Cyber News

Industry Calls Jay Cohen’s
Conviction Unfair

Last month, I told you about a landmark trial that was taking place in New York regarding Jay Cohen of the World Sports Exchange online gambling site (www.wsex.com). The charges against Cohen included six counts of using wire communication to transmit bets and wagers and one count of conspiracy to use wire facilities to transmit bets. According to Cohen, his site did not violate the Wire Act (a law passed in the ‘60s to control illegal betting using phone lines) because the wagering took place in Antigua, where it’s legal.

After a week-long trial that many called one-sided, Cohen was convicted for violating the 1961 Wire Act. Talking about the case and the verdict, Sue Schneider, chairman of the Interactive Gaming Council, stated: “We are disappointed that the Justice Department decided to pursue this case, even though Jay Cohen was operating a licensed and regulated gaming establishment and causing harm to no one. However, our disappointment is dwarfed by the Council’s concern about the Orwellian tactics that the prosecutors used to obtain this conviction. Not only was Mr. Cohen precluded from offering a substantive defense, the judge in the case would not even let the jury have a complete or accurate copy of the Wire Act upon which to base their decision. This type of ‘convict now and find facts later’ prosecution should be troubling for all members of the Internet community.”

But even after what was considered by many as an unfair trial, the jury took two days to deliberate, which, at the very least, spoke to the complexity of this issue.

According to Schneider’s Interactive Gaming News, the jury during its deliberations asked for a copy of the Wire Act (18 U.S.C. sec. 1084) to determine whether Cohen’s actions were indeed criminal. The judge obliged, but had the provision of section 1084, which contained a legal defense for Cohen, removed as if it didn’t exist. In addition, the jury wasn’t even told that parts of the statute had been removed. Last month, I mentioned that if Cohen were to be acquitted, the pressure for a ban on Internet gambling—the
Kyl Bill—would be stronger than ever.

But even though it now looks like the 40-year-old Wire Act may be sufficient to prosecute an offshore sports betting operator like Cohen (who is expected to appeal and is expected to win), the fact remains that the Wire Act does not apply to casino-style games or, for that matter, the Internet itself, so the government may have a long way to go if it wants to stifle the online casino gambling industry.

Justice Department Remains
Critical of Kyl Bill

Way back in the spring of 1998, Arizona Senator Jon Kyl seemed to be close to getting his Net gambling ban passed into law. That was until the US Justice Department voiced its concerns over the bill’s enforceability and constitutionality. In retrospect, those concerns were obviously damaging to the Kyl Bill, which has still yet to pass.

Fast forward to the present. Kyl’s bill has passed the Senate and in mid-March was scheduled to be debated further in the House of Representatives. But just when Kyl figured he was on his way to finally getting his law passed, the Justice Department dealt another blow to the Arizona Senator.

In early March, and just a week after the landmark conviction of offshore operator Jay Cohen, the Justice Department suggested that instead of passing a separate law (the Kyl Bill), the government should look to update the 40-year-old Wire Act.

“The fact that gambling, an age-old crime, has gone high-tech and can now be done through the Internet, is no reason to pass new laws that specifically target the Internet for regulation,” Kevin DiGregory, deputy assistant attorney general, told the House Judiciary subcommittee on crime. DiGregory added that amending the Wire Act instead of creating a new law prevents an “overlap in statutes,” which would complicate law enforcement.

While the hearings in the House continued in March, it was not yet known how the Justice Department’s position would affect the Kyl Bill, but it can’t be good news for the now three-year-old potential law. In fact, Kyl himself said that “if we don’t get legislation this year, we’re not going to get it.” Kyl may have said that because if a Net gambling ban doesn’t pass by Labor Day (around the time Congress is expected to break for the year), he and his supporters would have to start their efforts to pass a law from scratch in ‘01, and by then it may be too late.