If Betting Is Not A Crime Is It Legal?

written by I. Nelson Rose

#150 ©Copyright 2002, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, Whittier Law School, Costa Mesa, CA.

In New York, it is not a crime to make a bet. But does that mean that betting in New York is legal?

This may sound like legal hair-splitting. But the U.S. Supreme Court recently refused to overturn a lower court’s decision that betting does not have to be a crime to be illegal, resulting in a felony conviction for Jay Cohen, with a probable 21 months in prison. This legal technicality is also what is stopping companies like Caesars from opening up Internet casinos and taking bets from Americans.

Cohen was the president and co-founder of one of the most successful online sports betting operations, World Sports Exchange (“WSEX.com”), licensed and run out of Antigua.

His problem was the federal Wire Act, which makes it a crime for anyone in the business of gambling to use a wire that crosses a state line to send information which would be helpful in the placing of bets.

But the Wire Act has a “safe harbor,” an exception to protect legitimate news reporting of sports events and state-licensed race books.

The Wire Act was first proposed in 1961 as part of U.S. Attorney General Bobby Kennedy’s War on Crime. It was designed to help states enforce their nearly unanimous prohibition on betting on sports events and races by telephone.

Because Nevada allows bets on horse races taking place in other states, there had to be a way for Nevada’s racebooks to receive race results. So, the Wire Act expressly does not cover “the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.”

It has been settled law throughout almost all of the United States that a person cannot be punished for a specific activity, say betting on a sports event, unless a legislature has passed a statute making that activity a crime.

Betting with WSEX.com is legal in Antigua. Cohen’s lawyers pointed out that the New York Legislature has never made it a crime to make a bet in New York. This, they said, made it legal on both ends.

The trial court and Court of Appeals disagreed. They sided with the prosecutors and declared that gambling is illegal in New York, even though it is not a crime. They pointed to language in the State Constitution “no…bookmaking, or any other kind of gambling [except lotteries and horseracing] shall hereafter be authorized or allowed;” and the General Obligations Law, “All wagers, bets or stakes…shall be unlawful.”

In fact, many off-track betting parlors in the state have had account wagering for years, exactly like WSEX.com. Bettors deposit money in advance with the OTB and then call when they want to bet on a horse race. New York law expressly allows bettors in other states to make phone bets to New York OTBs.

Until December, 2000, federal law did not make an exception for state-licensed OTBs. Yet, the feds only went after Cohen.

Which proves that the definition of “legal” sometimes depends more on who you are than on what you are doing.

Professor I. Nelson Rose is recognized as one of the world’s leading authorities on gambling law. He can be reached at his website, www.GamblingAndTheLaw.com.

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