Mailbag Mythbusting: The ‘Kitchen Sink’ Statutes

Answer:

This is false. While the Federal government has at least two very broad and powerful statutes that can be applied in a wide range of circumstances, they cannot be used to prosecute just anyone for anything. The Mail Fraud (18 U.S.C. 1341) statute and the Wire Fraud (18 U.S.C. 1343) statute – these are different than the Wire Act discussed in part I and part II – are powerful tools, but the power contained within each of them is not unlimited. Wire Fraud (and mail fraud, which I will use interchangeably here) involves five elements for an act to trigger the statute:

1. The Use of Wire Communications to advance;
2. A scheme to defraud;
3. Involves a material deception;
4. Intent to deprive another of;
5. Property or Honest Services.

This statute is potentially important to maintaining the integrity of both the sporting events themselves and the betting markets. For instance, this statute could conceivably be applied against manipulators with knowledge of a fix. Assuming a mobile bet was placed that would almost certainly satisfy element one of the statute, a scheme to manipulate a sporting event would likely satisfy as an effort to defraud; the key question is how many people would be deprived of property or honest services? The sportsbook and potentially, even other bettors would have an interest in recovering their lost money, which is property.

The honest services fraud concept is a legal argument that effectively states an employee who committed fraud on their job deprived their employer of “honest services” or the wages that they paid to the employee to do their job properly. This argument was raised in the case of former NBA referee Tim Donaghy, though claims for restitution under this legal theory have been pushed back since a 2010 Supreme Court decision. Despite this ruling, it remains a possible theory of recovery for leagues or sportsbooks against employees who have defrauded them through nefarious betting activities.

Answer:

Yes. This is a great question. The Kennedy administration, at the urging of his brother Robert’s Department of Justice, pushed for elaborate criminal justice reform in the early part of Jack’s administration. In 1961, no fewer than seven different bills were debated that targeted organized crime. These included: what would become the Travel Act, which effectively meant that the transportation of the proceeds of certain organized criminal activities across state lines was a violation of Federal law, as determined by the state law in which the proceeds were generated, (No. 1 on the list of enumerated activities is gambling).

In addition to the Wire Act, Travel Act, and various bills involving fugitives and granting of immunity for testimony, the Senate also debated what would become the Wagering Paraphernalia Act 18 U.S.C. § 1953. What the Federal government sought to do there was to stop gambling by stopping the interstate sale of mechanisms that facilitated gambling by the importation of “any record, paraphernalia, ticket, certificate, bills, slip, token, paper, writing, or other device used, or to be used, or adapted, devised, or designed for use in (a) bookmaking; or (b) wagering pools with respect to a sporting event; or (c) in a numbers, policy, bolita, or similar game….”

As the plain text indicates, the Wagering Paraphernalia Act remains relevant especially as we begin to see distinctions in state laws. Consider, for instance, the case of United States v. Mendelsohn. Mendelsohn and a co-defendant who mailed a floppy disk to Michael Felix who was a California resident. The computer disk from Nevada contained software that would facilitate bookmaking (something that is illegal in California).

The Ninth Circuit Court of Appeals upheld a lower court ruling that found the bookmaking software contained on a disk constituted a “device” within the context of the statute and the defendants were sentenced to three years probation which was upheld. While statutes like the Wagering Paraphernalia Act and the Travel Act may appear dated, and utilize antiquated language, they remain relevant to the challenges of intrastate gaming taking place in an interconnected country.

Answer:

Wow. You sure have an excellent grasp of the English language for a horse. Also, where do you find time to ask these questions? Shouldn’t you be propagating? But yes, that has been suggested. The Interstate Horseracing Act is a piece of federal legislation that was passed in 1978 (15 U.S.C. §§ 3001-3007). The statute contains three primary findings: two of which are routinely cheered by states’ rights advocates, with the third serving to support the first two.

Congress found:

(1) the states should have the primary responsibility for determining what forms of gambling may legally take place within their borders;

(2) the federal government should prevent interference by one state with the gambling policies of another and should act to protect identifiable national interests; and

(3) in the limited area of interstate off-track wagering on horse races, there is a need for federal action to ensure states will continue to cooperate with one another in the acceptance of legal interstate wagers.

The system could serve as a happy medium of sorts for the federal government (and some of those who desire federal intervention), and more like the traditional supporting role that the federal government has played in gaming. The statute has a few key components: 1) the host of the race must consent to interstate wagering; 2) tracks within a 60-mile radius of off-track betting locations must approve of interstate wagering; and 3) (which is reproduced in its entirety because it is a mouthful) “No pari-mutuel off-track betting system may employ a takeout for an interstate wager which is greater than the takeout for corresponding wagering pools of off-track wagers on races run within the off-track State except where such greater takeout is authorized by State law in the off-track State.”

Is the Interstate Horseracing Act a perfect model for sports betting? No, it isn’t. There are, however, components that could be adapted, certainly many would support a federal bill that facilitates interstate wagering in a manner similar to the Interstate Horseracing Act, but intellectual property jurisprudence surrounding ownership of human sporting event results makes a consent-based system untenable by creating a property right in what is essentially information that exists in the public domain. Additionally, it is not entirely clear how a sports betting exclusion zone would be feasible, especially if casinos were placed in charge. There are potential antitrust issues, as well as a looming First Amendment question, that may garner a different analysis under legalized sports betting than it did under the prohibition.