US appeals court upholds 2006 federal law banning Internet gambling, rejects NJ challenge

US appeals court upholds Internet gambling ban

PHILADELPHIA — A U.S. appeals court upheld an Internet gambling ban Tuesday, rejecting a challenge from an association of off-shore bookies that the federal prohibition was too vague and violated privacy rights.

The 3rd U.S. Circuit Court of Appeals in Philadelphia rejected arguments from Interactive Media Entertainment & Gaming Association in New Jersey, which had filed the lawsuit hoping to legalize online betting in that state.

Congress passed the Unlawful Internet Gambling Enforcement Act in 2006 to ban online gambling that would be illegal in the state where the individual or gambling business conducts the transaction. The law does not target the bet itself but criminalizes bank or credit card transactions linked to the bet.

The group, comprised of mostly offshore betting operators, had attacked the law as unconstitutionally vague. Their lawyers questioned how the location of an online bet would be determined if the gambler is in Delaware, for instance, and the operation is in Costa Rica.

At least one of the three judges who heard arguments last month seemed to question that logic.

“No matter how metaphysical you want to get, I’m not in Costa Rica, I’m in Delaware,” 3rd Circuit Judge Kent Jordan said.

The court also rejected arguments that the law invades a gambler’s right to privacy in the home.

The Justice Department, which successfully defended the law, had no immediate comment, a spokesman said.

While the association is considering an appeal, Chairman Joe Brennan Jr. said he saw a potential victory in the ruling because most states have not expressly addressed the legality of online betting.

“(The Justice Department) has been insisting there is a blanket ban on Internet gambling in the U.S., but the panel said state law is the determinant,” Brennan said. “If you go by that reasoning, if it’s not illegal in that state, then it would not be a violation of federal law to process a transaction from a player there.”

The group also is involved in a lawsuit in New Jersey that challenges the constitutionality of a 1992 federal ban on most sports betting. The association says sports betting could bring $100 million or more in tax revenues to state coffers on an existing — if underground — market estimated at $10 billion annually in the state.

Brennan noted that New Jersey Gov. Jon Corzine wants to intervene in the case in support of sports betting, and the chairman said other states are showing interest.

“There’s a lot of interest in it just because of the times and the straits the states find themselves in,” Brennan said.

Delaware officials tried to legalize sports betting in their state, arguing that they enjoy grandfather rights under the 1992 law.

But the appeals court last month struck down the attempt, limiting the state to the parlay bets on professional football games that were allowed at the time.