USA Law and Practice Contributed by: Chao Yu (Charles Yu) and Greg Pilarowski, Pillar Legal
sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome”. The act also mandated the creation of regulations requiring financial insti- tutions to identify and block transactions related to unlawful internet gambling. Such regulation (Reg GG (12 CFR 233)) requires financial transaction provid- ers to establish procedures to identify whether their commercial clients are operating as internet gambling businesses, and if so, to verify whether their gambling activities are legal. The Illegal Gambling Business Act imposes penal- ties, including fines and imprisonment, on any indi- vidual who “conducts, finances, manages, supervises, directs, or owns” an “illegal gambling business”. An “illegal gambling business” includes any gambling enterprise that violates the law of the state or political subdivision in which it is conducted. Thus, the Act plays a role in enforcing state regulations. This Act also specifically targets large-scale operations gener- ating USD2,000 or more in daily gross revenue, par- ticularly those linked to organised crime, and does not apply to small-scale or individual gambling activities. The Travel Act (18 USC, Section 1952) prohibits the use of interstate or foreign travel or transportation to further unlawful activity. The term “unlawful activ- ity” specifically includes any business operation that involves gambling, provided it violates either the laws of the state where the illegal acts occur or federal laws. The Travel Act establishes a federal mechanism to penalise businesses that use interstate or interna- tional facilities in violation of state law. It serves as federal support for enforcing state regulations. The application of the Travel Act largely depends on the specifics of the relevant state law, meaning that with- out a state law violation, there can be no violation of the Travel Act. It is also worth noting that the Professional and Ama- teur Sports Protection Act (PASPA) prohibits wager- ing on sporting events involving human athletes, with a few exceptions for states like Nevada, which had already established legalised sports gambling before the law was passed. In 2016, however, New Jersey challenged the constitutionality of PASPA, asserting
that the state should have the right to repeal its own sports betting prohibitions. In May 2018, the Supreme Court ruled in Murphy v National Collegiate Athletic Association that the statute was indeed unconstitu- tional, thereby invalidating PASPA. 3.2 Definition of Gambling Although the definition of gambling varies from state to state, most states regard gambling as consisting of three elements: (i) risking something of value; (ii) the occurrence of a chance event; and (iii) a potentially valuable prize. In other words, for a game machine to be considered gambling, it must involve: • consideration; • chance; and • a prize. When all three elements are present, an activity is generally classified as gambling and requires state authorisation. However, if one of these elements is removed or modified, the activity may fall outside gambling laws. For example, skill-based games or contests eliminate the element of chance, and sweep- stakes promotions remove the element of considera- tion by offering free alternative methods of entry. Consideration For a gameplay mechanism to constitute gambling, players must risk, bet, wager, or stake something of value, which serves as the consideration element of gambling. Although wagers of legal currency clearly satisfy the consideration element, jurisdictions differ in their interpretations of what constitutes sufficient consideration when the item risked is not legal cur- rency. While most states require that the consideration be something of marketable value, a minority of states interpret “something of value” more broadly, finding consideration if the operator benefits in any manner from the participants’ actions. Some states, including Alabama (AL Code, Section 13A-12-20), Alaska (AK Statutes, Section 11.66.280), Hawaii (HI Revised Statutes, Section 712-1220), Kentucky (KY Revised Statutes, Section 528.010), Missouri (MO Revised Statutes, Section 572.010), Nebraska (NE Code, Section 28-1101), New Jersey (NJ Revised Statutes, Section 2C:37-1), New York
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