Whether online gambling is legal remains a matter of dispute. However, analysts agree that the industry has grown dramatically in recent years. Many internet gambling sites don’t pay taxes to their home countries. In addition, state officials have expressed concern that the Internet can be used to bring illegal gambling into their jurisdictions.
The Department of Justice has attempted to quantify the size of the online gambling industry. In addition, the National Gambling Impact Study Commission has estimated that revenues from online gambling reached $2 billion in 2000. In 2005, sports book betting accounted for one-third of all Internet gambling.
Some argue that because gambling does not involve an individual interest of the same constitutional magnitude, it does not qualify for protection under the Commerce Clause. However, because gambling is primarily a matter of state law, it is unlikely that federal law will prohibit it.
There are several statutes involved in the prosecution of illegal Internet gambling. The Unlawful Internet Gambling Enforcement Act (UIGEA) prohibits the transfer of money to gambling sites. A related statute, the Travel Act, prohibits individuals from entering a state to engage in certain activities.
Several legal cases have contested the law’s enforcement. In one case, federal prosecutors warned PayPal that it could face prosecution. In another, federal marshals seized $3.2 million from Discovery Communications. These cases all involved illegal Internet gambling.
Other notable cases involve the use of high-tech software to make gambling more interactive. Some websites allow users to chat with each other in a virtual reality environment. These sites also use industry-standard 128-bit encryption.