Legal Question in Business Law in California

Re: Internet gambling sites

There are no federal laws against gambling per se, which is instead covered by state law. This is why gambling is legal in Nevada, Atlantic City, etc. The federal government probably has the authority to regulate gambling but has not done so.

But there are federal laws which govern financial transfers, and others which govern the use of telephone lines -- which still carry most internet communications. Operating in the U.S. would also subject the companies to federal taxes as well as to the taxes and regulations of at least one state.

I don't think any web site can limit its reach to users in a particular geographic area; the technology just doesn't exist. And even if a Nevada site could ensure its users are all in Nevada, it would need a license and would also have to satisfy whatever requirements the state imposes, as well as those of the city where it is based. It may be impossible for an online business to meet all of these requirements.

Generally speaking, Americans can own or invest in businesses based in other countries. Those businesses are bound by the laws of the countries in which they operate. They do not become subject to American law merely because some of their stock belongs to Americans, just as an American company would not suddenly become subject to, say, Egyptian law if an Egyptian invests in the company.

The extent to which people in the U.S. can legally use offshore gambling sites is probably subject to the laws of each state. How laws which were written for particular places apply to dealings over the internet is not entirely clear, and gambling is not the only matter affected by this uncertainty.

Re: Internet gambling sites

I'm sorry I can't over-answer, because I enjoy giving lots of legal history and details in response to LawGuru inquiries, but on this subject I don't know a whole lot. I will say that Nevada is not the answer for you, because Nevada heavily regulates its gaming industry and you would never get a license for your proposed business, and because Nevada is especially heavy on policing gambling (to protect its tax revenues, of course, and also its reputation).

My guess is that most of the Internet gambling operations operate offshore, or appear to, not because that makes them fully legal, but because it makes them harder to sue or prosecute.

In the last couple of years, a lot of material has become available to attorneys regarding Web-based businesses' exposure to local laws. I have kept up with one aspect of it, that being whether and how a business can offer securities on a Web site without offending the Blue Sky laws in every jurisdiction where the offering material might be viewed and downloaded, whether or not the offering was registered there. Trying to keep up with this is enough; I just don't read what Web-law news services, journals and treatises are saying about on-line casinos and other forms of Web gambling.

There is, however, a lot of information out there. Maybe you could induce me to plow through it and give you a summary of the applicable law for a modest fee. Please contact me if interested.

Re: Internet gambling sites

As far as I know: 1) It's legal to gamble by phone or internet if you are within Nevada, and the casino has a Nevada gaming license. 2) Except for 1), it's illegal to operate a gambling site in the US. 3) Most established gambling sites are offshore. 4) It's illegal to gamble online from the US across state lines, but -players- are never, or at least rarely, prosecuted. However, you would need an offshore neteller.com account (to hold your grubstake/winnings) which you would have to report on Form 1040, Schedule B=automatic IRS audit or else lie and don't report it (bzzt! illegal). 5) The established sites such as PartyPoker have grown very big and rich (publicly traded) and now have the money both to bribe Congress not to hassle their US players, and to crush new competitors.