Internet Gambling Ban Upheld by Appeals Court in Philadelphia

Sept. 2 (Bloomberg) -- A 2006 federal law that prohibits gambling over the Internet was upheld by a U.S. appeals court after a challenge from a New Jersey-based nonprofit corporation that promotes electronic betting.

In a decision handed down yesterday, three judges in the U.S. Court of Appeals in Philadelphia said the Unlawful Internet Gambling Enforcement Act isn’t unconstitutionally vague and doesn’t violate gamblers’ privacy rights.

The law “clearly provides a person of ordinary intelligence with adequate notice of the conduct that it prohibits,” the judges wrote.

Interactive Media Entertainment & Gaming Association Inc. sued the U.S. Attorney General, Federal Trade Commission and Federal Reserve System in 2007 in an effort to void the law. The Act bars placing, receiving or otherwise knowingly transmitting a bet or wager using the Internet. The law makes it a crime for banks or other institutions to process financial transactions used to place illegal bets online. In March 2008, U.S. District Judge Mary L. Cooper dismissed the association’s challenge to the law.

This year, U.S. Representative Barney Frank, a Massachusetts Democrat, proposed legislation to legalize and regulate online gambling. Co-sponsors of the bill include Republican Peter King of New York and Democrat Shelley Berkley of Nevada, whose district includes Las Vegas.

Treasury License

Harrah’s Entertainment Inc. and Youbet.com Inc. have joined professional poker players to help support the legislation, which would allow U.S. residents to gamble online with companies licensed by the Treasury Department.

Companies would have to have safeguards to protect against underage gamblers and to prevent people from gambling online in states that prohibit it. Sports betting would not be allowed.

Harrah Vice President Jan Jones said in May that regulating and taxing online gambling might increase government coffers by $2 billion to $6 billion a year.

In upholding Cooper’s decision, the appeals panel noted that the law “does not itself outlaw any gambling activity, but rather incorporates other federal or state law related to gambling.”

“We’re exploring all options” for appeal, Interactive’s lawyer, Eric M. Bernstein, said in a phone interview.

The case is Interactive Media Entertainment and Gaming Association v. Attorney General of the U.S., 08-1981, 3rd U.S. Circuit Court of Appeals (Philadelphia).