computers supplied by a “service
provider.” There are commercial service providers, such as America OnLine, that
provide access to the Internet and other computer services for a fee, and there are
government entities, universities, corporations, and some private groups that provide
access for those associated with them.
In some cases, Internet gambling is not much different than gambling by
telephone – a bettor places his bet with a bookie using his computer and e-mail rather
than using just his telephone. But the sophistication of modern computer technology
permits another kind of Internet gambling. The Gambling Commission reported that
by mid-1999 there were “over 250 on-line casinos, 64 lotteries, 20 bingo games, and
139 sports books providing gambling over the Internet.”7 Today, an estimated 1800
Internet gambling sites probably now realize somewhere between $4 billion and $4.2
billion in operating revenue.8
Four obstacles initially stood in the way of Internet gambling becoming a
multibillion dollar endeavor: the limits of available technology;9 an efficient
financing mechanism (to eliminate credit approval delays);10 credibility among the
gambling public;11 and greater clarity as to its legal status.12 Many of the technical
challenges seem to have been overcome. The status of the other impediments is
more uncertain. Volume may be the best evidence of consumer acceptance, but as
noted earlier reliable statistics are somewhat elusive.13 Finance problems may be
6
For a more complete description of the Internet and related matters than appears here see
ACLU v. Reno, 929 F.Supp. 824, 830-44 (E.D.Pa. 1996), or Shea v. Reno, 930 F.Supp. 916,
925-30 (S.D.N.Y. 1996).
7
The National Gambling Impact Study Commission, Final Report, 2-16 (1999).
8
S.RepNo. 108-173, at 2 (2003); H.Rep.No. 108-51, Pt. 2, at 7 (2003).
9
Kanaley, Technical Matters Hinder Internet Gambling, ARIZONA REPUBLIC/ PHOENIX
GAZETTE E1 (Jan. 6, 1997).
10
Growth of Internet-Based Gambling Raises Questions for Bank Systems, BNA’S
ELECTRONIC INFORMATION POLICY & LAW REPORT (Feb. 28, 1997).
11
Horvitz, Cyber Gambling Proves Dicey for Bettors, Regulators Alike, WASHINGTON
TIMES 42 (Nov. 11, 1996).
12
13
Kanamine, Gamblers Stake Out the ‘Net, USA TODAY 1A (Nov. 17, 1995).
The Gambling Commission cited to the Sebastian Sinclair (Christiansen/Cummings
Associates) estimated world-wide revenues of $300 million for 1997 and $651 million for
1998, The National Gambling Impact Study Commission, Final Report, 2-15 (1999). Media
accounts refer to estimates by Sinclair and others of revenues of $651 million for 1998, $1.2
billion for 1999, and $3 billion by 2002, Thompson, Who Is Gambling Online?, CNN.COMM
CRS-3
aggravated by the determination of that the gambling is unlawful. Credit cards could
prove a boon to online gambling, and more and more sites are configured to
encourage their use. Historically, the courts would not enforce gambling debts,14
however, and federal law precludes financial institution involvement with certain
forms of gambling.15 Moreover, major credit card issuers and associations have acted
to block use their credit cards for Internet gambling purposes, and at least one
economic transfer service, PayPal, has taken similar action.16
Gamblers have introduced features like proxy gambling, gambling for credit,
and at least the claim of gambling in a virtual offshore gambling locale to induce
bettors to believe they have overcome legal prohibitions. In fact, they have not.
Nevertheless, enforcement may be uncertain. Internet gambling cannot be raided in
a traditional sense, and gambling is rarely a high law enforcement priority even
without the complications that the Internet can bring to the table. It is likewise
uncertain whether Internet gambling – like many types of gambling in a few states
– will be legalized with regulations put in place to reassure both investors and the
gambling public.17 However that may be, using the Internet to conduct a gambling
business, either involving betting on sporting events or involving a form of gambling
(June 29, 1999); Schouten, Betting Is “Virtual” But Debt Is All Too Real, USA TODAY
(Dec. 27, 1999). Whether the estimated revenues for 2002 were a withdrawal from earlier
estimates of $10 billion, Online Gambling Goes Global, TIME MAGAZINE (Sept. 27, 1999)
or are simply a more conservative estimate is remains to be seen. One author indicates it
may be both, Kelly, Internet Gambling Law, 26 WILLIAM MITCHELL LAW REVIEW 117, 11920 (2000) (“Observers disagree about the projected growth of Internet gambling. One
reporter predicted that by 2000 it might be a $60 billion per year business. The Chicago
Crime Commission . . . predicted that Internet gaming would be a $25 billion annual
business by 2000. Jason Ader . . . suggested it could soon become a $10 billion per year
industry. By contrast, Sebastian Sinclair . . . downgraded Internet gaming projections for
the year 2000 from $8.661 billion (1997) to $6.163 billion (1998). . . . By 1999, Sinclair
estimated actual Internet gaming revenues in 2000 would be $1.52 billion. Frost and
Sullivan . . . estimates online gaming revenues will be $2.617 billion by 2000 and $11
billion by 2005"). Christiansen Capital Advisors estimated US. online betting at $ 4 billion
for 2002 and almost $5.7 billion for 2003, supra n.3.
14
Gambling, 38 AM.JUR.2D §210 (1999), citing, Pearce v. Rice, 142 U.S. 28 (1891), inter
alia. Enforcing obligations that grew out of illegal conduct was thought contrary to sound
public policy.
15
12 U.S.C. 25a (participation by national banks in lotteries and related activities); 12
U.S.C. 339 (participation by state member banks in lotteries and related activities); 12
U.S.C. 1463(e)(participation by savings associations in lotteries and related activities); 12
U.S.C. 1829a (participation by state nonmember insured banks in lotteries and related
activities).
16
Prosecutors, Plaintiffs Aim to Curb Internet Gambling, 40 TRIAL 14 (Aug. 2004);
S.Rep.No. 108-173, at 4 (2003); American Banker, 1 (April 2, 2003).
17
Pending adjustments in federal law, at least two American jurisdictions stand poised to
regulate legalized Internet gambling, NEV.REV.STAT. §§463.759 to 463.780; V.I.CODE ANN.
tit.32, §§601-645. On the other hand, a few states have supplemented their general antigambling laws with specific Internet gambling proscriptions, e.g., LA.REV.STAT.ANN.
§14:90.3; ORE.REV.STAT. §167.109; S.D.COD.LAWS ANN. §§22-25A-1 to 22-25A-15.
CRS-4
illegal under the laws of the state in which any of the players are located, will almost
certainly involve the violation of one or more federal criminal laws.
Federal Criminal Law
It is a federal crime to:
• use telecommunications to conduct a gambling business, 18 U.S.C.
1084;
• conduct a gambling business in violation of state law, 18 U.S.C.
1955
• travel interstate or overseas, or to use any other facility of interstate
or foreign commerce, to facilitate the operation of an illegal gambling
business, 18 U.S.C. 1952;
• systematically commit these crimes in order to acquire or operate a
commercial enterprise, 18 U.S.C. 1962;
• launder the proceeds of an illegal gambling business or to plow
them back into the business, 18 U.S.C. 1956;
• spend or deposit more than $10,000 of the proceeds of illegal
gambling in any manner, 18 U.S.C. 1957; or
• conspire with others, or to aid and abet them, in their violation of
any of these federal laws, 18 U.S.C. 371, 2.
The Wire Act
Commentators most often mention the Wire Act, 18 U.S.C. 1084, when
discussing federal criminal laws that outlaw Internet gambling in one form or
another.18 Early federal prosecutions of Internet gambling generally charged
violations of the Wire Act.19 In fact, perhaps the most widely known of federal
18
Keller, The Game’s the Same: Why Gambling in Cyberspace Violates Federal Law, 108
YALE LAW JOURNAL 1569, 1580 (1999)(“It is the breadth of the Wire Wager Act that has
attracted the most attention in the Internet gambling context because notwithstanding the
possible applicability of other federal laws, it directly prohibits the use of a wire
transmission facility to foster a gambling business”); Gottfried, The Federal Framework for
Internet Gambling, 10 RICHMOND JOURNAL OF LAW AND TECHNOLOGY 26, 46 (2004)(“the
Wire Act . . . is the federal act most often applied in efforts to prosecute Internet gambling.
. . .”); Do Not Bet on Unilateral Prohibition of Internet Gambling to Eliminate CyberCasinos, 1999 UNIVERSITY OF ILLINOIS LAW REVIEW 1045, 1057; Gambling On-Line: For
a Hundred Dollars, I Bet You Government Regulation Will Not Stop the Newest Form of
Gambling, 22 UNIVERSITY OF DAYTON LAW REVIEW 163, 180 (1996); Goldstein, On-Line
Gambling: Down to the Wire? 8 MARQUETTE SPORTS LAW JOURNAL 1, 18 (1997); General
Accounting Office [now the Government Accountability Office], Internet Gambling: An
Overview of the Issues 11 (Dec. 2002).
19
United States v. Ross, 1999 WL 782749 (S.D.N.Y. Sept. 16, 1999)(denying a motion to
dismiss a four count indictment charging violations of 18 U.S.C. 1084 and 18 U.S.C. 371
(conspiracy) in connection with Internet gambling business operated out of Curacao in the
Netherlands Antilles); see also, People v. World Interactive Gaming Corporation, 1999 WL
591995 (N.Y.S.Ct. July 22, 1999)(noting in dicta violations of the Wire Act in connection
CRS-5
Internet gambling prosecutions, United States v. Cohen, 260 F.3d 68 (2d Cir. 2001),
involved the conviction, upheld on appeal, of the operator of an offshore, online
sports book under the Wire Act.
In general terms, the Act outlaws the use of interstate telephone facilities by
those in the gambling business to transmit bets or gambling-related information.
Offenders are subject to imprisonment for not more than two years and/or a fine of
the greater of not more than twice the gain or loss associated with the offense or
$250,000 (not more than $500,000 for organizations), 18 U.S.C. 1084(a),
3571(b),(d). They may also have their telephone service canceled at law enforcement
request,20 and a violation of section 1084 may help provide the basis for a prosecution
under 18 U.S.C. 1952 (Travel Act), 1955 (illegal gambling business), 1956 and 1957
(money laundering), and/or 1961-63 (RICO).21 The elements of section 1084 extend
to anyone who:
1. being engaged in the business of betting or wagering
2. knowingly
3. uses a wire communication facility
4. A. for the transmission in interstate or foreign commerce
1. of bets or wagers or
2. information assisting in the placing of bets or wagers
on any sporting event or contest, or
B. for the transmission of a wire communication which entitles the recipient
to receive money or credit as a result of bets or wagers, or
C. for information assisting in the placing of bets or wagers. . . . 18 U.S.C.
1084(a).
As a general matter, the Wire Act has been more sparingly used than some of
the other federal gambling statutes, and as a consequence it lacks some of
interpretative benefits which a more extensive caselaw might bring. The Act is
with an offshore Internet casino that accepted wagers from bettors in New York); cf., United
States v. D’Ambrosia., 313 F.3d 987, 987-89 (7th Cir. 2002)(resolution of sentencing issues
associated with Wire Act conviction of the operators “of an offshore internet-based sports
bookmaking operation”); United States v. Tedder, 2003 WL 23204848 (W.D.Wis. Aug. 22,
2003)(construction of 18 U.S.C. 1084 involving the same parties and circumstances as
D’Ambrosia).
20
“When any common carrier, subject to the jurisdiction of the Federal Communications
Commission, is notified in writing by a Federal, State, or local law enforcement agency,
acting within its jurisdiction, that any facility furnished by it is being used or will be used
for the purpose of transmitting or receiving gambling information in interstate or foreign
commerce in violation of Federal, State or local law, it shall discontinue or refuse, the
leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber,
but no damages, penalty or forfeiture, civil or criminal, shall be found against any common
carrier for any act done in compliance with any notice received from a law enforcement
agency. Nothing in this section shall be deemed to prejudice the right of any person affected
thereby to secure an appropriate determination, as otherwise provided by law, in a Federal
court or in a State or local tribunal or agency, that such facility should not be discontinued
or removed, or should be restored,” 18 U.S.C. 1084(d).
21
Each of these statutes is discussed, infra, and the text of each is appended.
CRS-6
addressed to those “engaged in the business of betting or wagering” and therefore
apparently cannot be used to prosecute simple bettors.22
The government must prove that the defendant was aware of the fact he was
using a wire facility to transmit a bet or gambling-related information; it need not
prove that he knew that such use was unlawful.23 The courts have also rejected the
contention that the prohibition applies only to those who transmit, concluding that
“use for transmission” embraces both those who send and those who receive the
transmission.24
Grammatically, interstate transmission appears as a feature of only half of the
elements (compare, “for the transmission in interstate or foreign commerce of bets
or wagers or information assisting in the placing of bets or wagers on any sporting
event or contest,” (4.A.1 & 2. above), with, “for the transmission of a wire
communication which entitles the recipient to receive money or credit as a result of
bets or wagers, or for information assisting in the placing of bets or wagers,” (4.B.
& C. above). Nevertheless, virtually every court to consider the question has
concluded that a knowing, interstate or foreign transmission is an indispensable
element of any 1084 prosecution.25
The execution of a similar interpretative exercise might lead to the conclusion
that the section applies only to cases involving gambling on sporting events (compare
4.A.1 & 2. with 4.B. & C. again). The vast majority of prosecutions involve sports
gambling, but cases involving other forms of gambling under section 1084 are not
22
United States v. Scavo, 593 F.2d 837, 843 (8th Cir. 1979)(“If an individual performs only
an occasional or nonessential service or is a mere bettor or customer, he cannot property be
said to engage in the business”); see also, Rewis v. United States, 401 U.S. 808, 810-11
(1971)(noting that the absence of a Congressional intent to include “mere bettors” among
those who, by operation of 18 U.S.C. 2, might be convicted of aiding or abetting a violation
of the Travel Act, 18 U.S.C. 1952 (relating to interstate travel to carry on a gambling
business, inter alia), but see, United States v. Southard, 700 F.2d 1, 20 n.24 (1st Cir. 1983)
(“The district court held that the statute did not prohibit the activities of ‘mere bettors.’ We
take no position on this ruling except to point out that the legislative history is ambiguous
on this point at best”).
23
United States v. Blair, 54 F.3d 639, 642-43 (10th Cir. 1995); United States v. Ross, 1999
LW 7832749, Slip at 8-9 (S.D.N.Y. Sept. 16, 1999); cf., United States v. Cohen, 260 F.3d
68, 71-3 (2d Cir. 2001)(conviction for conspiracy to engage in conduct in violation the Wire
Act does not require proof that the defendant knew that the conduct was unlawful); contra,
Cohen v. United States, 378 F.2d 751, 756-57 (9th Cir. 1967).
24
United States v. Pezzino, 535 F.2d 483, 484 (9th Cir. 1976). United States v. Sellers, 483
F.2d 37, 44-5 (5th Cir. 1973); United States v. Tomeo, 459 F.2d 445, 447 (10th Cir. 1972);
Sagansky v. United States, 358 F.2d 195, 200 (1st Cir. 1966); contra, United States v.
Stonehouse, 452 F.2d 455 (7th Cir. 1971).
25
United States v. Southard, 700 F.2d 1, 24 (1st Cir. 1983), citing inter alia, Sagansky v.
United States, 358 F.2d 195, 199 n.4 (1st Cir. 1966); United States v. Barone, 467 F.2d 247,
249 (2d Cir. 1972); Cohen v. United States, 378 F.2d 751, 754 (9th Cir. 1967); contra,
United States v. Swank, 441 F.2d 264, 265 (9th Cir. 1971).
CRS-7
unknown,26 and the limitation is contrary to a literal reading of the statute.
Nevertheless at least one federal appellate panel has concluded that the Wire Act
applies only to sports gambling.27
Construction of the Act is further complicated by the defense available under
subsection 1084(b).28 Read casually it might suggest a general defense, but the
district court in the Internet gambling case in the Southern District of New York has
highlighted its more restrictive scope, “the §1084(b) exemption by its terms applies
only to the transmission of information assisting in the placing of bets, not to the
other acts prohibited in §1084(a), i.e., transmission of (1) bets or wages or (2) wire
communications entitling the recipient to money or credit as a result of bets or
wagers. With regard to transmissions of information assisting in the placing of bets,
the exemption is further narrowed by its requirement that the betting at issue be legal
in both jurisdictions in which the transmission occurs. No exemption applies to the
other wire communications proscribed in §1084(a) even if the betting at issue is legal
in both jurisdictions. See United States v. McDonough, 835 F.2d 1103, 1105 (5th Cir.
1988).”29 The Second Circuit panel in Cohen, endorsed the court’s construction.30
An accomplice who aids and abets another in the commission of a federal crime
may be treated as if he had committed the crime himself.31 The classic definition
from Nye & Nissen v. United States, 336 U.S. 613, 619 (1949) explains that liability
for aiding and abetting attaches when one “in some sort associates himself with the
venture, participates in it as in something that he wishes to bring about, [and] seeks
26
E.g., AT&T Corp. v. Coeur d’Alene Tribe, 45 F.Supp.2d 995 (D.Idaho 1998) (lottery);
United States v. Smith, 390 F.2d 420, 421 (4th Cir. 1968); United States v. Chase, 372 F.2d
453, 457 (4th Cir. 1967). Smith and Chase both involved “numbers” and seem to have arisen
under the same facts. None of these cases specifically reject, or even mention, a “sporting
event” limitation.
27
In re MasterCard International Inc., 313 F.3d 257, 262 (5th Cir. 2002)(“The district court
concluded that the Wire Act concerns gambling on sporting events or contests and that the
[RICO] plaintiffs had failed to allege that they had engaged in internet sports gambling. We
agree. . .”).
28
“Nothing in this section shall be construed to prevent the transmission in interstate or
foreign commerce of information for use in news reporting of sporting events or contests,
or for the transmission of information assisting in the placing of bets or wagers on a sporting
event or contest from a State or foreign country where betting on that sporting event or
contest is legal into a State or foreign country in which such betting is legal,” 18 U.S.C.
1084(b).
29
United States v. Ross, 1999 WL 782749 (S.D.N.Y. Sept. 16, 1999).
30
260 F.3d at 73 (emphasis added) (“Cohen appeals the district court for instructing the
jury to disregard the safe harbor provision contained in §1084(b). That subsection provides
a safe harbor for transmissions that occur under both of the following two conditions: (1)
betting is legal in both the place of origin and the destination of the transmission; and (2)
the transmission is limited to mere information that assists in the placing of bets, as opposed
to including the bets themselves”).
31
“Whoever commits an offense against the United States or aids, abets, counsels,
commands, induces or procures its commission, is punishable as a principal,” 18 U.S.C.
2(a).
CRS-8
by his action to make it succeed.”32 The Department of Justice advised the National
Association of Broadcasters that its members risked prosecution for aiding and
abetting when they provided advertising for the online gambling operations.33
In addition to such accomplice liability, a conspirator who contrives with
another for the commission of a federal crime is likewise liable for the underlying
crime and for any additional, foreseeable offense committed by a confederate in
furtherance of the common scheme.34
Illegal Gambling Businesses
On the face of it, an illegal gambling business conducting its activities by way
of the Internet seems to come within the reach of section 1955. The limited
commentary on the point appears to concur.35 Dicta in an early federal appellate
decision likewise strongly suggested the applicability of section 1995:
32
United States v. Frampton , 382 F.3d 213, 223 (2d Cir. 2004); United States v. DelgadoUribe, 363 F.3d 1077, 1084 (10th Cir. 2004).
33
Advertising for Internet Gambling and Offshore Sportsbook Operations, Letter from
United States Deputy Attorney General John G. Malcolm to the National Association of
Broadcasters dated June 11, 2003, filed as Exhibit A with the complaint in Casino City, Inc.
v. United States Department of Justice, Civil Action No. 04-557-B-M3 (M.D.La.).
In other related developments, U.S. marshals are reported to have seized $3.2 million
that Discovery Communications had accepted for ads from Tropical Paradise, a Web casino
operation based in Costa Rica, The Wall Street Journal - Europe, A5 (Aug. 2, 2004), and
the federal prosecutors apparently warned PayPal, a money transfer service, that it risked
prosecution under 18 U.S.C. 1960 (transmission of funds intended to be used to promote or
support unlawful activity) by providing services to online gambling operations, American
Banker, 1 (April 2, 2003).
34
Pinkerton v. United States, 328 U.S. 640, 645-48 (1946); Salinas v. United States, 522
U.S. 52, 62-3 (1997)(“The partners in the criminal plan must agree to pursue the same
criminal objective and may divide up the work, yet each is responsible for the acts of each
other”). The conspiratorial agreement is itself a separate crime under 18 U.S.C. 371 (“If two
or more persons conspire either to commit any offense against the United States, or to
defraud the United States, or any agency thereof in any manner or for any purpose, and one
or more of such persons do any act to effect the object of the conspiracy, each shall be fined
under this title or imprisoned not more than five years, or both. If, however, the offense, the
commission of which is the object of the conspiracy, is a misdemeanor only, the punishment
for such conspiracy shall not exceed the maximum punishment provided for such
misdemeanor”); United States v. Bruno, 383 F.3d 65, 89 (2d Cir. 2004); United States v.
Hanhardt, 361 F.3d 382, 392 (7th Cir. 2004).
35
Gottfried, The Federal Framework for Internet Gambling, 10 RICHMOND JOURNAL OF
LAW AND TECHNOLOGY 26, 53 (2004)(“While section 1955 has yet to be successfully used
to prosecute an Internet gaming operation, its minimal requirements may make it a likely
candidate for future use”); General Accounting Office [now the Government Accountability
Office], Internet Gambling: An Overview of the Issues 11 (Dec. 2002); Blackjack or Bust:
Can U.S. Law Stop Internet Gambling? 16 LOYOLA OF LOST ANGELES ENTERTAINMENT
LAW JOURNAL 667, 675-77 (1996).
CRS-9
[U]nder §1955, it is quite obvious that bettors should not be held criminal
liable either under the statute or under §2 and that local merchants who sell the
accounting paper or the computers on which bets are registered are not
sufficiently connected to the enterprise to be included even if they know that
their goods will be used in connection with the work of the business. On the
other hand, it seems similarly obvious that the seller of computer hardware or
software who is fully knowledgeable about the nature and scope of the gambling
business would be liable under §2 if he installs the computer, electronic
equipment and cables necessary to operate a “wire shop” or a parimutuel betting
parlor, configures the software programs to process betting information and
instructs the owners of the gambling business on how to use the equipment to
make the illegal business more profitable and efficient. Such actions would
probably be sufficient proof that the seller intended to further the criminal
enterprise.36
Violations of section 1955 are punishable by imprisonment for not more than
5 years and/or fines of the greater of not more than twice the gain or loss associated
with the offense or $250,000 ($500,000 for an organization), 18 U.S.C. 1955(a),
3571(d). Moreover, the federal government may confiscate any money or other
property used in violation of the section, 18 U.S.C. 1955(d). The offense may also
provide the foundation for a prosecution under the Travel Act, 18 U.S.C. 1952, the
money laundering statutes, 18 U.S.C. 1956 and 1957, and RICO, 18 U.S.C. 19611963.
The elements of section 1955 apply to anyone who:
1. A. conducts,
B. finances,
C. manages,
D. supervises,
E. directs, or
F. owns
2. all or part of an illegal gambling business that
3. A. is a violation of the law of a State or political subdivision in which it is
conducted;
B. involves five or more persons who conduct, finance, manage, supervise,
direct, or own all or part of such business; and
C. has been or remains in substantially continuous operation for a period in
excess of thirty days or has a gross revenue of $2,000 in any single day.
“[N]umberous cases have recognized that 18 U.S.C. 1955 proscribes any degree
of participation in an illegal gambling business except participation as a mere
bettor.”37 Or as more recently described, “`[c]onductors’ extends to those on lower
36
United States v. Hill, 55 F.3d 1197, 1200 (6th Cir. 1995).
37
Sanabria v. United States, 437 U.S. 54, 70-1 n.26 (1978).
CRS-10
echelons, but with a function at their level necessary to the illegal gambling
operation.”38
The section bars only those activities that involve illegal gambling under
applicable state law and that meet the statutory definition of a business. Illegal
gambling is at the threshold of any prosecution under the section, and cannot to be
pursued if the underlying state law is unenforceable under either the United States
Constitution,39 or the operative state constitution.40
The business element can be satisfied (for any endeavor involving five or more
participants) either by continuity (“has been or remains in substantially continuous
operation for period in excess of thirty days”) or by volume (“has a gross revenue of
$2,000 in any single day”).41 The volume prong is fairly self-explanatory and the
courts have been fairly generous in their assessment of continuity.42 They are
divided, however, on the question of whether the jurisdictional five and
continuity/volume features must coincide.43
38
United States v. O’Brien, 131 F.3d 1428, 1431 (10th Cir. 1997). Perceptions of necessity
are not always particularly demanding, see e.g., United States v. Heacock, 31 F.3d 249, 25253 (5th Cir. 1994)(may include “everyone from layoff bettors and line services to waitresses
who serve drinks”); United States v. Grey, 56 F.3d 1219, 1221 (10th Cir. 1995)(bartenders
and managers of establishments where the defendant placed his video poker machines and
who recording winnings, made payoffs, and reset the machines were properly counted as
conductors of the defendant’s gambling business); United States v. Mick, 263 F.3d 553, 56869 (6th Cir. 2001)(“layoff bettors may be considered part of the requisite five members, so
long as their dealings with the gambling business are regular and not just based on one
contact”); United States v. Febus, 218 F.3d 784, 797 (7th Cir. 2000)(emphasis added)
(conduct for purposes of section 1955 extends to the performance of “any act, function or
duty which is necessary to or helpful in the ordinary operation of the business” including
the owner of a bar who knowingly allowed gamblers to use the bar as a collection site);
United States v. Chance, 306 F.3d 356, 379-80 (6th Cir. 2002)(“regularly helpful or
necessary to the operation of the gambling enterprise”); Requirement of 18 U.S.C. §1955,
Prohibiting Illegal Gambling Business, That Such Business Involve Five or More Persons,
55 ALR FED. 778 (1981 & 2004 Supp.).
39
Cf., United States v. Hill, 167 F.3d 1055, 1063-64 (6th Cir. 1999).
40
Cf., United States v. Ford, 184 F.3d 566, 582-83 (6th Cir. 1999).
41
Sikes v. Teleline, Inc., 281 F.3d 1350, 1366-367 (11th Cir. 2002).
42
E.g., United States v. Trupiano, 11 F.3d 769, 773-74 (8th Cir. 1993)(“Congress did not
purport to require absolute or total continuity in gambling operations. Consistent with this,
substantially continuous has been read not to mean every day. The operation, rather, must
be one that was conducted upon a schedule of regularity sufficient to take it out of the casual
nonbusiness category”).
43
Compare, United States v. Nicolaou, 180 F.3d 565, 568 (4th Cir. 1999)(“the five-person
requirement must be satisfied in conjunction with the third element. That is . . . section 1955
covers only those gambling operations that involve at all times during some thirty day period
at least five persons . . . or that involve at least five persons on any single day on which it
had gross revenues of $2,000"), with, United States v. Boyd, 149 F.3d 1062, 1064-65 (10th
Cir. 1998)(“the government is not required to demonstrate the involvement of five or more
persons for a continuous period of more than thirty days to support a conviction under
§1955, but rather need only demonstrate that the operation operated for a continuous period
CRS-11
There is no such diversity of opinion on the question of whether section 1955
lies within the scope of Congress’ legislative authority under the Commerce Clause.
The Supreme Court’s decision in United States v. Lopez, 514 U.S. 549 (1996),
finding the Gun Free School Zone Act (18 U.S.C. 922(q)) beyond the bounds of
Congress’ Commerce Clause power, stimulated a host of appellate decisions here and
elsewhere. In the case of section 1955, Lopez challenges have been rejected with the
observation that, unlike the statute in Lopez, section 1955 (a) involves the regulation
of a commercial activity (a gambling business), (b) comes with jurisdictional
elements selected to reserve prosecution to those endeavors likely to substantially
affect interstate commerce (five participants in a substantial gambling undertaking),
and (c) was preceded by Congressional findings evidencing the impact of substantial
gambling operations upon interstate commerce.44
The accomplice and conspiratorial provisions attend violations of section 1955
as they do violations of the Wire Act. Although frequently difficult to distinguish in
a given case, the difference is essentially a matter of depth of involvement. “[T]o be
guilty of aiding and abetting a section 1955 illegal gambling business . . . the
defendant must have knowledge of the general scope and nature of the illegal
gambling business and awareness of the general facts concerning the venture . . . [and
he] must take action which materially assists in ‘conducting, financing, managing,
supervising, directing or owning’ the business for the purpose of making the business
succeed,” United States v. Hill, 55 F.3d 1197, 1201-202 (6th Cir. 1995). Unlike
conspiracy, one may only be prosecuted for aiding and abetting the commission of
a completed crime; “before a defendant can be found guilty of aiding and abetting a
violation of section 1955 a violation of section 1955 must exist . . . [and] aiders and
abettors cannot be counted as one of the statutorily required five persons,” id. at
1204.
As a general rule, a federal conspiracy exists when two or more individuals
agree to commit a federal crime and one of them commits some overt act in
furtherance of their common scheme.45 “A conspiracy may exist even if a conspirator
does not agree to commit or facilitate each and every part of the substantive offense.
The partners in the criminal plan must agree to pursue the same criminal objective
and may divide up the work, yet each is responsible for acts of each other. If the
conspirators have a plan which calls for some conspirators to perpetrate the crime and
of thirty days and involved five or more persons at some relevant time”).
44
E.g., United States v. Riddle, 249 F.3d 529, 538-39 (6th Cir. 2001); United States v. Lee,
173 F.3d 809, 810-11 (11th Cir. 1999); United States v. Threadgill, 172 F.3d 357, 371-72
& n.12 (5th Cir. 1999); United States v. Ables, 167 F.3d 1021, 1026-28 (6th Cir. 1999)(also
rejecting the suggestion that section 1955 exceeded the reach of Congress under the
Commerce Clause because it intruded into an area traditionally reserved to the states);
United States v. Boyd, 149 F.3d 1062, 1066 (10th Cir. 1998); United States v. Zizzo, 120
F.3d 1338, 1350 (7th Cir. 1998); United States v. Wall, 912 F.3d 1444, 1445-452 (6th Cir.
1996).
45
United States v. Falcone, 311 U.S. 205, 210 (1941); United States v. Edwards, 188 F.3d
230, 234 (4th Cir. 1999); United States v. Lage, 183 F.3d 374, 382 (5th Cir. 1999); United
States v. Svoboda, 347 F.3d 471, 476 (2d Cir. 2003).
CRS-12
others to provide support, the supporters are as guilty as the perpetrators.”46
Conspiracy is a separate crime and thus conspirators may be convicted of both
substantive violations of section 1955 and conspiracy to commit those violations.47
In fact, under the Pinkerton doctrine, coconspirators are liable for conspiracy, the
crime which is the object of the conspiracy (when it is committed), and any other
reasonably foreseeable crimes of their confederates committed in furtherance of the
conspiracy.48
The application of section 1955 to offshore gambling operations that take
wagers from bettors in the United States involves two questions. First, does state law
proscribing the gambling in question apply when some of the elements of the offense
are committed outside its jurisdiction? Second, did Congress intend section 1955 to
apply beyond the confines of the United States?
Section 1955 can only apply overseas when based on an allegation that the
gambling in question is illegal under a state law whose reach straddles jurisdictional
lines. For example, a statute that prohibits recording bets (bookmaking) in Texas
cannot be used against a gambling business which records bets only in Jamaica or
Dominican Republic even if the bets are called in from Texas, United States v.
Truesdale, 152 F.3d 443, 446-49 (5th Cir. 1998) (rejecting the argument that the
gambling was illegal under a provision of Texas law not mentioned in indictment or
the jury charge). On the other hand, an overseas gambling business may find itself
in violation of section 1955 if it accepts wagers from bettors in New York, because
New York law considers the gambling to have occurred where the bets are made,
inter alia.49
46
Salinas v. United States, 522 U.S. 52, 63-4 (1997).
47
Iannelli v. United States, 420 U.S. 770 (1975); United States v. Jimenez Recio, 537 U.S.
270, 274 (2003).
48
Pinkerton v. United States, 328 U.S. 640, 645-48 (1946); United States v. EscobarDeJesus, 187 F.3d 148, 174-75 (1st Cir. 1999); United States v. Castillo, 179 F.3d 321, 32425 (5th Cir. 1999).
49
People v. World Interactive Gaming Corp., 1999 WL 591995, slip at 5 (N.Y.S.Ct.)(July
22, 1999)(“Respondents argue that the Court lacks subject matter jurisdiction, and that
Internet gambling falls outside the scope of New York state gambling prohibitions, because
the gambling occurs outside of New York state. However, under New York Penal Law, if
the person engaged in gambling is located in New York, then New York is the location
where the gambling occurred (See Penal Law §225.02(2)). Here, some or all of those funds
in an Antiguan bank account are staked every time the New York user enters betting
information into the computer. It is irrelevant that Internet gambling is legal in Antigua.
The act of entering the bet and transmitting the information from New York via the Internet
is adequate to constitute gambling activity within New York state”).
CRS-13
Whether a federal applies overseas is a matter of Congressional intent.50 The
intent is most obvious where Congress has expressly stated that a provision shall
have extraterritorial application, e.g., 18 U.S.C. 2381 (relating to treason committed
in the United States “or elsewhere”).
In the absence of an explicit statement, the courts use various construction aids
to divine Congressional intent. Unless some clearer indication appears, Congress is
presumed to have intended its laws to apply only within the United States.51 The
courts have recognized contrary indications under several circumstances. Congress
will be thought to have intended a criminal proscription to apply outside the United
States where one of the elements of the offense, like the commission of an overt act
in furtherance of a conspiracy, occurs in the United States.52 Similarly, Congress will
be thought to have intended to outlaw overseas crimes calculated to have an impact
in the United States, for example, false statements made abroad in order to gain entry
into the United States.53 Finally, Congress will be thought to have intended
extraterritorial application for a criminal statute where its purpose in enacting the
statute would otherwise be frustrated, for instance, the theft of United States property
overseas.54
There is a countervailing presumption interwoven among these interpretive
devices. Congress is presumed not to have intended any extraterritorial application
50
EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991)(“Congress has the
authority to enforce its laws beyond the territorial boundaries of the United States. Whether
Congress has in fact exercised that authority . . . is a matter of statutory construction”);
Foley Brothers v. Filardo, 336 U.S. 281, 284-85 (1949) (“The question . . is not the power
of Congress to extend the . . . law to . . . foreign countries. Petitioners concede that such
power exists. The question is rather whether Congress intended to make the law
applicable”); In re Simon, 153 F.3d 991, 995 (9th Cir. 1998); United States v. DelgadoGarcia, 374 F.3d 1337, 1345 (D.C.Cir. 2004).
51
Sale v. Haitian Centers Council, Inc., 509 U.S. 155, 174 (1993); Steele v. Bulova Watch
Co., 344 U.S. 280, 285 (1952).
52
United States v. MacAllister, 160 F.3d 1304, 1308 (11th Cir. 1998).
53
Ford v. United States, 273 U.S. 593, 620-21 (1927)(“Acts done outside a jurisdiction,
but intended to produce and producing detrimental effects within it, justify a State in
punishing the cause of the harm as if he had been present at the effect”); United States v.
Larsen, 952 F.2d 1099, 1100-101 (9th Cir. 1991); United States v. Hill, 279 F.3d 731, 73940 (9th Cir. 2002).
54
United States v. Bowman, 260 U.S. 94, 98 (1922)(“Other [crimes] are such that to limit
their locus to the strictly territorial jurisdiction would be greatly to curtail the scope and
usefulness of the statute and leave open a large immunity for frauds as easily committed by
citizens . . . in foreign countries as at home. In such cases, Congress has not thought it
necessary to make specific provision in the law that the locus shall include . . . foreign
countries, but allows it to be inferred from the nature of the offense”); Blackmer v. United
States, 284 U.S. 421, 438 (1932)(“The jurisdiction of the United States over its absent
citizen, so far as the binding effect of its legislation is concerned, is a jurisdictional in
personam, as he is personally bound to take notice of the laws that are applicable to him and
to obey them”); United States v. Vasquez-Velasco, 15 F.3d 833, 839 (9th Cir. 1994); United
States v. Delgado-Garcia, 374 F.3d 1337, 1345-347 (D.C.Cir. 2004).
CRS-14
that would be contrary to international law.55 International law in the area is a matter
of reasonableness, of minimal contacts,56 traditionally described as permitting
geographical application of a nation’s laws under five principles: a country’s laws
may be applied within its own territory (territorial principal); a country’s laws may
be applied against its own nationals wherever they are located (nationality principle);
a country’s laws may be applied to protect it from threats to its national security
(protective principle); a country’s laws may be applied to protect its citizens overseas
(passive personality principle); and a country’s laws may be applied against crimes
repugnant to the law of nations such as piracy (universal principle).57
Section 1955 does not say whether it applies overseas. Yet an offshore illegal
gambling business whose customers where located in the United States seems within
the section’s domain because of the effect of the misconduct within the United States.
Travel Act
The operation of an illegal gambling business using the Internet may easily
involve violations of the Travel Act, 18 U.S.C. 1952, as several writers have noted.58
Like section 1955, Travel Act convictions result in imprisonment for not more than
5 years and/or fines of the greater of not more than twice the gain or loss associated
with the offense or $250,000 ($500,000 for an organization), 18 U.S.C. 1955(a),
3571(d). The Act may serve as the foundation for a prosecution under the money
laundering statutes, 18 U.S.C. 1956 and 1957, and RICO, 18 U.S.C. 1961-1963. It
has neither the service termination features of the Wire Act nor the forfeiture features
of section 1955.
The Travel Act’s elements cover anyone who:
1.A. travels in interstate or foreign commerce, or
B. uses any facility in interstate or foreign commerce, or
C. uses the mail
2. with intent
A. to distribute the proceeds of
55
Weinberger v. Rossi, 456 U.S. 25, 32 (1982)(“It has been a maxim of statutory
construction since the decision in Murray v. the Charming Betsy, that an act of Congress
ought never to be construed to violate the law of nations, if any other possible construction
remains”); United States v. Dawn, 129 U.S. 878, 882 (7th Cir. 1997); United States v.
Yousef, 327 F.3d 56, 96 (2d Cir. 2003).
56
RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES §§401
to 423 (1986 & 2004 Supp.).
57
Jurisdiction with Respect to Crime, 29 AMERICAN JOURNAL OF INTERNATIONAL LAW
(SUPP.) 439, 445 (1935).
58
Do Not Bet on Unilateral Prohibition of Internet Gambling to Eliminate Cyber-Casinos,
1999 UNIVERSITY OF ILLINOIS LAW REVIEW 1045, 1057; Schwartz, The Internet Gambling
Fallacy Craps Out, 14 BERKELEY TECHNOLOGY LAW JOURNAL 1021, 1028-29 (1999);
Gottfried, The Federal Framework for Internet Gambling, 10 RICHMOND JOURNAL OF LAW
AND TECHNOLOGY 26, 52 (2004); General Accounting Office [now the Government
Accountability Office], Internet Gambling: An Overview of the Issues 11 (Dec. 2002).
CRS-15
i. any business enterprise involving unlawful activities (including
gambling) in violation of the laws in which it is conducted or of the laws of the
United States; or
ii. any act which is indictable as money laundering; or
B. to otherwise
i. promote,
ii. manage,
iii. establish,
iv. carry on, or
v. facilitate the promotion, management, establishment, or carrying on,
of any business enterprise involving unlawful activities (including gambling) in
violation of the laws in which it is conducted or of the laws of the United States,
or any act which is indictable as money laundering; and
3. thereafter so
A. distributes the proceeds from any business enterprise involving
gambling or from any act indictable as money laundering, or
B. promotes, manages, establishes, carries on, or facilitates the promotion,
management, establishment, or carrying on of any business enterprise involving
unlawful activities (including unlawful gambling) or any act indictable as
money laundering.
The courts often abbreviate their statement of the elements: “The government
must prove (1) interstate travel or use of an interstate facility; (2) with the intent to
. . . promote . . . an unlawful activity and (3) followed by performance or attempted
performance of acts in furtherance of the unlawful activity.”59
The Supreme Court determined some time ago that the Travel Act does not
apply to the simple customers of an illegal gambling business, Rewis v. United States,
401 U.S. 808, 811 (1971), although interstate solicitation of those customers may
certainly be covered, 401 U.S. at 811.60
When the Act’s jurisdictional element involves mail or facilities in interstate or
foreign commerce, rather than interstate travel, evidence that a telephone was used,61
59
United States v. Escobar-de-Jesus, 187 F.3d 148, 177 (1st Cir. 1999); United States v.
Bankston, 182 F.3d 296, 315 (5th Cir. 1999); United States v. Montford, 27 F.3d 137, 138
n.1 (5th Cir. 1994); United States v. Xiong, 262 F.3d 672, 676 (7th Cir. 2001); United States
v. Burns, 298 F.3d 523, 537 (6th Cir. 2002); United States v. Welch, 327F.3d 1081,
1090(10th Cir. 2003).
60
Unlike 18 U.S.C. 1953 (interstate transportation of certain gambling paraphernalia),
section 1952 does not exclude the interstate or foreign shipment of newspapers (whether
soliciting customers or otherwise) from the activities that may trigger the section’s
jurisdictional element, see e.g., Erlenbaugh v. United States, 409 U.S. 239 (1972)(upholding
a conviction for violation of section 1952 which took the form of interstate delivery
newspapers “scratch sheets” to out of state bookies).
61
United States v. Baker, 227 F.3d 955, 962 (7th Cir. 2000); United States v. Jenkins, 943
F.2d 167, 172 (2d Cir. 1991); United States v. Graham, 856 F.2d 756, 760-61 & n.1 (6th Cir.
1988).
CRS-16
or an ATM,62 or the facilitates of an interstate banking chain63 will suffice.64 The
government is not required to show that the defendant used the facilities himself or
that the use was critical to the success of the criminal venture. It is enough that he
caused them to be used65 and that their employment was useful for his purposes.66
A criminal business enterprise, as understood in the Travel Act, “contemplates
a continuous course of business – one that already exists at the time of the overt act
or is intended thereafter. Evidence of an isolated criminal act, or even sporadic acts,
will not suffice,”67 and it must be shown to be involved in an unlawful activity
outlawed by a specifically identified state or federal statute.68 Finally, the
government must establish some overt after in furtherance of the illicit business
committed after the interstate travel or the use of the interstate facility.69
Accomplice and coconspirator liability, discussed earlier, apply with equal force
to the Travel Act.70
In the case of Internet gambling, the jurisdictional element of the Travel Act
might be established at a minimum either by reference to the telecommunications
component of the Internet, to shipments in interstate or foreign commerce (in or from
the United States) associated with establishing operations on the Internet, to any
62
United States v. Baker, 82 F.3d 273, 275 (8th Cir. 1996).
63
United States v. Auerbach, 913 F.2d 407, 410 (7th Cir. 1990).
64
Of course, interstate travel will also suffice, United States v. Xiong, 262 F.3d 672, 676
(7th Cir. 2001).
65
United States v. Baker, 82 F.3d at 275; United States v. Auerbach, 913 F.2d at 410.
66
United States v. Baker, 82 F.3d at 275-76; United States v. McNeal, 77 F.3d 938, 944
(7th Cir. 1996); United States v. Houlihan, 92 F.3d 1271, 1292 (1st Cir. 1996).
67
United States v. Roberson 6 F.3d 1088, 1094 (5th Cir. 1993); see also, United States v.
James, 210 F.3d 1342, 1345 (11th Cir. 2000); United States v. Saget, 991 F.2d 702, 712 (11th
Cir. 1993)(“If the defendant engages in a continuous course of cocaine distribution rather
than a sporadic or casual course of conduct, then the statutory requirement of a business
enterprise involving narcotics is satisfied”); United States v. Iennaco, 893 F.2d 394, 398
(D.C.Cir. 1990).
68
United States v. Griffin, 85 F.3d 284, 287-88 (7th Cir. 1996); United States v. Campione,
942 F.2d 429, 433-36 (7th Cir. 1991); United States v. Jones, 909 F.2d 533, 536-39
(D.C.Cir. 1990).
69
United States v. Jenkins, 943 F.2d 167, 173 (2d Cir. 1991); United States v. Admon, 940
F.2d 1121, 1125 (8th Cir. 1991); United States v. Burns, 298 F.3d 523, 537-38 (6th Cir.
2002); United States v. Nishnianidze, 342 F.3d 6, 15 (1st Cir. 2003).
70
United States v. Childress, 58 F.3d at 721 (D.C.Cir. 1995)(citing the Pinkerton principle
of coconspirator liability); see also, United States v. Auerbach, 913 F.2d at 410 (7th Cir.
1990) (coconspirator liability); United States v. Lee, 359 F.3d 194, 209 (3d Cir. 2004)(aiding
and abetting); United States v. Stott, 245 F.3d 890, 909 (7th Cir. 2001)(aiding and abetting);
United States v. Pardue, 983 F.2d 943, 945-46 (8th Cir. 1993)(aiding and abetting); United
States v. Dischner, 974 F.2d 1502, 1521 (9th Cir. 1992)(aiding and abetting).
CRS-17
interstate or foreign nexus to the payment of the debts resulting from the gambling,
or to any interstate or foreign distribution of the proceeds of such gambling.
The Act would only apply to “business enterprises” involved in illegal gaming,
so that e-mail gambling between individuals would likely not be covered. And
Rewis, supra, seems to bar prosecution of an Internet gambling enterprise’s
customers as long as they remain mere customers.71 But an Internet gambling
venture that constitutes an illegal gambling business for purposes of section 1955,
supra, and is engaged in some form of interstate or foreign commercial activity in
furtherance of the business will almost inevitably have included a Travel Act
violation.
Racketeer Influenced and Corrupt Organizations (RICO)
Illegal gambling may trigger the application of RICO provisions. Section 1955,
the Wire Act, the Travel Act, and any state gambling felony are all RICO predicate
offenses, which expose offenders to imprisonment for not more than twenty years
and/or a fine of greater of not more than $250,000 (not more than $500,000 for an
organization) or twice the gain or loss associated with the offense, 18 U.S.C. 1963,
3571. An offender’s crime-tainted property may be confiscated, and he may be liable
to his victims for triple damages and subject to other sanctions upon the petition of
the government, 18 U.S.C. 1964. RICO makes it a federal crime for any person to:
1. conduct or participate, directly or indirectly, in the conduct of
2. the affairs of an enterprise
3. engaged in or the activities of which affect, interstate or foreign commerce
4. A. through the collection of an unlawful debt, or
B. through a pattern of racketeering activity, defined to include:
i. any act of gambling which is chargeable under State law and
punishable by imprisonment or more than 1 year;
ii. any act which is indictable under 18 U.S.C. 1084 (Wire Act);
iii. any act which is indictable under 18 U.S.C. 1952 (Travel Act);
iv. any act which is indictable under 18 U.S.C. 1955 (relating to
conducting an illegal gambling business, 18 U.S.C. 1962(c).72
“To establish the elements of a substantive RICO offense, the government must
prove (1) that an enterprise existed; (2) that the enterprise affected interstate or
foreign commerce; (3) that the defendant associated with the enterprise; (4) that the
defendant participated, directly or indirectly, in the conduct of the affairs of the
enterprise; and (5) that the defendant participated in the enterprise through a pattern
71
Contra, Blackjack or Bust: Can U.S. Law Stop Internet Gambling? 16 LOYOLA OF LOS
ANGELES ENTERTAINMENT LAW JOURNAL at 675 (“The Travel Act applies not only to
Internet casinos, but it also seems to apply to players who use interstate facilities for the
transportation of unlawful activities [i.e., their wagers]”)(the JOURNAL article does not
discuss Rewis).
72
Other subsections of 18 U.S.C. 1962 outlaw acquire or maintaining control of a
commercial enterprise through collection of an unlawful debt or pattern of racketeering and
proscribe conspiracy to commit a RICO offense, 18 U.S.C. 1962(a),(b),(d).
CRS-18
of racketeering activity by committing at least two racketeering (predicate) acts [e.g.,
18 U.S.C. 1084 (Wire Act), 18 U.S.C. 1952 (Travel Act), 18 U.S.C. 1955 (illegal
gambling business)]. To establish the charge of conspiracy to violate the RICO
statute, the government must prove, in addition to elements one, two and three
described immediately above, that the defendant objectively manifested an agreement
to participate . . . in the affairs of the enterprise.”73 This statement of the elements
addresses the more common RICO prosecution involving a pattern of racketeering
activity (i.e., predicate offenses), but the government is under no obligation to prove
pattern if the underlying misconduct is “the collection of an unlawful debt.”74
The “person” who commits a RICO offense need not be a human being, but may
be “any individual or entity capable of holding a legal or beneficial interest in
property,” 18 U.S.C. 1961(3). The “enterprise” element is defined with comparable
breath, embracing “any individual, partnership, corporation, association, or other
legal entity, and any union or group of individuals associated in fact although not a
legal entity,” 18 U.S.C. 1961(4). In spite of their sweeping scope, the elements are
distinct and a single defendant may not be simultaneously charged as both the
“person” and the “enterprise” under 18 U.S.C. 1962(c).75 Subject to this limitation,
however, a RICO enterprise may be formal or informal, legal or illegal. In order for
a group associated in fact to constitute a RICO enterprise, it must be characterized
by “an ongoing organization . . . and . . . evidence that [its] various associates
function as a continuing unit.”76
The interstate commerce element of the RICO offense may be established either
by evidence that the enterprise has conducted its affairs in interstate commerce or
73
United States v. Darden, 70 F.3d 1507, 1518 (8th Cir. 1995); see also, United States v.
Parise, 159 F.3d 790, 794 (3d Cir. 1998); Cofacredit, S.A. v. Windsor Plumbing Supply Co.,
Inc., 187 F.3d 229, 242 (2d Cir. 1999); United States v. Pipkins, 378 F.3d 1281, 1288 (11th
Cir. 2004).
74
United States v. Tocco, 200 F.3d 401, 426 (6th Cir. 2000)(indictment based on the
collection of illegal gambling proceeds). Although the “collection of unlawful debts” may
clearly include loan sharking (18 U.S.C. 891-896 relating to extortionate credit
transactions), the collection of an unlawful debt need not involve the violence or the threat
of violence required of extortionate credit transactions.
75
Wagh v. Metris Direct, Inc., 363 F.3d 821, 830 (9th Cir. 2003); Whalen v. Winchester
Production Co., 319 F.3d 225, 229 (5th Cir. 2003); United States v. Fairchild, 189 F.3d 769,
777 (8th Cir. 1999); Anatian v. Coutts Bank (Switzerland) Ltd., 193 F.3d 85, 88-9 (2d Cir.
1999); Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001)(holding,
however, that the “person” and the individual through whom a corporate enterprises acts
may be the same and need not be distinct).
76
United States v. Lee, 374 F.3d 637, 647 (8th Cir. 2004); United States v.Pipkins, 378 F.3d
1281, 1289 (11th Cir. 2004); United States v. Morales, 185 F.3d 74, 80 (2d Cir. 1999),
quoting, United States v. Turkette, 452 U.S. 576, 583 (1981); see also, United States v.
Torres, 191 F.2d 799, 805-6 (7th Cir. 1999)(“A RICO enterprise is an ongoing structure of
persons associated thought time, joined in purpose, and organized in a manner amenable to
hierarchical or consensual decision-making . . . The continuity of an informal enterprise and
the differentiation among roles can provide the requisite structure to prove the elements of
the enterprise”); United States v. Richardson, 167 F.3d 621, 625 (D.C.Cir. 1999).
CRS-19
foreign commerce or has engaged in activities that affect interstate commerce or
foreign commerce.77
The “pattern of racketeering activity” element demands the commission of at
least two predicate offenses, 18 U.S.C. 1961(5), which must be of sufficient
relationship and continuity to be described as a “pattern.”78 Related crimes, for
pattern purposes, are marked by “the same or similar purposes, results, participants,
victims, or methods of commission, or otherwise are interrelated by distinguishing
characteristics and are not isolated events.”79
The “continuity” of predicate offenses may be shown in two ways, either by
prove of the regular occurrences related misconduct over a period of time in the past
(closed ended) or by evidence of circumstances suggesting that if not stopped by
authorities they would have continued in the future (open ended).80
The courts have been reluctant to find the continuity required for a RICO pattern
for closed ended enterprises (those with no threat of future predicate offenses) unless
the enterprise’s activities spanned a fairly long period of time.81 Open-ended
77
United States v. Robertson, 514 U.S. 669, 671 (1995); proof of even a de minimis effect
on interstate commerce is sufficient where the enterprise is engaged in economic activity,
Waucaush v. Untied States, 380 F.3d 251, 256 (6th Cir. 2004); United States v. Cianci, 378
F.3d 71,83 (1st Cir. 2004); United States v. Rodriguez, 360 F.3d 949, 955 (9th Cir. 2004);
United States v. Gray, 137 F.3d 765, 773 (4th Cir. 1998).
78
“A pattern is not formed by sporadic activity. . . . [A] person cannot be subjected to the
sanctions [of RICO] simply for committing two widely separate and isolated criminal
offenses. Instead, the term `pattern’ itself requires the showing of a relationship between the
predicates and of the threat of continuing activity. It is this factor of continuity plus
relationship which combines to produce a pattern,” H.J., Inc. v. Northwestern Bell
Telephone Co., 492 U.S.229, 239 (1989)(emphasis of the Court); United States v. Polanco,
145 F.3d 536, 541 (2d Cir. 1998); United States v. Cianci, 378 F.3d 71, 88 (1st Cir. 2004).
Prior conviction of a predicate offense, however, is not required or even usual,
BancOklahoma Mortgage Corp. v. Capital Title Co., 194 F.3d 1089, 1102 (10th Cir. 1999);
cf., Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 488-93 (1985)(a private cause of
action under RICO does not require the prior conviction of a defendant).
79
H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. at 240, quoting 18 U.S.C.
3575(e); United States v. Keltner, 147 F3.d 662, 669 (8th Cir. 1998); United States v.
Torres, 191 F.3d 799, 806 (7th Cir. 1999); United States v. Bruno, 383 F.3d 65, 83-4 (2d
Cir. 2004).
80
H.J.,Inc. v. Northwestern Bell Tel.Co., 492 U.S. 229, 241 (1988)(“continuity “is both a
closed- and open-ended concept, referring either to a closed end period of repeated conduct,
or to past conduct that by its nature projects into the future with a threat of repetition”);
First Capital Asset Management v. Satinwood, Inc., 358 F.3d 159, 180 (2d Cir. 2004);
Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004).
81
First Capital Asset Management v. Satinwood, Inc., 358 F.3d at 181-82 (2d Cir.
2004)(this Court has never found a closed-ended pattern where the predicate acts spanned
fewer than two years”); Primary Care Investors, Seven v. PHP Healthcare Corp., 986 F.2d
1208, 1215 (8th Cir. 1993)(holding predicate offenses over 10-11 months insufficient and
citing cases finding several years sufficient but several periods of less than a year
insufficient).
CRS-20
continuity (found where there is a threat of future predicate offenses) is nowhere near
as time sensitive and is often found where the predicates consist of murder, drug
dealing or other law-ignoring crimes or is part of the enterprise’s regular way of
doing business.82
The RICO conspiracy and accomplice branches of the law are notable for at
least two reasons. RICO conspiracies are outlawed in a subsection of section 1962,
18 U.S.C. 1962(d), that imposes no overt act requirement. The crime is complete
upon the agreement to commit a RICO offense.83 Second, at least in some circuits,
RICO accomplices are not subject to RICO tort liability.84
Money Laundering
Congress has enacted several statutes to deal with money laundering. It would
be difficult for an illegal Internet gambling business to avoid either of two of the
more prominent, 18 U.S.C. 1956 and 1957, both of which involve financial
disposition of the proceeds of various state and federal crimes, including violation
of 18 U.S.C. 1084 (Wire Act), 18 U.S.C. 1955 (illegal gambling business), 18 U.S.C.
1952 (Travel Act), or any state gambling law (if punishable by imprisonment for
more than one year), 18 U.S.C. 1956(7)(A), 1957(f)(3), 1961(1). In fact, the courts
have frequently upheld money laundering convictions predicated upon various
gambling offenses.85 The crimes under section 1956 are punishable by imprisonment
82
United States v. Torres, 191 F.3d 799, 808 (7th Cir. 1999)(“As other courts of appeals
have noted, in cases where the acts of the defendant or the enterprise were inherently
unlawful, such as murder or obstruction of justice, and where in pursuit of inherently
unlawful goals, such as narcotics trafficking or embezzlement, the courts generally have
concluded that the requisite threat of continuity was adequately established by the nature of
the activity, even though the period spanned by the racketeering activity was short”). Open
ended continuity may also be found where the evidence suggests that only the intervention
of law enforcement authorities closed down the enterprise, United States v. Richardson, 167
F.3d 621, 626-27 (D.C.Cir. 1999); Jackson v. Bellsouth Telecommunications, 372 F.3d
1250, 1267 (11th Cir. 2004); United States v. Connolly, 341 F.3d 16, 30 (1st Cir. 2003).
83
Salinas v. United States, 522 U.S. 52, 63 (1997).
84
Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644, 656-68 (3d Cir. 1998);
Jubelirer v. MasterCard International, Inc., 68 F.Supp. 1049, 1053-54 (D.Wis. 1999)
(dismissing RICO claim against credit card company, bank and Internet casino on the
grounds, among others, that there is no RICO civil liability for those who aid and abet a
RICO violation); In re MasterCard Internaitonal Inc., Internet Gambling Litigation, 132
F.supp.2d 468, 493-95 (E.D.La. 2001)(same), aff’d, 313 F.3d 257 (5th Cir. 2002); but see,
American Automotive Accessories, Inc. v. Fishman, 991 F.Supp. 987, 993 (N.D.Ill.
1998)(“to be held liable as an aider and abettor, a person must in some sort associate himself
with the venture, participate in it as something he wishes to bring about, and seek by his
action to make it succeed”)(noting that the Seventh Circuit has yet to “comment on the
possibility of aiding and abetting liability in civil RICO actions”); Simon v. Weaver, 327
F.Supp.2d 258, 262 (S.D.N.Y. 2004)(“In order to properly allege a claim for aiding and
abetting [a RICO violation], plaintiffs must show . . .”).
85
E.g., United States v. Mick, 263 F.3d 553 (6th Cir. 2001)(upholding convictions under 18
U.S.C. 1952, 1955, 1956, and 1957); United States v. Ables, 167 F.3d 1021 (6th Cir.
1999)(upholding convictions under 18 U.S.C. 1955, 1956, and 1957); United States v. Hill,
CRS-21
for not more than twenty years or a fine of the greater of not more than twice value
of the property involved in the transaction or not more than $500,000, 18 U.S.C.
1956(a); those under section 1957 carry a prison term of not more than ten years or
a fine of the greater of twice the amount involved in the offense or not more than
$250,000 (not more than $500,000 for an organization), 18 U.S.C. 1957(b), 3571.
Any property involved in a violation of either section is subject to the civil and
criminal forfeiture provisions of 18 U.S.C. 981, 982.
Laundering the Proceeds
Section 1956 is really several distinct crimes: (1) laundering with intent to
promote an illicit activity such as an unlawful gambling business; (2) laundering to
evade taxes; (3) laundering to conceal or disguise; (4) structuring financial
transactions (smurfing) to avoid reporting requirements; (5) international laundering;
and (5) “laundering” conduct by those caught in a law enforcement sting.
Promotion. In its most basic form the promotion offense essentially involves
plowing the proceeds of crime back into an illegal enterprise. Like most of the
crimes under section 1956, the elements of the promotion offense begin with a
financial transaction and the knowledge that the proceeds involved flow from a
predicate offense like illegal gambling:
1. knowing
A. that the property involved in a financial transaction,
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct
such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. with the intent to promote the carrying on of specified unlawful activity.
(18 U.S.C. 1956(a)(1)(A)(i)).
The knowledge element is the subject to special definition which allows a
conviction without the necessity of proving that the defendant know the exact
particulars of the underlying offense or even its nature.86 The “proceeds” may be
167 F.3d 1055 (6th Cir. 1999)(same); United States v. Owens, 159 F.3d 221 (6th Cir. 1998)
(upholding convictions under 18 U.S.C. 1952, 1955, and 1956); United States v. Boyd, 149
F.3d 1062 (10th Cir. 1998)(upholding convictions under 18 U.S.C. 1955 and 1956); see
also, United States v. Iacaboni, 363 F.3d 1 (1st Cir. 2004)(affirming in part and reversing in
part a lower court forfeiture decision based upon the defendant’s plea to violations of 18
U.S.C. 1955 and 1956). For a more extensive discussion of section 1956 see, Eighteenth
Survey of White Collar Crime: Money Laundering, 40 AMERICAN CRIMINAL LAW REVIEW
847 (2003); Validity, Construction, and Application of 18 USCS §1956, Which Criminalizes
Money Laundering, 121 ALR FED 525 (1994 & 2004 Supp.).
86
“The term ‘knowing that the property involved in a financial transaction represents the
proceeds of some form of unlawful activity’ means that the person knew the property
involved in the transaction represented proceeds from some form, though not necessarily
which form, of activity that constitutes a felony under State, Federal, or foreign law,
regardless of whether or not such activity is specified in paragraph (7),” 18 U.S.C.
CRS-22
tangible or intangible, e.g., cash or debt, things of value or things with no intrinsic
value, e.g., checks written on depleted accounts.87
“Financial transaction” for purposes of section 1956 make take virtually any
shape that involves the disposition of something represent the proceeds of an
underlying crime,88 including disposition as informal has handing cash over to
someone else.89
The jurisdictional requirements of the section may be satisfied in two ways —
with a transaction which affects commerce or with a financial institution whose
activities affect commerce. In either case, the effect on interstate or foreign
commerce need be no more than de minimis to satisfy the jurisdictional
requirement.90
The “promotion” element of the offense can be satisfied by proof that the
defendant used the proceeds to continue a pattern of criminal activity91 or to enhance
1956(c)(1); United States v. Rivera-Rodriguez, 318 F.3d 268, 271-72 (1st Cir. 2003); United
States v. Hill, 167 F.3d 1055, 1065-68 (6th Cir. 1999).
87
United States v. Akintonbi, 159 F.3d 401, 403 (9th Cir. 1998). There is some dispute over
whether the term includes revenues, or only profits, or something in between, United States
v. Grasso, 381 F.3d, 160, 166-69 (3d Cir. 2004)(citing cases reflecting conflicting views).
88
“The term ‘financial transaction’ means (A) a transaction which in any way or degree
affects interstate or foreign commerce (i) involving the movement of funds by wire or other
means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of
title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use
of a financial institution which is engaged in, or the activities of which affect, interstate or
foreign commerce in any way or degree,” 18 U.S.C. 1956(c)(4).
“The term ‘transaction’ includes a purchase, sale, loan, pledge, gift, transfer, delivery,
or other disposition, and with respect to a financial institution includes a deposit,
withdrawal, transfer between accounts, exchange of currency, loan, extension of credit,
purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use
of a safe deposit box, or any other payment, transfer, or delivery by, through, or to a
financial institution, by whatever means effected,” 18 U.S.C. 1956(c)(3).
89
United States v. Gough, 152 F.3d 1172, 1173 (9th Cir. 1998); United States v. Garcia
Abrego, 141 F.3d 142, 160 (5th Cir. 1998); United States v. Roy, 375 F.3d 21, 23-4 (1st Cir.
2004)(exchange between individuals of $100 bills for currency of smaller denominations
to facilitate drug trafficking).
90
United States v. Ables, 167 F.3d 1021, 1029 (6th Cir. 1999); United States v. Owens, 167
F.3d 739, 755 (1st Cir. 1999); United States v. Bollin, 264 F.3d 391, 408 (4th Cir. 2001);
United States v. Sabbeth, 262 F.3d 207, 218-19 (2d Cir. 2001).
91
United States v. Masten, 170 F.3d 790, 797-98 (7th Cir. 1999)(payments to early victims
of a pyramid scheme kept the scheme alive and enabled the defendant to ensnare subsequent
victims); United States v. Parker, 364 F.3d 934, 947-50 (8th Cir. 2004)(payment for surplus
instrumental as part of an ongoing fraud); United States v. Miles, 360 F.3d 472, 478 (5th Cir.
2004)(adding the observation that when an enterprise is as a whole illegitimate even
otherwise ordinary and lawful expenditures may support a promotion money laundering
charge).
CRS-23
the prospect of future criminal activity.92
Concealment. The “concealment” offense shares several common elements
with the other offenses in section 1956.93 The courts have made it clear that
conviction for the concealment offense requires proof of something more than simply
spending the proceedings of a predicate offense.94 That having been said, the line
between innocent spending and criminal laundering is not always easily discerned.
“Evidence that may be considered when determining whether a transaction was
designed to conceal includes: [deceptive] statements by a defendant probative of
intent to conceal; unusual secrecy surrounding the transactions; structuring the
transaction to avoid attention; depositing illegal profits in the bank account of a
legitimate business; highly irregular features of the transaction; using third parties to
conceal the real owner; a series of unusual financial moves cumulating in the
transaction; and expert testimony on practices of criminals.”95
92
United States v. King, 169 F.3d 1035, 1040 (6th Cir. 1999)(drug dealer’s payment for
past shipments preserved the defendant’s opportunity to acquire additional shipments);
United States v. Williamson, 339 F.3d 1295, 1302 (11th Cir. 2003).
93
Concealment occurs when anyone:
1. knowing
A. that the property involved in a financial transaction
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct
such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. knowing that the transaction is designed in whole or in part
to conceal or disguise the nature, location, the source, the ownership, or the
control of the proceed of specified unlawful activity. 18 U.S.C. 1956(a)(1)(B)
(i) (common elements in italics); United States v. Frank, 354 F.3d 910, 919 (8th Cir.
2004)(“The money-laundering statute required the government to prove that each of the
defendants conducted or attempted to conduct a financial transaction, knowing that the
property involved in the transaction represented the proceeds of unlawful activity, and
knowing the transaction was designed to conceal or disguise the nature, location, source,
ownership, or control of the proceeds of the unlawful activity”).
94
United States v. Anderson, 189 F.3d 1201, 1209 (10th Cir. 1999); United States v.
Stephenson, 183 F.3d 110, 121 (2d Cir. 1999).
95
United States v. Burns, 162 F.3d 840, 848-49 (5th Cir. 1998), quoting, United States v.
Garcia-Emanuel, 14 F.3d 1469, 1475-476 (10th Cir. 1994).
CRS-24
Tax evasion, smurfing and international laundering. The tax evasion96
and structured transactions (“smurfing”) offenses97 shadow the promotion and
concealment offenses. A tax evasion, laundering prosecution requires the
government to show that the defendant acted intentionally rather than inadvertently,
but not that the defendant knew that his conduct violated the tax laws.98 Similarly,
conviction for the smurfing offense does not require a showing that the defendant
knew that his conduct was criminal as long as the government establishes that the
defendant acted with the intent to frustrate a reporting requirement.99 The
international laundering crime replicates the elements of the promotion, concealment
and smurfing offenses (but not the tax evasion offense) and adds an international
transportation element.100 Of course, the proof the transportation element alone is
96
“1. knowing
A. that the property involved in a financial transaction
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct
such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. with intent to engage in conduct constituting a violation of section 7201 or
7206 of the Internal Revenue Code of 1986,” 18 U.S.C. 1956(a)(1)(A)(ii)(elements in
common with the promotion offense in italics).
97
1. knowing
A. that the property involved in a financial transaction
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct
such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. knowing that the transaction is designed in whole or in part to avoid a
transaction reporting requirement under State or Federal law”, 18 U.S.C.
1956(a)(1)(B)(ii)(elements shared with the concealment offense in italics).
98
United States v. Zanghi, 189 F.3d 71, 77-8 (1st Cir. 1999).
99
United States v. Hill, 167 F.3d 1055, 1070 (6th Cir. 1999); United States v. Morales, 108
F.3d 1213, 1221 (10th Cir. 1997); United States v. Bowman, 235 F.3d 1113, 1117-119 (8th
Cir. 2000).
100
The prohibition applies to anyone who:
1. A. transports,
B. transmits, or
C. transfers, or
D. attempts to transport, transmit, or transfer
2. a monetary instrument or funds
3. from a place in the United States to or through a place outside the United States or
to a place in the United States from or through a place outside the United States
A. with the intent to promote the carrying on of specified unlawful activity; or
B. knowing that the monetary instrument or funds involved in the transportation,
transmission, or transfer represent the proceeds of some form of unlawful activity and
knowing that such transportation, transmission, or transfer is designed in whole or in
part
i. to conceal or disguise the nature, the location, the source, the ownership,
or the control of the proceeds of specified unlawful activity; or
CRS-25
insufficient without the evidence of an intent to promote, conceal or smurf.101
The final crime found in section 1956 is a “sting” offense, the proscription
drafted to permit the prosecution of money launderers taken in by under cover
officers claiming have proceeds in need of cleansing from illegal gambling or other
predicate offenses.
Spending the Proceeds. Section 1956 does not make spending tainted
money a crime, but section 1957 does. Using most of the same definitions as section
1956, the elements of 1957 cover anyone who:
1. A. in the United States,
B. in the special maritime or territorial jurisdiction of the United
States, or
C. outside the United States if the defendant is an American,
2. knowingly
3. A. engages or
B. attempts to engage in
4. a monetary transaction102
5. [in or affecting interstate commerce]
6. in criminally derived property that
ii. to avoid a transaction reporting requirement under State or Federal law.
18 U.S.C. 1956(a)(2); United States v. Bieganowski, 313 F.3d 264, 279 (5th Cir.
2002)(“An offense under section 1956(a)(2)(B)(i) is almost identical [to an offense
under section 1956(a)(1)(B)(i)], with the exception that the transaction in question
must be from a place in the United States to a place outside the United States”); United
States v. Caplinger, 339 F.3d 226, 232-33 (4th Cir. 2003)(citing authority under the
domestic provisions of section 1956(a)(1) in its construction of the international
provisions of section 1956(a)(2)).
101
102
United States v. Pitt, 193 F.3d 751, 762 (3d Cir. 1999).
“[T]he term ‘monetary transaction’ means the deposit, withdrawal, transfer, or
exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument
(as defined in section 1956(c)(5) of this title)* by, through, or to a financial institution (as
defined in section 1956 of this title),** including any transaction that would be a financial
transaction under section 1956(c)(4)(B) of this title,*** but such term does not include any
transaction necessary to preserve a person’s right to representation as guaranteed by the
sixth amendment to the Constitution,” 18 U.S.C. 1957(f)(1).
* “[T]he term ‘monetary instruments’ means (i) coin or currency of the United States
or of any other country, travelers’ checks, personal checks, bank checks, and money orders,
or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such
form that title thereto passes upon delivery,” 18 U.S.C. 1956(c)(5).
** “[T]he term ‘financial institution’ has the definition given that term in section
5312(a)(2) of title 31, United States Code, or the regulations promulgated thereunder,” 18
U.S.C. 1956(c)(6). The title 31 definition quoted, supra, includes banks, car dealers,
jewelers, real estate agents, brick and mortar casinos and most other institutions likely to be
involved in a transaction involve more than $10,000.
*** “[T]he term ‘financial transaction’ means . . . (B) a transaction involving the use
of a financial institution which is engaged in, or the activities of which affect, interstate or
foreign commerce in any way or degree,” 18 U.S.C. 1956(c)(4)(B).
CRS-26
A. is of a greater value than $10,000 and
B. is derived from specified unlawful activity. 18 U.S.C. 1957(a),(d),(f).
The government’s jurisdictional burden is the same one it must bear for section
1956 and therefore is minimal.103 The knowledge requirement receives similar
treatment. Thus, the government must prove that the defendant knew the monetary
instrument came from some criminal activity,104 but not that the defendant knew that
the underlying crime was a money laundering predicate.105
Constitutional Considerations
There have been suggestions that prosecution of illegal Internet gambling raises
various constitutional issues. Principal among these are questions as to legislative
power under the Commerce Clause, restrictions imposed by the First Amendment’s
guarantee of free speech, and due process concerns about the regulation of activities
occurring at least in part overseas.
Commerce Clause
Congress possesses no legislative power that cannot be traced to the
Constitution, U.S.Const. Amends. IX, X. Among its Constitutionally enumerated
powers, Congress enjoys the authority “To regulate Commerce with foreign Nations,
and among the several States, and with the Indian Tribes . . . [and] To make all Laws
which shall be necessary and proper for carrying into Execution the foregoing Powers
. . . .” U.S.Const. Art. I, §8, cls.3, 18. Over the years, the Supreme Court regularly
confirmed the enormous breath of Congress’s legislative prerogatives under the
Commerce Clause. Within the last decade, however, it has announced a series of
decisions pointed out that Congress’ Commerce power is not without limit.
United States v. Lopez, 514 U.S. 549 (1995), and United States v. Morrison, are
perhaps the best know of these. Lopez held that the Congress lacked the authority
under the Commerce Clause to enact the Gun-Free School Zones Act, 18 U.S.C.
922(q)(1988 ed., Supp. II), which outlawed possession of a firearm within 1000 feet
of a school, 514 U.S. at 551. In doing so, Lopez mapped Congress’ Commerce
Clause powers:
First, Congress may regulate the use of the channels of interstate
commerce. . . . Heart of Atlanta Motel, [Inc. v. United States, 379 U.S. 241, 256
(1964)](“`[T]he authority of Congress to keep the channels of interstate
103
United States v. Ables, 167 F.3d 1021, 1030-31 (6th Cir. 1999).
104
United States v. Diamond, 378 F.3d 720, 728 (7th Cir. 2004)(“In order to find Diamond
guilty of this offense [under section 1957], the government needed to prove that she derived
property from a specified unlawful activity and that she engaged in a monetary transaction”).
105
“In a prosecution for an offense under this section, the Government is not required to
prove the defendant knew that the offense from which the criminally deprived property was
derived was specified unlawful activity,” 18 U.S.C. 1957(c); United States v. Hawkey, 148
F.3d 920, 925 (8th Cir. 1998); United States v. Carucci, 364 F.3d 339, 343 (1st Cir. 2004).
CRS-27
commerce free from immoral and injurious uses has been frequently sustained
and is no longer open to question.’”).
Second, Congress is empowered to regulate and protect the
instrumentalities of interstate commerce, or persons or things in interstate
commerce, even through the threat may come only from intrastate activities.
See. e.g., . . . Perez [v. United States, 402 U.S. 146, 150 (1971)] (“[F]or
example, the destruction of an aircraft (18 U.S.C. §32), or . . . thefts from
interstate shipments (18 U.S.C. §659").
Finally, Congress’ commerce authority includes the power to regulate those
activities having a substantial relation to interstate commerce, i.e., those
activities that substantially affect interstate commerce. 514 U.S. at 558-59
(several citations of the Court omitted).
Since the School Zone Act addressed neither the channels nor the content of
commerce, it had to find coverage under the power to regulate matters that
“substantially affect” interstate or foreign commerce. This it could not do. It was
devoid of any economic component and so could claim no kinship to earlier cases
approving Congressional regulation of various forms of intrastate economic activity
that substantially affected interstate commerce, such as, “regulation of intrastate coal
mining, intrastate extortionate credit transactions [loan sharking], restaurants
utilizing substantial interstate supplies, inns and hotels catering to interstate guests,
and production and consumption of homegrown wheat,” 514 U.S. at 559-60.
Moreover, the Act lacked the kind of explicit restraints or guidelines that might
have confined its application to instances more clearly within the Commerce power.
Its criminal proscription contained no “commerce” element; it did not, for example,
outlaw possession of a firearm, which had been transported in interstate commerce,
within 1000 feet of a school. Its enactment occurred without the accompaniment of
legislative findings or declarations of purpose that might have guided appropriate
enforcement limitations. The Act’s overreaching was all the more troubling because
it sought to bring federal regulation to school activities, an area where the states
“historically have been sovereign.”106
Morrison echoed Lopez, quoting it extensively in the course of an opinion that
found that the Commerce Clause did not empower Congress to create a federal civil
remedy for the victims of gender-motivated violence, 529 U.S. at 607-19. Other
opinions confirm that the Commerce Clause must be read in light of the principles
of federalism reflected in the Tenth Amendment. The Clause does not empower
Congress to compel the states to exercise their sovereign legislative or executive
powers to implement a federal regulatory scheme.107
106
514 U.S. at 64; 514 U.S. at 83 (Kennedy & O’Connor, JJ., concurring)(“The statute now
before us forecloses the States from experimenting and exercising their own judgment in an
area to which States lay claim by right of history and expertise, and it does so by regulating
an activity beyond the realm of commerce in the ordinary and usual sense of that term”).
107
New York v. United States, 505 U.S. 144, 188 (1992)(“The Federal Government may
not compel the States to enact or administer a federal regulatory program”); Printz v. United
States, 521 U.S. 898, 935 (1997)(“The Federal Government may neither issue directives
requiring the states to address particular problems, nor command the States’ officers, or
CRS-28
These limitations, notwithstanding, the federal appellate courts have concluded,
thus far, that the federal gambling statutes, directed as they are against an economic
activity, come safely within Congress’ legislative authority under the Commerce
Clause.108
First Amendment
Gambling implicates First Amendment free speech concerns on two levels.
Gambling is communicative by nature. Gambling also relies on advertising and a
wide range of auxiliary communication services. Historically, gambling itself has
been considered a vice and consequently beyond the protection of the First
Amendment. There is every reason to believe that illegal gambling remains beyond
the shield of the First Amendment. Gone, however, is the notion that the power to
outlaw a vice includes the power to outlaw auxiliary speech when the underlying vice
remains unregulated.109 The Supreme Court made this readily apparent when it
approved an advertising ban on gambling illegal at the point of broadcast,110 but
invalidated an advertising ban on gambling lawful at the point of broadcast111
those of their political subdivisions, to administer or enforce a federal regulatory program”).
This does not mean that the states are beyond federal regulation when they engage in
interstate, or interstate-impacting, commercial activity, Reno v. Condon, 528 U.S. 141, 14851 (2000).
108
United States v. Lee, 173 F.3d 809, 810-11 (11th Cir. 1999)(18 U.S.C. 1955) (limiting
proscriptions to gambling businesses provides the nexus to interstate commerce impact);
United States v. Zizzo, 120 F.3d 1338, 1350 (7th Cir. 1997) (same); United States v. Wall,
92 F.3d 1444, 1449 (6th Cir. 1996) (same); United States v. Riddle, 249 F.3d 529, 537 (6th
Cir. 2001)(18 U.S.C. 1955, 1962)(conduct of a commercial activity, a gambling business,
precludes a successful Lopez challenge); United States v. Boyd, 149 F.3d 1062, 1065-66
(10th Cir. 1998)(18 U.S.C. 1955) (the statute regulates a commercial activity (gambling),
comes with Congressional findings concerning the activity’s impact on interstate commerce,
and contains elements that weed out run of the mill, low level gambling cases — all factors
absent in Lopez).
109
Greater New Orleans Broadcasting Ass’n, Inc. v. United States, 527 U. S. at 182 noting
that 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996), “rejected the argument that
the power to restrict speech about certain socially harmful activities was as broad as the
power to prohibit such conduct.”
110
111
United States v. Edge Broadcasting Co. 509 U.S. 418 (1993).
Greater New Orleans Broadcasting Ass’n, Inc. v. United States, 527 U.S. 173 (1999).
Greater New Orleans adopted the Central Hudson test, quoted above in part, “At the outset,
we must determine whether the expression is protected by the First Amendment. For
commercial speech to come within that provision, it at least must concern lawful activity and
not be misleading. Next, we ask whether the asserted governmental interest is substantial.
If both inquiries yield positive answers, we must determine whether the regulation directly
advances the governmental interest asserted, and whether it is not more extensive than is
necessary to serve that interest,” Greater New Orleans Broadcasting Ass’n, Inc. v. United
States, 527 U.S. at 183.
CRS-29
Although the Court’s decisions acknowledges the ambivalence of American
gambling policies,112 they do not appear to threaten the basic premise that the First
Amendment permits Congress to outlaw gambling in any form and to ban any speech
incidental to illegal gambling.
Due Process
Commentators have suggested two possible due process issues triggered by
application of federal criminal law to off shore Internet gambling. They point to the
due process limitations on the exercise of personal jurisdiction over the defendant or
subject matter jurisdiction over the gambling activity.113
Personal jurisdiction. Questions of personal jurisdiction are the more
familiar of the two. They revolve around issues, often addressed in civil cases,
concerning the reach of a state’s long arm statute. The Supreme Court has explained
that:
The Due Process Clause protects an individual’s liberty interest in not
being subject to the binding judgments of a forum with which he has established
no meaningful ‘contacts, ties, or relations.’ International Shoe Co. v.
Washington, 326 U.S. [310], at 319. By requiring that individuals have fair
warning that a particular activity may subject them to the jurisdiction of a
foreign sovereign, the Due Process Clause gives a degree of predictability to the
legal system that allows potential defendants to structure their primary conduct
with some minimum assurance as to where that conduct will and will not render
them liable to suit,’ World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
297 (1980) . . . .
[T]he constitutional touchstone remains whether the defendant
purposefully established minimum contacts in the forum State. Although it has
been argued that foreseeability of causing injury in another State should be
sufficient to establish such contacts there when policy considerations so require,
the Court has consistently held that this kind of foreseeability is not a sufficient
benchmark for exercising personal jurisdiction. Instead, the foreseeability that
is critical to due process analysis . . . is that the defendant’s conduct and
connection with the forum State are such that he should reasonably anticipate
being haled into court there. Burger King Corp. v. Rudzewicz, 472 U.S. 462,
471-74 (1985)(some internal quotation marks and citations omitted).
112
“The operation of [18 U.S.C.] 1304 and its attendant regulatory regime is so pierced by
exemptions and inconsistencies that the Government cannot hope to exonerate it,” 527 U.S.
at 190.
113
Schwartz, The Internet Gambling Fallacy Craps Out, 14 BERKELEY TECHNOLOGY LAW
JOURNAL 1021, 1039-46 (1999); Do Not Bet on Unilateral Prohibition of Internet Gambling
to Eliminate Cyber-Casinos, 1999 UNIVERSITY OF ILLINOIS LAW REVIEW 1045, 1062-65;
Keller, The Game’s the Same: Why Gambling in Cyberspace Violates Federal Law, 108
YALE LAW JOURNAL 1569, 1596-1602 (1999); World Wide Wager: The Feasibility of
Internet Gambling Regulation, 8 SETON HALL CONSTITUTIONAL LAW JOURNAL 815, 827-48
(1998).
CRS-30
The federal appellate courts, called upon to apply these principles in Internet
commercial litigation, have concluded that suing nonresident parties doing business
on the Internet where their customers are found does not offend due process
requirements. Yet, more than a passive Internet site is required; the critical test is
the level of commercial activity associated with the website.114
Subject matter jurisdiction. Subject matter, although raised less often, is
closely related. It involves the question of when, in fairness, nonresidents can be
bound by local law for conduct they committed elsewhere. Due process aside, the
overseas application of federal criminal law applies overseas is a matter of
Congressional choice rather than constitutional requirement.115 Sometimes Congress
has said when a statute is to apply abroad, the money launder statutes for example,
18 U.S.C. 1956(f), 1957(d).116 Where Congress enacts a statute in the exercise of
authority to regulate foreign commerce, it may be applied to those aspects of the
foreign commerce of the United States that occur overseas, for example, gambling
involving this country and any other.117 Even where a statute itself is silent as to
overseas application, under some circumstances the courts will assume Congress
intended the law to have extraterritorial application.118
114
Gator.Com Corp. v. L.L.Bean, Inc., 341 F.3d 1072, 1081 (9th Cir. 2003); Carefirst of
Maryland, Inc. v. Carefirst Pregnancy Centers, Inc., 334 F.3d 390, 398-99 (4th Cir. 2003);
Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292, 1296 (10th Cir.
1999); Mink v. AAAA Development LLC, 190 F.3d 333, 336-37 (5th Cir. 1999); AlitaliaLinee Aeree Italiane v. Casinoalitalia.Com., 128 F.Supp.2d 340, 349-50 (E.D.Va. 2001);
see also, State v. Granite Gate Resorts, Inc., 568 N.W.2d 715, 718 (Minn.App. 1997), aff’d,
576 N.W.2d 747 (Minn. 1998).
115
United States v. Yousef, 327 F.3d 56, 86 (2d Cir. 2003); United States v. Neil, 312 F.3d
419, 421 (9th Cir. 2002); cf., EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991);
but see, United States v. Columba-Colella, 604 F.2d 3546, 360 (5th Cir. 1979).
116
“There is extraterritorial jurisdiction over the conduct prohibited by this section if – (1)
the conduct is by a United States citizen or, in the case of a non-United States citizen, the
conduct occurs in part in the United States; and (2) the transaction or series of related
transactions involves funds or monetary instruments of a value exceeding $10,000,” 18
U.S.C. 1956(f); section 1957 establishes extraterritorial jurisdiction when “the offense under
this section takes place outside the United States and such special jurisdiction, but the
defendant is a United States person (as defined in section 3077 of this title, but excluding
the class described in paragraph (2)(D) of such section).”
117
United States v. Ross, 1999 WL 782749 (S.D.N.Y. Sept. 16, 1999)(refusal to dismiss
an indictment charging violations of 18 U.S.C. 1084 arising out of operation of an Internet
gambling operation centered in Curacao but accepting wagers from the United States).
118
United States v. Bowman, 260 U.S. 74 (1922); United States v. Ford, 273 U.S. 593
(1927). To do so, the courts must overcome the natural assumption that a nation’s laws
apply within and only within its boundaries and that the laws of no other nation apply there.
To determine if Congress enacted a particular statute with a contrary intent, the courts will
look to the purpose for the statute, the language used in it, and whether international law
provides a principle that will support extraterritorial application. For a more extensive
discussion see, Extraterritorial Application of American Criminal Law, CRS REP. No. 94166 (Sept. 2, 2002).
CRS-31
The authority of Congress to establish extraterritorial jurisdiction is limited by
due process,119 but only a few lower court cases have attempted to explain the
boundaries. Those cases suggest that due process insists that the offshore application
of federal criminal law be limited to those instances where there is some nexus to the
United States, some factor to alert an individual overseas of the need to avoid the
conduct condemned in our law.120
119
United States v. Yousef, 327 F.3d 56, 111 (2d Cir. 2003); United States v. Medjuck, 48
F.3d 1107, 1110-111 (9th Cir. 1995); United States v. Martinez-Hidalgo, 993 F.2d 1052,
1056 (3d Cir. 1993); United States v. Robinson, 843 F.2d 1, 6-7 (1st Cir. 1998); United
States v. Columba-Corella, 604 F.2d 356, 358-61 (5th Cir. 1979).
120
United States v. Davis, 905 F.2d 245, 249 n.2 (9th Cir. 1990) (“International law
principles may be useful as a rough guide of whether a sufficient nexus exists between the
defendant and the United States so that application of the statute in question would not
violate due process”). Whether notice is sufficient and how much process is due will
depend upon the circumstances of a given case, United States v. Martinez-Hidalgo, 993 F.2d
1052, 1056-57 (3d Cir. 1993) (noting that the prosecution of universally condemned conduct
does not offend due process even in absence of a nexus to the United States); United States
v. Juda, 46 F.3d 961, 966-67 (9th Cir. 1995)(due process does not require proof of a nexus
to the United States for misconduct committed aboard a “stateless” vessel since by failing
to claim registry under the laws of a specific country the vessel is known under international
law to have subjected itself to the laws of every nation); United States v. Suerte, 291 F.3d
366, 370-71 (5th Cir. 2002)(due process does not require a nexus between a foreign citizen
and the United States when the misconduct has occurred aboard a vessel whose nation of
registry as consented to the application of U.S. law).
CRS-32
Appendices
I. State Anti-Gambling Laws: Citations
ALA.CODE §§13A-12-20 to 13A-12-92;
ALASKA STAT. §§11.66.200 to 11.66.280;
ARIZ. REV.STAT.ANN. §§13-3301 to 13-3312;
ARK.CODE ANN. §§5-66-101 to 5-66-119;
CAL.PENAL CODE §§319 to 337z;
MONT.CODE ANN. §§23-5-110 to 23-5-810;
NEB.REV.STAT. §§28-1101 to 28-1117;
NEV.REV.STAT. §§462.250 to 462.330;
N.H.REV.STAT.ANN. §§647:1 to 647:2;
N.J.STAT.ANN. §§2C:37-1 to 2C:37-9;
COLO.REV.STAT.ANN. §§18-10-101 to 18-10-108;
CONN.GEN.STAT.ANN. §§53-278a to 53-278g;
DEL.CODE ANN. tit.11 §§1410 to 1432;
FLA.STAT.ANN. §§849.01 to 849.46;
GA.CODE ANN. §§16-12-20 to 16-12-62;
N.M.STAT.ANN. §§30-19-1 to 30-19-7.2;
N.Y.PENAL LAW §§225.00 to 225.40;
N.C.GEN.STAT. §§14-289 to 14-309.20;
N.D.CENT.CODE §§12.1-28-01 to 12.1-28-02;
OHIO REV.CODE ANN. §§2915.01 to 2915.13;
HAW.REV.STAT. §§712-1220 to 712-1231;
IDAHO CODE §§18-3801 to 18-3810;
ILL.COMP.LAWS ANN. ch.720 §§5/28-1 to 5/28-9;
IND.CODE ANN. §§35-45-5-1 to 35-45-5-10;
IOWA CODE ANN. §§727.5 to 725.16;
OKLA.STAT.ANN. tit.21 §§941 to 996.3;
ORE.REV.STAT. §§167.108 to 167.167;
PA.STAT.ANN. tit.18 §§5512 to 5514;
R.I.GEN.LAWS §§11-19-1 to 11-19-45; 11-51-1 to 11-51-2;
S.C.CODE ANN. §§16-19-10 to 16-19-160;
KAN.STAT.ANN. §21-4302 to 21-4308;
KY.REV.STAT.ANN. §§528.010 to 528.120;
LA.REV.STAT.ANN. §§14:90 to 14:90.4;
ME.REV.STAT.ANN. tit.17-A §§951 to 961;
MD.CRIM.CODE ANN. §§12-101 to 12-307;
S.D.COD.LAWS ANN. §§22-25-1 to 22-25-51; 22-25A-1 to
22-25A-15;
TENN.CODE ANN. §§39-17-501 to 39-17-610;
TEX.PENAL CODE ANN. arts. 47.01 to 47.10;
UTAH CODE ANN. §§76-10-1101 to 76-10-1109;
VT.STAT.ANN. tit.13 §§2101 to 2177;
MASS.GEN.LAWS ANN. ch.271 §§1 to 50;
MICH.COMP.LAWS ANN. §§750.301 to 750.315a, 759.330 to
750.331, 750.372 to 750.376a;
MINN.STAT.ANN. §§609.75 to 609.763.
MISS.CODE ANN.§§97-33-1 to 97-33-49;
MO.ANN.STAT. §§572.010 to 572.125;
VA.CODE ANN. §§18.2-325 to 18.2-340.38;
WASH.REV.CODE ANN. §§9.46.10 to 9.46.903;
W.VA.CODE §§61-10-1 to 61-10-31;
WIS.STAT.ANN. §§945.01 to 945.13;
WYO.STAT. §§6-7-101 to 6-7-104.
CRS-33
II. Federal Anti-Gambling Laws: Citations
8 U.S.C. 1101(a)(43)(D),(J)(definition of aggravated felony (grounds for deportation of an alien)
includes violations of 18 U.S.C. 1956 & 1957 (money laundering) and 18 U.S.C. 1084(interstate
transmission of gambling information), 1955 (gambling business), 1962 (RICO))
8 U.S.C. 1101(f)(4),(5)(no one whose income is derived from gambling and no one with 2 or more
gambling convictions can be consider of good moral character)(grounds to deny entry into the U.S.)
8 U.S.C. 1182(a)(2)(D)(iii)(excludable aliens include those coming to the U.S. to engage in
commercialized vice)(grounds for denying entry and for deportation of aliens who were excludable
at the time of entry)
12 U.S.C. 25a (national banks may not participate in lotteries or related activities)
12 U.S.C. 339 (state member banks (members of Federal Reserve) may not participate in lotteries or
related activities)
12 U.S.C. 1463 (federal savings associations may not participate in lotteries or related activities)
12 U.S.C. 1829a (state nonmember but federally insured banks may not participate in lotteries or
related activities)
15 U.S.C. 1171 to 1178 (unlawful interstate or international transportation of gambling devices)
15 U.S.C. 3001 to 3007 (Interstate Horseracing Act)
18 U.S.C. 224 (bribery with intent to influence the outcome of a sporting event)
18 U.S.C. 1081 to 1083 (gambling ships)
18 U.S.C. 1084 (interstate or international transmission of wagering information)
18 U.S.C. 1301 (interstate or international transportation of lottery tickets)
18 U.S.C. 1302 (mailing lottery tickets or related matter)
18 U.S.C. 1303 (postal officials acting as lottery agents)
18 U.S.C. 1304 (broadcasting lottery information)
18 U.S.C. 1305 (fishing contests exempted)
18 U.S.C. 1306 (penalties for violating 12 U.S.C. 25a, 339, and 1829a)
18 U.S.C. 1307 (exemptions for state-run lotteries)
18 U.S.C. 1511 (obstructing state or local law enforcement officials to facilitate an illegal gambling
business)
18 U.S.C. 1952 (interstate or foreign travel or use of the mails to facilitate illegal activities defined to
include business enterprises involving gambling)
18 U.S.C. 1953 (interstate or foreign transportation of wagering paraphernalia)
18 U.S.C. 1955 (engaging in an illegal gambling business)
18 U.S.C. 1956 (money laundering of funds associated with any of a list of predicate offenses which
includes), by way of 18 U.S.C. 1961, 18 U.S.C. 1955)
18 U.S.C. 1957 (engaging in financial transactions involving funds derived from any of the crimes in
the money laundering predicate list, e.g., 18 U.S.C. 1955)
18 U.S.C. 1959 (violent crimes in aid of racketeering defined to include 18 U.S.C. 1955, again by way
of 18 U.S.C. 1961)
18 U.S.C. 1961-1965 (racketeer influenced and corrupt organizations (RICO) prohibits patterned use
of predicate crimes to acquire or operate an enterprise affecting interstate or foreign commerce;
predicate crime list includes 18 U.S.C. 1955)
19 U.S.C. 1305 (prohibits the importation of lottery tickets or advertisements for lotteries, inter alia)
25 U.S.C. 2701 to 2721 (regulation of Indian gaming)
26 U.S.C. 4401 to 4405 (federal taxes on wagers)
26 U.S.C. 4411 to 4424 (gambling occupation tax)
26 U.S.C. 5723 (tobacco products manufactured in or imported into the U.S. may not include lottery
tickets)
28 U.S.C. 3701 to 3704 (protection of professional and amateur sports from gambling)
39 U.S.C. 3005 (restrictions on mailing lottery-related)
CRS-34
III. Selected Federal Anti-Gambling Laws: Text
18 U.S.C. 1084. Transmission of wagering information; penalties
(a) Whoever being engaged in the business of betting or wagering knowingly uses a wire
communication facility for the transmission in interstate or foreign commerce of bets or wagers or
information assisting in the placing of bets or wagers on any sporting event or contest, or for the
transmission of a wire communication which entitles the recipient to receive money or credit as a result
of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this
title or imprisoned not more than two years, or both.
(b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign
commerce of information for use in news reporting of sporting events or contests, or for the
transmission of information assisting in the placing of bets or wagers on a sporting event or contest
from a State or foreign country where betting on that sporting event or contest is legal into a State or
foreign country in which such betting is legal.
(c) Nothing contained in this section shall create immunity from criminal prosecution under any
laws of any State.
(d) When any common carrier, subject to the jurisdiction of the Federal Communications
Commission, is notified in writing by a Federal, State, or local law enforcement agency, acting within
its jurisdiction, that any facility furnished by it is being used or will be used for the purpose of
transmitting or receiving gambling information in interstate or foreign commerce in violation of
Federal, State or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such
facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or
criminal, shall be found against any common carrier for any act done in compliance with any notice
received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the
right of any person affected thereby to secure an appropriate determination, as otherwise provided by
law, in a Federal court or in a State or local tribunal or agency, that such facility should not be
discontinued or removed, or should be restored.
(e) As used in this section, the term “State” means a State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or a commonwealth, territory or possession of the
United States.
18 U.S.C. 1955. Prohibition of illegal gambling businesses
(a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal
gambling business shall be fined under this title or imprisoned not more than five years, or both.
(b) As used in this section–
(1) “illegal gambling business” means a gambling business which–
(i) is a violation of the law of a State or political subdivision in which it is conducted;
(ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all
or part of such business; and
(iii) has been or remains in substantially continuous operation for a period in excess of thirty
days or has a gross revenue of $2,000 in any single day.
(2) “gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot
machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games,
or selling chances therein.
(3) “State” means any State of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, and any territory or possession of the United States.
(c) If five or more persons conduct, finance, manage, supervise, direct, or own all or part of a
gambling business and such business operates for two or more successive days, then, for the purpose
of obtaining warrants for arrests, interceptions, and other searches and seizures, probable cause that
the business receives gross revenue in excess of $2,000 in any single day shall be deemed to have been
established.
CRS-35
(d) Any property, including money, used in violation of the provisions of this section may be
seized and forfeited to the United States. All provisions of law relating to the seizure, summary, and
judicial forfeiture procedures, and condemnation of vessels, vehicles, merchandise, and baggage for
violation of the customs laws; the disposition of such vessels, vehicles, merchandise, and baggage or
the proceeds from such sale; the remission or mitigation of such forfeitures; and the compromise of
claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures
and forfeitures incurred or alleged to have been incurred under the provisions of this section, insofar
as applicable and not inconsistent with such provisions. Such duties as are imposed upon the collector
of customs or any other person in respect to the seizure and forfeiture of vessels, vehicles,
merchandise, and baggage under the customs laws shall be performed with respect to seizures and
forfeitures of property used or intended for use in violation of this section by such officers, agents, or
other persons as may be designated for that purpose by the Attorney General.
(e) This section shall not apply to any bingo game, lottery, or similar game of chance conducted
by an organization exempt from tax under paragraph (3) of subsection (c) of section 501 of the Internal
Revenue Code of 1954, as amended, if no part of the gross receipts derived from such activity inures
to the benefit of any private shareholder, member, or employee of such organization except as
compensation for actual expenses incurred by him in the conduct of such activity.
18 U.S.C. 1952. Interstate and foreign travel or transportation in aid of racketeering enterprises
(a) Whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate
or foreign commerce, with intent to–
(1) distribute the proceeds of any unlawful activity; or
(2) commit any crime of violence to further any unlawful activity; or
(3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management,
establishment, or carrying on, of any unlawful activity,
and thereafter performs or attempts to perform–
(A) an act described in paragraph (1) or (3) shall be fined under this title, imprisoned not more
than 5 years, or both; or
(B) an act described in paragraph (2) shall be fined under this title, imprisoned for not more than
20 years, or both, and if death results shall be imprisoned for any term of years or for life.
(b) As used in this section (i) “unlawful activity” means (1) any business enterprise involving
gambling, liquor on which the Federal excise tax has not been paid, narcotics or controlled substances
(as defined in section 102(6) of the Controlled Substances Act), or prostitution offenses in violation
of the laws of the State in which they are committed or of the United States, (2) extortion, bribery, or
arson in violation of the laws of the State in which committed or of the United States, or (3) any act
which is indictable under subchapter II of chapter 53 of title 31, United States Code, or under section
1956 or 1957 of this title and (ii) the term “State” includes a State of the United States, the District of
Columbia, and any commonwealth, territory, or possession of the United States.
(c) Investigations of violations under this section involving liquor shall be conducted under the
supervision of the Attorney General.
18 U.S.C. 1962. Prohibited activities
(a) It shall be unlawful for any person who has received any income derived, directly or
indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which
such person has participated as a principal within the meaning of section 2, title 18, United States
Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income,
in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged
in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the
open market for purposes of investment, and without the intention of controlling or participating in
the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection
if the securities of the issuer held by the purchaser, the members of his immediate family, and his or
their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such
purchase do not amount in the aggregate to one percent of the outstanding securities of any one class,
and do not confer, either in law or in fact, the power to elect one or more directors of the issuer.
CRS-36
(b) It shall be unlawful for any person through a pattern of racketeering activity or through
collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control
of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged
in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly
or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or
collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection
(a), (b), or (c) of this section.
18 U.S.C. 1961. Definitions
As used in this chapter–
(1) "racketeering activity" means (A) any act or threat involving murder, kidnapping, gambling,
arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or
listed chemical (as defined in section 102 of the Controlled Substances Act), which is chargeable
under State law and punishable by imprisonment for more than one year; (B) any act which is
indictable under any of the following provisions of title 18, United States Code: Section 201 (relating
to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to
counterfeiting), section 659 (relating to theft from interstate shipment) if the act indictable under
section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds),
sections 891-894 (relating to extortionate credit transactions), section 1028 (relating to fraud and
related activity in connection with identification documents), section 1029 (relating to fraud and
related activity in connection with access devices), section 1084 (relating to the transmission of
gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud),
section 1344 (relating to financial institution fraud), section 1425 (relating to the procurement of
citizenship or nationalization unlawfully), section 1426 (relating to the reproduction of naturalization
or citizenship papers), section 1427 (relating to the sale of naturalization or citizenship papers),
sections 1461-1465 (relating to obscene matter), section 1503 (relating to obstruction of justice),
section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the
obstruction of State or local law enforcement), section 1512 (relating to tampering with a witness,
victim, or an informant), section 1513 (relating to retaliating against a witness, victim, or an
informant), section 1542 (relating to false statement in application and use of passport), section 1543
(relating to forgery or false use of passport), section 1544 (relating to misuse of passport), section
1546 (relating to fraud and misuse of visas, permits, and other documents), sections 1581-1591
(relating to peonage, slavery, and trafficking in persons), section 1951 (relating to interference with
commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to
interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund
payments), section 1955 (relating to the prohibition of illegal gambling businesses), section 1956
(relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary
transactions in property derived from specified unlawful activity), section 1958 (relating to use of
interstate commerce facilities in the commission of murder-for-hire), sections 2251, 2251A, 2252, and
2260 (relating to sexual exploitation of children), sections 2312 and 2313 (relating to interstate
transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation
of stolen property), section 2318 (relating to trafficking in counterfeit labels for phonorecords,
computer programs or computer program documentation or packaging and copies of motion pictures
or other audiovisual works), section 2319 (relating to criminal infringement of a copyright), section
2319A (relating to unauthorized fixation of and trafficking in sound recordings and music videos of
live musical performances), section 2320 (relating to trafficking in goods or services bearing
counterfeit marks), section 2321 (relating to trafficking in certain motor vehicles or motor vehicle
parts), sections 2341-2346 (relating to trafficking in contraband cigarettes), sections 2421-24 (relating
to white slave traffic), (C) any act which is indictable under title 29, United States Code, section 186
(dealing with restrictions on payments and loans to labor organizations) or section 501(c) (relating to
embezzlement from union funds), (D) any offense involving fraud connected with a case under title
11 (except a case under section 157 of this title), fraud in the sale of securities, or the felonious
manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled
substance or listed chemical (as defined in section 102 of the Controlled Substances Act), punishable
under any law of the United States, (E) any act which is indictable under the Currency and Foreign
Transactions Reporting Act, (F) any act which is indictable under the Immigration and Nationality Act,
section 274 (relating to bringing in and harboring certain aliens), section 277 (relating to aiding or
CRS-37
assisting certain aliens to enter the United States), or section 278 (relating to importation of alien for
immoral purpose) if the act indictable under such section of such Act was committed for the purpose
of financial gain, or (G) any act that is indictable under any provision listed in section 2332b(g)(5)(B);
(2) "State" means any State of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, any territory or possession of the United States, any political subdivision, or any
department, agency, or instrumentality thereof;
(3) "person" includes any individual or entity capable of holding a legal or beneficial interest
in property;
(4) "enterprise" includes any individual, partnership, corporation, association, or other legal
entity, and any union or group of individuals associated in fact although not a legal entity;
(5) "pattern of racketeering activity" requires at least two acts of racketeering activity, one of
which occurred after the effective date of this chapter and the last of which occurred within ten years
(excluding any period of imprisonment) after the commission of a prior act of racketeering activity;
(6) "unlawful debt" means a debt (A) incurred or contracted in gambling activity which was in
violation of the law of the United States, a State or political subdivision thereof, or which is
unenforceable under State or Federal law in whole or in part as to principal or interest because of the
laws relating to usury, and (B) which was incurred in connection with the business of gambling in
violation of the law of the United States, a State or political subdivision thereof, or the business of
lending money or a thing of value at a rate usurious under State or Federal law, where the usurious rate
is at least twice the enforceable rate;
(7) "racketeering investigator" means any attorney or investigator so designated by the Attorney
General and charged with the duty of enforcing or carrying into effect this chapter;
(8) "racketeering investigation" means any inquiry conducted by any racketeering investigator
for the purpose of ascertaining whether any person has been involved in any violation of this chapter
or of any final order, judgment, or decree of any court of the United States, duly entered in any case
or proceeding arising under this chapter;
(9) "documentary material" includes any book, paper, document, record, recording, or other
material; and
(10) "Attorney General" includes the Attorney General of the United States, the Deputy Attorney
General of the United States, the Associate Attorney General of the United States, any Assistant
Attorney General of the United States, or any employee of the Department of Justice or any employee
of any department or agency of the United States so designated by the Attorney General to carry out
the powers conferred on the Attorney General by this chapter. Any department or agency so
designated may use in investigations authorized by this chapter either the investigative provisions of
this chapter or the investigative power of such department or agency otherwise conferred by law.
U.S.C. 1956. Laundering of monetary instruments
(a)(1) Whoever, knowing that the property involved in a financial transaction represents the
proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial
transaction which in fact involves the proceeds of specified unlawful activity–
(A)(i) with the intent to promote the carrying on of specified unlawful activity; or
(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the
Internal Revenue Code of 1986; or
(B) knowing that the transaction is designed in whole or in part–
(i) to conceal or disguise the nature, the location, the source, the ownership, or the
control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law,
shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in
the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.
(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a
monetary instrument or funds from a place in the United States to or through a place outside the United
States or to a place in the United States from or through a place outside the United States–
(A) with the intent to promote the carrying on of specified unlawful activity; or
(B) knowing that the monetary instrument or funds involved in the transportation,
transmission, or transfer represent the proceeds of some form of unlawful activity and knowing
that such transportation, transmission, or transfer is designed in whole or in part–
(i) to conceal or disguise the nature, the location, the source, the ownership, or the
control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law,
CRS-38
shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument
or funds involved in the transportation, transmission, or transfer whichever is greater, or imprisonment
for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B),
the defendant's knowledge may be established by proof that a law enforcement officer represented the
matter specified in subparagraph (B) as true, and the defendant's subsequent statements or actions
indicate that the defendant believed such representations to be true.
(3) Whoever, with the intent–
(A) to promote the carrying on of specified unlawful activity;
(B) to conceal or disguise the nature, location, source, ownership, or control of property
believed to be the proceeds of specified unlawful activity; or
(C) to avoid a transaction reporting requirement under State or Federal law,
conducts or attempts to conduct a financial transaction involving property represented to be the
proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful
activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes
of this paragraph and paragraph (2), the term "represented" means any representation made by a law
enforcement officer or by another person at the direction of, or with the approval of, a Federal official
authorized to investigate or prosecute violations of this section.
(b) Penalties.–
(1) In general.– Whoever conducts or attempts to conduct a transaction described in
subsection (a)(1) or (a)(3), or section 1957, or a transportation, transmission, or transfer
described in subsection (a)(2), is liable to the United States for a civil penalty of not more than
the greater of-(A) the value of the property, funds, or monetary instruments involved in the transaction;
or
(B) $10,000.
(2) Jurisdiction over foreign persons.--For purposes of adjudicating an action filed or enforcing
a penalty ordered under this section, the district courts shall have jurisdiction over any foreign person,
including any financial institution authorized under the laws of a foreign country, against whom the
action is brought, if service of process upon the foreign person is made under the Federal Rules of
Civil Procedure or the laws of the country in which the foreign person is found, and–
(A) the foreign person commits an offense under subsection (a) involving a financial
transaction that occurs in whole or in part in the United States;
(B) the foreign person converts, to his or her own use, property in which the United States
has an ownership interest by virtue of the entry of an order of forfeiture by a court of the United
States; or
(C) the foreign person is a financial institution that maintains a bank account at a financial
institution in the United States.
(3) Court authority over assets.– A court described in paragraph (2) may issue a pretrial
restraining order or take any other action necessary to ensure that any bank account or other property
held by the defendant in the United States is available to satisfy a judgment under this section.
(4) Federal receiver.–
(A) In general.– A court described in paragraph (2) may appoint a Federal Receiver, in
accordance with subparagraph(B) of this paragraph, to collect, marshal, and take custody,
control, and possession of all assets of the defendant, wherever located, to satisfy a civil
judgment under this subsection, a forfeiture judgment under section 981 or 982, or a criminal
sentence under section 1957 or subsection (a) of this section, including an order of restitution
to any victim of a specified unlawful activity.
(B) Appointment and authority.– A Federal Receiver described in subparagraph (A)–
(i) may be appointed upon application of a Federal prosecutor or a Federal or State
regulator, by the court having jurisdiction over the defendant in the case;
(ii) shall be an officer of the court, and the powers of the Federal Receiver shall
include the powers set out in section 754 of title 28, United States Code; and
(iii) shall have standing equivalent to that of a Federal prosecutor for the purpose
of submitting requests to obtain information regarding the assets of the defendant–
(I) from the Financial Crimes Enforcement Network of the Department of the
Treasury; or
(II) from a foreign country pursuant to a mutual legal assistance treaty,
multilateral agreement, or other arrangement for international law enforcement
assistance, provided that such requests are in accordance with the policies and
procedures of the Attorney General.
(c) As used in this section–
CRS-39
(1) the term "knowing that the property involved in a financial transaction represents the
proceeds of some form of unlawful activity" means that the person knew the property involved
in the transaction represented proceeds from some form, though not necessarily which form, of
activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or
not such activity is specified in paragraph (7);
(2) the term "conducts" includes initiating, concluding, or participating in initiating, or
concluding a transaction;
(3) the term "transaction" includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other
disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between
accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond,
certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment,
transfer, or delivery by, through, or to a financial institution, by whatever means effected;
(4) the term "financial transaction" means (A) a transaction which in any way or degree affects
interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii)
involving one or more monetary instruments, or (iii) involving the transfer of title to any real property,
vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is
engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree;
(5) the term "monetary instruments" means (i) coin or currency of the United States or of any
other country, travelers' checks, personal checks, bank checks, and money orders, or (ii) investment
securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes
upon delivery;
(6) the term "financial institution" includes–
(A) any financial institution, as defined in section 5312(a)(2) of title 31, United States
Code, or the regulations promulgated thereunder; and
(B) any foreign bank, as defined in section 1 of the International Banking Act of 1978 (12
U.S.C. 3101);
(7) the term "specified unlawful activity" means–
(A) any act or activity constituting an offense listed in section 1961(1) of this title except
an act which is indictable under subchapter II of chapter 53 of title 31;
(B) with respect to a financial transaction occurring in whole or in part in the United
States, an offense against a foreign nation involving–
(i) the manufacture, importation, sale, or distribution of a controlled substance (as
such term is defined for the purposes of the Controlled Substances Act);
(ii) murder, kidnapping, robbery, extortion, destruction of property by means of
explosive or fire, or a crime of violence (as defined in section 16);
(iii) fraud, or any scheme or attempt to defraud, by or against a foreign bank (as
defined in paragraph 7 of section 1(b) of the International Banking Act of 1978));
(iv) bribery of a public official, or the misappropriation, theft, or embezzlement of
public funds by or for the benefit of a public official;
(v) smuggling or export control violations involving–
(I) an item controlled on the United States Munitions List established under
section 38 of the Arms Export Control Act (22 U.S.C. 2778); or
(II) an item controlled under regulations under the Export Administration
Regulations (15 C.F.R. Parts 730-774); or
(vi) an offense with respect to which the United States would be obligated by a
multilateral treaty, either to extradite the alleged offender or to submit the case for
prosecution, if the offender were found within the territory of the United States;
(C) any act or acts constituting a continuing criminal enterprise, as that term is defined in
section 408 of the Controlled Substances Act (21 U.S.C. 848);
(D) an offense under section 32 (relating to the destruction of aircraft), section 37
(relating to violence at international airports), section 115 (relating to influencing, impeding, or
retaliating against a Federal official by threatening or injuring a family member), section 152
(relating to concealment of assets; false oaths and claims; bribery), section 215 (relating to
commissions or gifts for procuring loans), section 351 (relating to congressional or Cabinet
officer assassination), any of sections 500 through 503 (relating to certain counterfeiting
offenses), section 513 (relating to securities of States and private entities), section 541 (relating
to goods falsely classified), section 542 (relating to entry of goods by means of false statements),
section 545 (relating to smuggling goods into the United States), section 549 (relating to
removing goods from Customs custody), section 641 (relating to public money, property, or
records), section 656 (relating to theft, embezzlement, or misapplication by bank officer or
employee), section 657 (relating to lending, credit, and insurance institutions), section 658
CRS-40
(relating to property mortgaged or pledged to farm credit agencies), section 666 (relating to theft
or bribery concerning programs receiving Federal funds), section 793, 794, or 798 (relating to
espionage), section 831 (relating to prohibited transactions involving nuclear materials), section
844(f) or (i) (relating to destruction by explosives or fire of Government property or property
affecting interstate or foreign commerce), section 875 (relating to interstate communications),
section 922(1) (relating to the unlawful importation of firearms), section 924(n) (relating to
firearms trafficking), section 956 (relating to conspiracy to kill, kidnap, maim, or injure certain
property in a foreign country), section 1005 (relating to fraudulent bank entries), 1006 (relating
to fraudulent Federal credit institution entries), 1007 (relating to fraudulent Federal Deposit
Insurance transactions), 1014 (relating to fraudulent loan or credit applications), section 1030
(relating to computer fraud and abuse), 1032 (relating to concealment of assets from
conservator, receiver, or liquidating agent of financial institution), section 1111 (relating to
murder), section 1114 (relating to murder of United States law enforcement officials), section
1116 (relating to murder of foreign officials, official guests, or internationally protected
persons), section 1201 (relating to kidnaping), section 1203 (relating to hostage taking), section
1361 (relating to willful injury of Government property), section 1363 (relating to destruction
of property within the special maritime and territorial jurisdiction), section 1708 (theft from the
mail), section 1751 (relating to Presidential assassination), section 2113 or 2114 (relating to
bank and postal robbery and theft), section 2280 (relating to violence against maritime
navigation), section 2281 (relating to violence against maritime fixed platforms), section 2319
(relating to copyright infringement), section 2320 (relating to trafficking in counterfeit goods
and services), section 2332 (relating to terrorist acts abroad against United States nationals),
section 2332a (relating to use of weapons of mass destruction), section 2332b (relating to
international terrorist acts transcending national boundaries), or section 2339A or 2339B
(relating to providing material support to terrorists) of this title, section 46502 of title 49, United
States Code, a felony violation of the Chemical Diversion and Trafficking Act of 1988 (relating
to precursor and essential chemicals), section 590 of the Tariff Act of 1930 (19 U.S.C. 1590)
(relating to aviation smuggling), section 422 of the Controlled Substances Act (relating to
transportation of drug paraphernalia), section 38(c) (relating to criminal violations) of the Arms
Export Control Act, section 11 (relating to violations) of the Export Administration Act of 1979,
section 206 (relating to penalties) of the International Emergency Economic Powers Act, section
16 (relating to offenses and punishment) of the Trading with the Enemy Act, any felony
violation of section 15 of the Food Stamp Act of 1977 [7 U.S.C.A. 2024] (relating to food stamp
fraud) involving a quantity of coupons having a value of not less than $5,000, any violation of
section 543(a)(1) of the Housing Act of 1949 [42 U.S.C. 1490s(a)(1)] (relating to equity
skimming), any felony violation of the Foreign Agents Registration Act of 1938, or any felony
violation of the Foreign Corrupt Practices Act;
(E) a felony violation of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.),
the Ocean Dumping Act (33 U.S.C. 1401 et seq.), the Act to Prevent Pollution from Ships (33
U.S.C. 1901 et seq.), the Safe Drinking Water Act (42 U.S.C. 300f et seq.), or the Resources
Conservation and Recovery Act (42 U.S.C. 6901 et seq.); or
(F) any act or activity constituting an offense involving a Federal health care offense;
(8) the term "State" includes a State of the United States, the District of Columbia, and any
commonwealth, territory, or possession of the United States.
(d) Nothing in this section shall supersede any provision of Federal, State, or other law imposing
criminal penalties or affording civil remedies in addition to those provided for in this section.
(e) Violations of this section may be investigated by such components of the Department of
Justice as the Attorney General may direct, and by such components of the Department of the Treasury
as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which
the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary
of the Treasury and the Postal Service shall be exercised in accordance with an agreement which shall
be entered into by the Secretary of the Treasury, the Postal Service, and the Attorney General.
Violations of this section involving offenses described in paragraph (c)(7)(E) may be investigated by
such components of the Department of Justice as the Attorney General may direct, and the National
Enforcement Investigations Center of the Environmental Protection Agency.
(f) There is extraterritorial jurisdiction over the conduct prohibited by this section if–
(1) the conduct is by a United States citizen or, in the case of a non-United States citizen,
the conduct occurs in part in the United States; and
(2) the transaction or series of related transactions involves funds or monetary instruments
of a value exceeding $10,000.
CRS-41
(g) Notice of conviction of financial institutions.– If any financial institution or any officer,
director, or employee of any financial institution has been found guilty of an offense under this section,
section 1957 or 1960 of this title, or section 5322 or 5324 of title 31, the Attorney General shall
provide written notice of such fact to the appropriate regulatory agency for the financial institution.
(h) Any person who conspires to commit any offense defined in this section or section 1957 shall
be subject to the same penalties as those prescribed for the offense the commission of which was the
object of the conspiracy.
(i) Venue.– (1) Except as provided in paragraph (2), a prosecution for an offense under this
section or section 1957 may be brought in–
(A) any district in which the financial or monetary transaction is conducted; or
(B) any district where a prosecution for the underlying specified unlawful activity could
be brought, if the defendant participated in the transfer of the proceeds of the specified unlawful
activity from that district to the district where the financial or monetary transaction is conducted.
(2) A prosecution for an attempt or conspiracy offense under this section or section 1957 may
be brought in the district where venue would lie for the completed offense under paragraph (1), or in
any other district where an act in furtherance of the attempt or conspiracy took place.
(3) For purposes of this section, a transfer of funds from 1 place to another, by wire or any other
means, shall constitute a single, continuing transaction. Any person who conducts (as that term is
defined in subsection (c)(2)) any portion of the transaction may be charged in any district in which the
transaction takes place.
18 U.S.C. 1957. Engaging in monetary transactions in property derived from specified unlawful
activity
(a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or
attempts to engage in a monetary transaction in criminally derived property that is of a value greater
than $10,000 and is derived from specified unlawful activity, shall be punished as provided in
subsection (b).
(b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is
a fine under title 18, United States Code, or imprisonment for not more than ten years or both.
(2) The court may impose an alternate fine to that imposable under paragraph (1) of not more
than twice the amount of the criminally derived property involved in the transaction.
(c) In a prosecution for an offense under this section, the Government is not required to prove
the defendant knew that the offense from which the criminally derived property was derived was
specified unlawful activity.
(d) The circumstances referred to in subsection (a) are –
(1) that the offense under this section takes place in the United States or in the special
maritime and territorial jurisdiction of the United States; or
(2) that the offense under this section takes place outside the United States and such
special jurisdiction, but the defendant is a United States person (as defined in section 3077 of
this title, but excluding the class described in paragraph (2)(D) of such section).
(e) Violations of this section may be investigated by such components of the Department of
Justice as the Attorney General may direct, and by such components of the Department of the Treasury
as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which
the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary
of the Treasury and the Postal Service shall be exercised in accordance with an agreement which shall
be entered into by the Secretary of the Treasury, the Postal Service, and the Attorney General.
(f) As used in this section–
(1) the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or
affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section
1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this
title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of
this title, but such term does not include any transaction necessary to preserve a person’s right to
representation as guaranteed by the sixth amendment to the Constitution;
CRS-42
(2) the term “criminally derived property” means any property constituting, or derived from,
proceeds obtained from a criminal offense; and
(3) the term “specified unlawful activity” has the meaning given that term in section 1956 of this
title.
V. Bibliography
Books & Articles
Balestra & Cabot, INTERNET GAMBLING REPORT (6th ed. 2003)
Berman & Weitzner, Abundance and User Control: Renewing the Democratic Heart of the First
Amendment in the Age of Interactive Media, 104 YALE LAW JOURNAL 1619 (1995)
Branscomb, Anonymity, Autonomy, and Accountability: Challenges to the First Amendment in
Cyberspaces, 104 YALE LAW JOURNAL 1639 (1995)
Charney & Alexander, Legal Issues in Cyberspace: Hazards on the Information Superhighway:
Computer Crime, 45 EMORY LAW JOURNAL 931 (1996)
Denning & Baugh, Key Escrow Encryption Policies and Technologies, 41 VILLANOVA LAW REVIEW
289 (1996)
Friedrich, Internet Casino Gambling: The Nightmare of Lawmaking, Jurisdiction, Enforcement & the
Dangers of Prohibition, 11 COMMLAW CONSPECTUS 369 (2003)
Froomkin, Flood Control on the Information Ocean: Living with Anonymity, Digital Cash, and
Distributed Databases, 15 JOURNAL OF LAW & COMMERCE 395, 415-16 (1996)
, The Metaphor Is the Key: Cryptography, the Clipper Chip, and the Constitution, 143 UNIVERSITY
OF PENNSYLVANIA LAW REVIEW 709, 717-18 (1995)
Getszendanner, Judicial “Pruning” of “Garden Variety Fraud Civil RICO Cases Does Not Work: Its
Time for Congress to Act, 43 VANDERBILT LAW REVIEW 673 (1990)
Goldstein, On-Line Gambling: Down to the Wire? 8 MARQUETTE SPORTS LAW JOURNAL 1 (1997)
Grosso, The Law Enforcement Argument for Mandatory Key Escrow Encryption: The Dank Case
Revisited, 43 FEDERAL LAWYER 46 (July, 1996)
Keller, The Game’s the Same: Why Gambling in Cyberspace Violates Federal Law, 108 YALE LAW
JOURNAL 1569 (1999)
Kelly, Internet Gambling Law, 26 WILLIAM MITCHELL LAW REVIEW 117 (2000)
Krattenmaker & Powe, Converging First Amendment Principles for Converging Communications
Media, 104 YALE LAW JOURNAL 1719 (1995)
LaFave & Scott, CRIMINAL LAW 491-94 (1972)
Lawrence, Toward a More Coherent Dormant Commerce Clause: A Proposed Unitary Framework,
21 HARVARD JOURNAL OF LAW AND PUBLIC POLICY 395 (1998)
Lessig, The Path of Cyberlaw, 104 YALE LAW JOURNAL 1743 (1995)
Lessig & Resnick, Zoning Speech on the Internet: A Legal and Technical Model, 98 MICHIGAN LAW
REVIEW 395 (1999)
National Association of Attorneys’ General, Gambling on the Internet (1996)
CRS-43
Perkins & Boyce, CRIMINAL LAW 698-92 (1982)
Schwartz, The Internet Gambling Fallacy Craps Out, 14 BERKELEY TECHNOLOGY LAW JOURNAL 1021
(1999)
Singhal, The Piracy of Privacy? A Fourth Amendment Analysis of Key Escrow Cryptography, 7
STANFORD LAW AND POLICY REVIEW 189, 190 (1996)
Soma, Banker, & Smith, Computer Crime: Substantive Statutes and Technical and Legal Search
Considerations, 39 AIR FORCE LAW REVIEW 225 (1996)
Sanders, The Regulation of Indecent Material Accessible to Children on the Internet: Is It Really
Alright to Yell Fire in a Crowded Chat Room? 39 CATHOLIC LAWYER 125 (1999)
Tien, Who’s Afraid of Anonymous Speech? McIntyre and the Internet, 75 OREGON LAW REVIEW 117
(1996)
Tratos, Gaming on the Internet 3 STANFORD JOURNAL OF LAW, BUSINESS AND FINANCE 101 (1997)
United States Congress, Internet Crimes Affecting Consumers: Hearing Before the Subcomm. on
Technology, Terrorism, and Government Information of the Senate Comm. on the Judiciary, 105th
Cong., 1st Sess. (1997)
, The Internet Gambling Act of 1997: Hearing Before the Subcomm. on Technology, Terrorism,
and Government Information of the Senate Comm. on the Judiciary, 105th Cong., 1st Sess. (1997)
, Internet Gambling Prohibition Act of 1997: Hearings Before the Subcomm. on Crime of the
House Comm. on the Judiciary, 105th Cong., 2d Sess. (1998)
, Internet Gambling: Hearing Before the Subcomm. on Technology, Terrorism, and Government
Information of the Senate Comm. on the Judiciary, 106th Cong., 1st Sess. (1999)
, Internet Gambling: Hearing Before the Senate Comm. on Indian Affairs, 106th Cong., 1st Sess.
(1999)
, Internet Gambling Prohibition Act of 1999: Hearing Before the Subcomm. on Crime of the House
Comm. on the Judiciary, 106th Cong., 2d Sess. (2000)
, Internet Gambling Prohibition Act of 1999: Hearing Before the Subcomm. on
Telecommunications, Trade and Consumer Protection of the House Comm. on Commerce, 106th
Cong., 2d Sess. (2000)
, H.R. 4419 – Internet Gambling Prohibition Act: Hearing Before the House Comm. on Banking
and Financial Services, 106th Cong., 2d Sess. (2000)
, Financial Aspects of Internet Gaming: Good Gamble or Bad Bet? Hearing Before the Subcomm.
on Oversight and Investigations of the House Comm. on Financial Services, 107th Cong., 1st Sess.
(2001)
, Unlawful Internet Gambling Funding Prohibition Act and the Combating Illegal Gambling
Reform and Modernization Act: Hearing Before the Subcomm. on Crime of the House Comm. on the
Judiciary., 107th Cong., 1st Sess. (2001)
, H.R.; 556 – The Unlawful Internet Gambling Funding Prohibition Act and Other Internet
Gambling Proposals: Hearing Before the Subcomm. on Financial Institutions and Consumer Credit
of the House Comm. on Financial Services, 107th Cong., 1st Sess. (2001)
, Proposals to Regulate Illegal Internet Gambling: Hearing Before the Senate Comm. on Banking,
Housing, and Urban Affairs, 108th Cong., 1st Sess. (2003)
CRS-44
, Unlawful Internet Gambling Funding Prohibition Act and the Internet Gambling Licensing and
Regulation Commission Act, 108th Cong., 1st Sess. (2003)
United States Department of Justice Computer Search and Seizure Working Group, Federal
Guidelines for Searching and Seizing Computers, printed in 56 BNA CRIMINAL LAW REPORTER 2023
(Dec. 21, 1994)
United States Department of State, Treaties in Force: A List of Treaties and Other International
Agreements of the United States in Force on January 1, 2003
United States General Accounting Office [now United States Government Accountability Office],
Internet Gambling: An Overview of the Issues (GAO-03-89)(December 2002)
, Money Laundering: Rapid Growth of Casinos Makes Them Vulnerable (GAO/GGD-9628)(January 1996)
Volokh, Cheap Speech and What It Will Do, 104 YALE LAW JOURNAL 1805 (1995)
4 WHARTON’S CRIMINAL LAW §731 (1981)
World Trade Organization, United States – Measures Affecting the Cross-Border Supply of Gambling
and Betting Services: Report of the Panel (November 10, 2004)
Notes & Comments
All Bets Are Off(Line): Antigua’s Trouble in Virtual Paradise, 35 UNIVERSITY OF MIAMI INTERAMERICAN LAW REVIEW 367 (2004)
American Libraries Association v. Pataki: Will States Be Prohibited from Internet Regulations, 18
JOURNAL OF LAW AND COMMERCE 151 (1998)
Anonymity and International Law Enforcement in Cyberspace, 7 FORDHAM INTELLECTUAL PROPERTY,
MEDIA & ENTERTAINMENT JOURNAL 231, 265-66 (1996)
Betting on the Net: An Analysis of the Government’s Role in Addressing Internet Gambling, 51
FEDERAL COMMUNICATIONS LAW JOURNAL 449 (1999)
Blackjack or Bust: Can U.S. Law Stop Internet Gambling? 16 LOYOLA OF LOS ANGELES
ENTERTAINMENT LAW JOURNAL 667, 671-72 (1996)
Coins, Notes, and Bits: The Case for Legal Tender on the Internet, 10 HARVARD JOURNAL OF LAW
& TECHNOLOGY 321 (1997)
Cryptography and the First Amendment: The Right to Be Unheard, 14 JOHN MARSHALL JOURNAL OF
COMPUTER & INFORMATION LAW 325 (1996)
Cyberspace, General Searches, and Digital Contraband: The Fourth Amendment and the Net-Wide
Search, 105 YALE LAW JOURNAL 1093 (1996)
Do Not Bet on Unilateral Prohibition of Internet Gambling to Eliminate Cyber-Casinos, 1999
UNIVERSITY OF ILLINOIS LAW REVIEW 1045
Establishing Legal Accountability for Anonymous Communication in Cyberspace, 96 COLUMBIA LAW
REVIEW 1526 (1996)
Extraterritorial Application of American Criminal Law, CRS REP. No. 94-166 (Mar. 13, 1999)
Five or More Persons, Requirement of 18 USCS §1955, Prohibiting Illegal Gambling Businesses,
That Such Businesses Involve Five or More Persons, 55 ALR FED. 778
CRS-45
Eighteenth Survey of White Collar Crime: Computer Crime, 40 AMERICAN CRIMINAL LAW REVIEW
285 (2003)
Eighteenth Survey of White Collar Crime: Money Laundering, 40 AMERICAN CRIMINAL LAW REVIEW
847 (2003)
Eighteenth Survey of White Collar Crime: Racketeer Influenced and Corrupt Organizations, 40
AMERICAN CRIMINAL LAW REVIEW 987 (2003)
Freedom to Speak Unintelligibly: The First Amendment Implications of Government-Controlled
Encryption, 4 WILLIAM & MARY BILL OF RIGHTS JOURNAL 1165 (1996)
A Full Laundering Cycle Is Required: Plowing Back the Proceeds to Carry on Crime Is a Crime
Under 18 U.S.C. 1956(a)(1)(A)(i), 70 NOTRE DAME LAW REVIEW 891 (1995)
A Game of High Stakes Roulette: Credit Card Companies Cash in on Gamblers’ Bad Luck, 32 JOHN
MARSHALL LAW REVIEW 1197 (1999)
Gambling On-Line: For a Hundred Dollars, I Bet You Government Regulation Will Not Stop the
Newest Form of Gambling, 22 UNIVERSITY OF DAYTON LAW REVIEW 163 (1996)
Growth of Internet-Based Gambling Raises Questions for Bank Systems, BNA’S ELECTRONIC
INFORMATION POLICY & LAW REPORT (Feb. 28, 1997)
Home Is Where Your Modem Is: An Appropriate Application of Search and Seizure Law to Electronic
Mail, 34 AMERICAN CRIMINAL LAW REVIEW 163 (1996)
Interstate Transportation or Travel, Validity, Construction and Effect of 18 USCS §1952, Making It
a Federal Offense to Use Interstate or Foreign Travel or Transportation in Aid of Racketeering
Enterprises, 1 ALR FED. 838
Jurisdiction and the Internet: Fundamental Fairness in the Networked World of Cyberspace, 6
ALBANY LAW JOURNAL OF SCIENCE & TECHNOLOGY 330 (1996)
Money Laundering and Drug Trafficking: A Question of Understanding the Elements of the Crime
and the Use of Circumstantial Evidence, 28 UNIVERSITY OF RICHMOND LAW REVIEW 255 (1994)
Requirement of 18 U.S.C. §1955, Prohibiting Illegal Gambling Business, That Such Business Involve
Five or More Persons, 51 ALR FED. 778
Searches and Seizures of Computers and Computer Data, 8 HARVARD JOURNAL OF LAW &
TECHNOLOGY 75 (1994)
State Regulatory Jurisdiction and the Internet: Letting the Dormant Commerce Clause Lie, 52
VANDERBILT LAW REVIEW 1095 (1999)
Transmission of
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.