If Betting Is Not A Crime Is It Legal?

In New York, it is not a crime to make a bet. But does that mean that betting in
New York is legal?

This may sound like legal hair-splitting. But the U.S. Supreme Court recently
refused to overturn a lower court’s decision that betting does not have to be a crime to be
illegal, resulting in a felony conviction for Jay Cohen, with a probable 21 months in
prison. This legal technicality is also what is stopping companies like Caesars from
opening up Internet casinos and taking bets from Americans.

Cohen was the president and co-founder of one of the most successful online sports
betting operations, World Sports Exchange (“WSEX.com”), licensed and run out of
Antigua.

His problem was the federal Wire Act, which makes it a crime for anyone in the
business of gambling to use a wire that crosses a state line to send information which
would be helpful in the placing of bets.

But the Wire Act has a “safe harbor,” an exception to protect legitimate news
reporting of sports events and state-licensed race books.

The Wire Act was first proposed in 1961 as part of U.S. Attorney General Bobby
Kennedy’s War on Crime. It was designed to help states enforce their nearly unanimous
prohibition on betting on sports events and races by telephone.

Because Nevada allows bets on horse races taking place in other states, there had
to be a way for Nevada’s racebooks to receive race results. So, the Wire Act expressly
does not cover “the transmission of information assisting in the placing of bets or wagers
on a sporting event or contest from a State or foreign country where betting on that
sporting event or contest is legal into a State or foreign country in which such betting is
legal.”

It has been settled law throughout almost all of the United States that a person
cannot be punished for a specific activity, say betting on a sports event, unless a
legislature has passed a statute making that activity a crime.

Betting with WSEX.com is legal in Antigua. Cohen’s lawyers pointed out that the
New York Legislature has never made it a crime to make a bet in New York. This, they
said, made it legal on both ends.

The trial court and Court of Appeals disagreed. They sided with the prosecutors
and declared that gambling is illegal in New York, even though it is not a crime. They
pointed to language in the State Constitution “no…bookmaking, or any other kind of
gambling [except lotteries and horseracing] shall hereafter be authorized or allowed;” and
the General Obligations Law, “All wagers, bets or stakes…shall be unlawful.”

In fact, many off-track betting parlors in the state have had account wagering for
years, exactly like WSEX.com. Bettors deposit money in advance with the OTB and then
call when they want to bet on a horse race. New York law expressly allows bettors in
other states to make phone bets to New York OTBs.

Until December, 2000, federal law did not make an exception for state-licensed
OTBs. Yet, the feds only went after Cohen.

Which proves that the definition of “legal” sometimes depends more on who you
are than on what you are doing.