Illegal Gambling Business Act

Citation: 18 U.S.C. §1955.

Background
The Illegal Gambling Business Act of 1970 was enacted as part of the Organized Crime Control Act. The statute (18 U.S.C. §1955) was aimed at syndicated gambling, See United States v. Sacco, 491 F.2d 995, 998 (9th Cir. 1974). that is, large-scale, illegal gambling operations that were thought to be financing organized crime.

Application to Internet Gambling
On the face of it, an illegal gambling business conducting its activities by way of the Internet would seem to come within the reach of 18 U.S.C. §1955. The limited commentary on the point appears to concur. Dicta in a federal appellate decision likewise strongly suggested the applicability of Section 1995:
 * [U]nder §1955, it is quite obvious that bettors should not be held criminal liable either under the statute or under §2 and that local merchants who sell the accounting paper or the computers on which bets are registered are not sufficiently connected to the enterprise to be included even if they know that their goods will be used in connection with the work of the business. On the other hand, it seems similarly obvious that the seller of computer hardware or software who is fully knowledgeable about the nature and scope of the gambling business would be liable under §2 if he installs the computer, electronic equipment and cables necessary to operate a “wire shop” or a parimutuel betting parlor, configures the software programs to process betting information and instructs the owners of the gambling business on how to use the equipment to make the illegal business more profitable and efficient. Such actions would probably be sufficient proof that the seller intended to further the criminal enterprise.

Penalties
Violations of section 1955 are punishable by imprisonment for not more than five (5) years and/or fines of the greater of not more than twice the gain or loss associated with the offense or $250,000 ($500,000 for an organization). Moreover, the federal government may confiscate any money or other property used in violation of the section. The offense may also provide the foundation for a prosecution under the Travel Act, the money laundering statutes, and RICO. Id. §§1961-63.

The Elements of a Claim
The elements of section 1955 apply to anyone who:
 * 1. A. conducts,
 * B. finances,
 * C. manages,
 * D. supervises,
 * E. directs, or
 * F. owns
 * 2. all or part of an illegal gambling business that
 * 3. A. is a violation of the law of a State or political subdivision in which it is conducted;
 * B. involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
 * C. has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.

“[N]umerous cases have recognized that Section 1955 proscribes any degree of participation in an illegal gambling business except participation as a mere bettor.” Or as more recently described, “`[c]onductors’ extends to those on lower echelons, but with a function at their level necessary to the illegal gambling operation.” The section bars only those activities that involve illegal gambling under applicable state law and that meet the statutory definition of a business. Illegal gambling is at the threshold of any prosecution under the section, and cannot to be pursued if the underlying state law is unenforceable under either the U.S. Constitution, or the operative state constitution. The business element can be satisfied (for any endeavor involving five or more participants) either by continuity (“has been or remains in substantially continuous operation for period in excess of thirty days”) or by volume (“has a gross revenue of $2,000 in any single day”). The volume prong is fairly self-explanatory and the courts have been fairly generous in their assessment of continuity. They are divided, however, on the question of whether the jurisdictional five and continuity/volume features must coincide. finding the Gun Free School Zone Act (18 U.S.C. §922(q)) beyond the bounds of Congress’ Commerce Clause power, stimulated a host of appellate decisions here and elsewhere. In the case of Section 1955, Lopez challenges have been rejected with the observation that, unlike the statute in Lopez, Section 1955 (a) involves the regulation of a commercial activity (a gambling business), (b) comes with jurisdictional elements selected to reserve prosecution to those endeavors likely to substantially affect interstate commerce (five participants in a substantial gambling undertaking), and (c) was preceded by congressional findings evidencing the impact of substantial gambling operations upon interstate commerce.

Accomplice and Conspiracy Liability
The accomplice and conspiratorial provisions attend violations of Section 1955 as they do violations of the Wire Act. Although frequently difficult to distinguish in a given case, the difference is essentially a matter of depth of involvement. “[T]o be guilty of aiding and abetting a section 1955 illegal gambling business. . . the defendant must have knowledge of the general scope and nature of the illegal gambling business and awareness of the general facts concerning the venture. . . [and he] must take action which materially assists in ‘conducting, financing, managing, supervising, directing or owning’ the business for the purpose of making the business succeed.” Unlike conspiracy, one may only be prosecuted for aiding and abetting the commission of a completed crime; “before a defendant can be found guilty of aiding and abetting a violation of section 1955 a violation of section 1955 must exist. . . [and] aiders and abettors cannot be counted as one of the statutorily required five persons.”

As a general rule, a federal conspiracy exists when two or more individuals agree to commit a federal crime and one of them commits some overt act in furtherance of their common scheme. “A conspiracy may exist even if a conspirator does not agree to commit or facilitate each and every part of the substantive offense. The partners in the criminal plan must agree to pursue the same criminal objective and may divide up the work, yet each is responsible for acts of each other. If the conspirators have a plan which calls for some conspirators to perpetrate the crime and others to provide support, the supporters are as guilty as the perpetrators.”

Conspiracy is a separate crime and thus conspirators may be convicted of both substantive violations of Section 1955 and conspiracy to commit those violations. In fact, under the Pinkerton doctrine, co-conspirators are liable for conspiracy, the crime which is the object of the conspiracy (when it is committed), and any other reasonably foreseeable crimes of their confederates committed in furtherance of the conspiracy.

Application to Offshore Gambling Operations
The application of Section 1955 to offshore gambling operations that take wagers from bettors in the United States involves two questions. First, does state law proscribing the gambling in question apply when some of the elements of the offense are committed outside its jurisdiction? Second, did Congress intend Section 1955 to apply beyond the confines of the United States?

Section 1955 can only apply overseas when based on an allegation that the gambling in question is illegal under a state law whose reach straddles jurisdictional lines. For example, a statute that prohibits recording bets (bookmaking) in Texas cannot be used against a gambling business which records bets only in Jamaica or Dominican Republic, even if the bets are called in from Texas. On the other hand, an overseas gambling business may find itself in violation of Section 1955 if it accepts wagers from bettors in New York, because New York law considers the gambling to have occurred where the bets are made.

Whether a federal law applies overseas is a matter of congressional intent. The intent is most obvious where Congress has expressly stated that a provision shall have extraterritorial application. In the absence of an explicit statement, the courts use various construction aids to divine congressional intent. Unless some clearer indication appears, Congress is presumed to have intended its laws to apply only within the United States. The courts have recognized contrary indications under several circumstances. Congress will be thought to have intended a criminal proscription to apply outside the United States where one of the elements of the offense, like the commission of an overt act in furtherance of a conspiracy, occurs in the United States. Similarly, Congress will be thought to have intended to outlaw overseas crimes calculated to have an impact in the United States, for example, false statements made abroad in order to gain entry into the United States. Finally, Congress will be thought to have intended extraterritorial application for a criminal statute where its purpose in enacting the statute would otherwise be frustrated, for instance, the theft of United States property overseas.

There is a countervailing presumption interwoven among these interpretive devices. Congress is presumed not to have intended any extraterritorial application that would be contrary to international law. International law in the area is a matter of reasonableness, of minimal contacts, traditionally described as permitting geographical application of a nation’s laws under five principles: a country’s laws may be applied within its own territory (territorial principal); a country’s laws may be applied against its own nationals wherever they are located (nationality principle); a country’s laws may be applied to protect it from threats to its national security (protective principle); a country’s laws may be applied to protect its citizens overseas (passive personality principle); and a country’s laws may be applied against crimes repugnant to the law of nations such as piracy (universal principle). Jurisdiction with Respect to Crime, 29 American J. of Int’l Law (Supp.) 439, 445 (1935).

Section 1955 does not say whether it applies overseas. Yet an offshore illegal gambling business whose customers where located in the United States seems within the section’s domain because of the effect of the misconduct within the United States.