Federal Internet Gambling Laws
Internet gambling violates provisions of federal law under 18 U.S.C. § 1084, sitting at the intersection of civil and criminal law that businesses navigating regulated industries must understand. This section prohibits the foreign or interstate transmission of bets or wagers or information on bets or wagers by use of a wire communication. For example, operating an off-shore sports betting operation that utilizes the telephone system within the United States is illegal, United States v. Blair, 54 F.3d 639 (10th Cir. 1995). As Internet transmissions are conducted over telephone lines, this is a potential area of liability for gambling service providers.
Minnesota Internet Gambling Laws
Internet gambling services are also illegal in Minnesota. Such activities include sporting events, lottery tickets, and simulated casino games. The line between lawful promotional sweepstakes and prohibited gambling is mapped in illegal lottery promotional contests. Generally, it is unlawful in Minnesota to sell or transfer a chance to participate in a lottery, Minn. Stat. § 609.755(2). Sports bookmaking is defined as “the activity of intentionally receiving, recording or forwarding within any 30-day period more than five bets, or offers to bet, that total more than $2,500 on any one or more sporting events,” Minn. Stat. § 609.75, Subd. 7.
Engaging in sports bookmaking is a felony. Finally, intentionally receiving, recording, or forwarding bets or offers to bet in lesser amounts is a gross misdemeanor, Minn. Stat. § 609.76, Subd. 1(7).
MN Court of Appeals on Internet Gambling
The Minnesota Court of Appeals upheld jurisdiction against an out of state Internet gambling service provider in State of Minnesota v. Granite Gate Resorts, Inc., 568N.W.2d 715 (Minn. Ct. App. 1997), part of the broader framework for suing out-of-state corporations in Minnesota. The Court found that because the provider had advertised on the Internet on-line gambling services and had developed from the Internet a mailing list that included one or more Minnesota residents, the provider had purposefully availed itself of the privilege of conducting commercial activities in Minnesota to an extent that maintenance of an action in Minnesota did not offend traditional notions of fair play and substantial justice. Therefore, the provider was subject to personal jurisdiction in Minnesota. Out-of-state defendants who believe the jurisdictional reach overstepped may file a motion to dismiss for lack of personal jurisdiction to test the contacts analysis.
Individual Bettor Liability
There is also a potential for individual bettor liability in Minnesota. In Minnesota it is unlawful to make a bet through Internet gambling organizations. Minnesota law makes it a misdemeanor to place a bet unless done pursuant to an exempted, state-regulated activity, such as licensed charitable gambling or the state lottery, Minn. Stat. §§ 609.75, Subd. 2 -3; 609.755(1). As Internet gambling organizations are not exempted, any person in Minnesota who places a bet through one of these organizations may be committing a crime. Further, Minnesota law provides for forfeiture provisions related to unlawful gambling activity, which fit within Minnesota’s broader specific forfeiture laws. It is the Minnesota Attorney General’s position that a computer that is used to play a game of chance for something of value would be subject to forfeiture under Minnesota law. The AG’s enforcement role parallels private rights of action under Minnesota’s private attorney general statute.
This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould. Businesses operating across state lines may also wish to consult how to register a business in Minnesota and forming an LLC in Minnesota when reviewing compliance posture.
