Casino operators may think they can skirt state laws in cyberspace, but a Missouri case shows the Net can't always defy borders.
In a groundbreaking conviction, state attorney general Jay Nixon has managed to run a Pennsylvania-based Net gambling site out of Missouri.
Although his company is based outside Missouri, Michael Simone, the operator of Interactive Gaming & Communications, pleaded guilty today to misdemeanor charges of promoting gambling in the state, according to Nixon's office.
"These criminal convictions should serve as a clear notice to Internet operators that we will aggressively pursue violations of Missouri law," Nixon said in a statement. "Cyberspace is no safe haven for lawbreakers."
Riverboat gambling is legal in Missouri, but in May 1997, Simone's roulette and black jack site was slapped with a court order to cease taking bets from Missouri residents.
Simone was indicted two months later for allegedly violating the court order when Missouri authorities placed bets on the site. He faced up to five years in prison or a $15,000 fine.
Under his plea, Simone will not do any jail time, although his company agreed today to pay $27,500 in court costs and fines. Simone could not immediately be reached for comment.
Simone was the first Net gambling site operator Missouri went after, but he is not the last.
The state still has a civil lawsuit pending against the Coeur d'Alene Indian reservation in Idaho, which hosts the U.S. Lottery site. In January, Madison County Circuit Judge Stanley Murphy prohibited the reservation from offering any wager opportunities to people in Missouri and from concealing that online gaming is illegal in the state.
The Eighth Circuit Court of Appeals is considering the ruling now, as well as whether Missouri has jurisdiction over the reservation.
In another closely watched case, a Minnesota Supreme Court reverted in May to an appeals court decision declaring the state has jurisdiction to sue Nevada businessman Kerry Rogers for falsely advertising on his Web site that Net gambling is legal anywhere in the United States.
Kerry has been wrangling with the state since 1995. Minnesota aims to restrict his Nevada-based Web site from promoting to its citizens a yet-to-be-launched sports betting site, Wager Net, in which the actual wagers will be taken via computers in Belize.
Now Minnesota's case against Rogers will finally go to trial.
The Minnesota appeals court decision equates Web sites to direct mail advertisements. So if a pitch reaches Minnesota, the state then can exercise its consumer protection laws. If the ruling is upheld, states could have a new precedent to regulate Net gambling and other online activities.
Minnesota authorities aren't the only ones after Rogers, however. During an online gambling sweep, the U.S. Attorney's Office in Manhattan indicted Rogers in March for his connection with the Winner's Way gambling site.
The Justice Department charged a handful of other operators with running gambling sites on the Internet in violation of federal laws that prohibit conspiring to take illegal bets and taking wagers over telephone wires.
And in another battle over the issue, Congress is working on clearing up the jurisdictional issues between states over Net gambling. Although the Justice Department says the proposal is too broad, in July the Senate passed a spending bill that included Sen. Jon Kyl's (R-Arizona) Internet Gambling Prohibition Act.
The provision slaps new criminal penalties on Net users who place bets, and would include the Internet under the existing law prohibiting the use of any wire communication for accepting interstate or foreign wagers, which the DOJ estimates was a $600 million industry last year.
With just one roll of the dice, Net users could face up to a $500 fine and three months in prison. Cybercasino operators would face up to $20,000 in fines and up to four years in prison. The Kyl amendment does carve out exceptions for horse racing and state lotteries that are available online, but only residents within those states could participate.