The Federal Role in The US Gambling Regulation

Although wide-scale legalized gambling is a relatively recent phenomenon, the large number 2 of jurisdictions involved, operating under many different conditions, has produced a useful variety of experience for other communities to draw on. By examining this variety of positive and negative experiences, governments can draw the appropriate lessons from the successes and mistakes of others and thereby reduce the need to experiment on their communities.

The Federal Role
Until relatively recently, the federal government largely deferred to the states in matters relating to gambling; Washington’s attention focused largely on criminal matters, including organized crime, fraud, and the like, especially when these involved activities across state lines. 2

In the early 1950’s, Congressional investigations into the activities of organized crime in the gambling industry resulted in an enhanced federal role, including the creation of the Special Rackets Squad of the FBI and the enactment of the Gaming Devices Act of 1951 (commonly referred to as the Johnson Act). 3

In the 1960’s the federal government expanded its regulatory role over gambling activity through such measures as the 1961 Wire Communications Act (” Wire Act”), which prohibits the use of wire communications (telephones, telegrams, etc.) by persons or organizations engaged in the business of wagering to transmit bets or wagers, or information that assists in the placing of bets or wagers, taking care to specifically mention “sporting events or contest.” 4 Similarly, the Travel Act prohibits travel or the use of mail, either inter-state or internationally, for “any business enterprise involving gambling.” 5 Other federal laws add to these measures, such as the prohibition on the inter-state transportation of wagering paraphernalia. 6

One of the best known federal measures is the Racketeering Influenced and Corrupt Organizations statutes (RICO). 7 Enacted in 1971 under the Crime Control Act, the RICO were aimed at combating “the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce,” including gambling. 8

In 1985, the Bank Secrecy Act was amended to include casinos, used car dealers, money transfer services, and a number of other “cash-intensive” businesses in the list of financial institutions subject to special requirements that are designed to prevent money laundering. Among other things, the Act requires casinos to report each deposit; withdrawal; exchange of currency, gambling tokens or chips, or other payment; or transfer that is made by, through, or to the casino in amounts greater than $10,000. 9 As its name indicates, the Money Laundering Control Act of 1986 was aimed at strengthening federal efforts in this area; it was followed in 1990 by the creation of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to “establish, oversee and implement policies to prevent and detect money laundering.” 10

2 James H. Frey, Introduction, Federal Gambling Law, Anthony N. Cabot (ed) 2 (1999), citing an unpublished paper by Cabot. 3 Among its other provisions, the Johnson Act prohibits the transportation of gambling devices across state lines. It was amended to exempt cruise ships but not airlines either originating from or bound for the U. S. 4 18 U. S. C. § 1084. 5 18 U. S. C. § 1952. 6 18 U. S. C. § 1953. 7 18 U. S. C. § 1961 et seq. 8 Senate Report No. 91-617, 91st Congress, 1st Session 80 (1969). 9 31 U. S. C. § 103. Also known as the Currency and Foreign Transactions Reporting Act 10 U. S. Treasury Order No. 105-08. http:// www. ustreas. gov/ fincen/ faqs. html (last visited May 8, 1999).