Prior authored articles have discussed the potential perils of the Illegal Gambling Business Act, 18 USC 1955, faced by those companies involved in Internet gaming that operate in or take action from players in the United States.
See Marc’s article title “Tackling a Hidden Danger” previously authored for iNTERGAMINGLAW Magazine.
In light of the recent legislative and regulatory activities, law enforcement investigations and civil lawsuits involving the Daily Fantasy Sports (DFS) industry, it is important to make particular note that the Illegal Gambling Business Act is not a “specific intent” crime, meaning prosecutors need not prove that those involved in [conducting, financing, managing, supervising, directing, or owning] (the verbs used in 18 USC 1955(1)) meant to violate criminal gambling statutes. As a “general intent” crime, this means, quite simply, that a defendant “did not need to know that his actions were illegal; he only needed to know that he performed the acts which turned out to be illegal.” See United States v. Cyprian, 23 F.3d 1189, 1199 n. 14 (7th Cir. 1994) and United States v. Ables, 167 F.3d 1021, 1031 (6th Cir.) (holding government not required to prove defendant knowingly violated state law in order to prove defendant conducted illegal gambling business in violation of § 1955), cert. denied, 527 U.S. 1027, 119 S.Ct. 2378, 144 L.Ed.2d 781 (1999).
Owners and financiers of the underlying gaming activities, including financial intermediaries, who may have relied upon “reasoned legal opinions” pursuant to Unlawful Internet Gambling Enforcement Act and its implementing regulations from the Department of Treasury, 12 CFR 233 et seq, regarding the legality of the internet gaming, should know that this could come as a painful lesson as “advice of counsel” does not provide a safe harbor defense under the IGBA. See US v. Cross, 113 F.Supp2d 1253.
The DFS experience is a reminder about how important it is to do a deep dive into the parameters of state gambling laws on the front end of any transaction with internet gambling concern. This will ensure that those involved protect themselves against the risks posed by the IGBA and other federal statutes used to prosecute illegal internet gaming.