Wednesday, March 07, 2007

Eighth Circuit Court of Appeals reverses convictions against North Dakota simulcast horseracing operator but cautions that all off track betting that takes place by phone or online may be illegal. 053688P.pdf 03/06/2007 United States v. Susan Bala No: 05-3688 05-3691,05-3690 District of North Dakota - Fargo [Loken, Author, with Smith and Gruender, Circuit Judges The defendants contracted with the State of North Dakota to provide charitable off track horse betting operators with signals and betting systems. Later the defendants lobbied the State of North Dakota to gain approval for off track account wagering. The defendants won the contract but failed to remit any proceeds to charities as the law required. The federal district court convicted the defendants of violating 18 USC 1955. 1084(a), 1084(b), along with wire fraud, money laundering charges. In addition the court ordered the defendants forfeit gambling proceeds. Eighth Circuit reverses, ruling that the Government failed to prove the defendants were illegal gambling businesses violating the relevant federal gambling statutes because the government failed to prove the defendants violated the North Dakota simulcasting statutes. Although an account wagering site in North Dakota had to transmit some gambling proceeds to charities, the law was never clear how much, when or how that would occur. The Eight Circuit cautions however although the government did not charge the defendants with illegal conducting wagering through wire facilities, it could have and any off track betting organization taking phone or online bets could be violating the law even though its home State might have authorized its operations: There is an aspect of this issue unnoticed by the parties that could have serious implications for the future of interstate account wagering. The prohibition in§ 1084(a) encompasses bets and wagers as well as information assisting bets and wagers, whereas the exception in § 1084(b) is limited to information assisting bets and wagers. Thus, the plain language suggests that Congress intended to prohibit all interstate wagering by wire, whether or not legal in the States between which the bets are transmitted…North Dakota passed the 2001 account wagering statute in an attempt to attract interstate electronic betting. If the reach of § 1084 is as broad as its legislative history suggests, the attempt if successful will violate federal law. We leave that issue to another day.

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