6 Va. J.L. & Tech. 6
(2001), at http://www.vjolt.net
1522-1687 / 2001 Virginia Journal of Law and Technology Association
VIRGINIA JOURNAL of LAW and TECHNOLOGY
UNIVERSITY OF VIRGINIA
6 VA. J.L. & TECH. 6
The Enforceability of Internet Gambling Debts:
Laws, Policies, and Causes of Action
By Michael Anastasio
A. Credit Cards
1. No one can deny that the Internet is having a profound impact on our society. Now, anyone, anywhere, with an inexpensive computer and a telecommunications link, can have instantaneous access to a virtually unlimited universe of information, products, and services. While the Internet offers innumerable benefits, it has also added new dimensions to complex matters of public concern. This is true, in particular, in the area of gambling.
2. The shape and operation of legalized gambling is largely a product of government decisions. Moreover, state governments have had almost exclusive authority to establish and enforce gambling policies and laws, with the federal government deferring to the discretion of state and local governments, and enacting laws primarily designed to aid enforcement. These policies and laws are grounded in a balance of often competing considerations, which include protecting the public from fraud, organized crime, and social ills, while promoting economic benefits and public welfare. The advent of Internet gambling, however, threatens this equilibrium.
3. As one leading scholar has put it:
Internet gambling is a reality. The problem is that governments do not know what to do about it. State and federal policymakers face difficult issues. Every government has policies regarding gambling by its citizens. Some prohibit it, while others heavily regulate it. In contrast, Internet gambling is anarchy within our midst: Its [sic] an arena where no rules apply and no public policies are applicable.
Among other things, Internet gambling introduces increased risks of underage and pathological gambling, as well as criminal activity and fraud. These concerns are heightened by the apparently rapid growth of the Internet gambling industry.
4. Revenue estimates for the Internet gambling industry range from several hundred million to over a billion dollars, while estimates of the number of Internet gambling sites range from 250 to more than 1000. Despite the difficulty of putting a figure on it, there is a consensus among observers that Internet gambling is growing rapidly.
5. The growth of Internet gambling and the concerns it raises, have led many interested groups and organizations, including the National Gambling Impact Study Commission (NGISC), to recommend that government enact more legislation and expand its enforcement efforts to curb Internet gambling. Among other measures, the NGISCs recommendations include the following:
The Commission recommends to the President, Congress, and state governments the passage of legislation prohibiting wire transfers to known Internet gambling sites, or the banks who represent them. Furthermore, the Commission recommends the passage of legislation stating that any credit card debts incurred while gambling on the Internet are unrecoverable.
6. This recommendation did not fall on deaf ears. On May 10, 2000, the House Committee on Banking and Financial Services introduced H.R. 4419, also known as the Internet Gambling Funding Prohibition Act. Among other things, the bill would make it unlawful for an Internet gambling business to accept a bank instrument in connection with the placement of bets or wagers over the Internet. Commenting on H.R. 4419, Representative John LaFalce, the bills cosponsor, stated: H.R. 4419 offers, in my view, the only realistic approach for restricting the expansion of Internet gamblingby restricting the electronic payments that make online betting and, thus, Internet gambling possible.
The State of California has also initiated legislative measures. The lower house passed a bill that would prohibit certain forms of on-line gambling, and declare unenforceable, debts incurred as a result of prohibited on-line gambling.
7. The NGISCs recommendations, and the legislative efforts in response to them, underscore the fundamental driving force behind Internet gambling: money. More to the point, Internet gambling will quickly become a thing of the past if operators are unable to accept bets and collect money from on-line gambling activities. However, notwithstanding enactment of new legislation, existing laws and policies concerning the enforceability of gambling debts may already present a threat to the Internet gambling industry.
8. On-line gamblers typically incur debt, mainly through the use of credit cards. Yet most, if not all, states have enacted laws that declare invalid or unenforceable, contracts based on gambling. In addition, courts generally refuse to enforce such contracts on the grounds that they either involve illegal subject matter or violate public policy.
9. The traditional rules concerning the unenforceability of contracts for gambling debts were first embraced in the context of Internet gambling in Providian National Bank v. Haines. In Providian, the defendant in a collection action brought by her credit card issuer, cross-claimed on behalf of herself and the general public of the State of California for damages, injunctive relief, and restitution. Seeking to enjoin Visa, MasterCard, and other named banks from illegal gambling on the Internet, the defendant alleged, among other things, that there are
very important public policy reasons why online gambling transactions are illegal, unfair, and unenforceable, including the lack of online casino licensing and the total inability of the online consumer to audit the integrity of the gambling software algorithm to make certain that the odds of winning are not unfairly altered in favor of the online casino.
10. In July of 1999, MasterCard settled under terms that included requiring sites to post notice that gambling may be illegal in certain jurisdictions, and to request prospective gamblers to identify their locations. Thereafter, Visa and Providian settled, with Visa agreeing to stipulations similar to those agreed to by MasterCard, and Providian further stating its intention to no longer process gambling transactions.
11. Not long after Providian was filed, the plaintiff in Jubelirer v. MasterCard Intl, Inc., who used his MBNA MasterCard to open an account and wager losing bets on Internet blackjack, brought an action in federal court against MasterCard and MBNA American Bank. However, the plaintiff alleged not only that the resulting credit card debt was illegal, but also that the defendants participation in financing his gambling constituted a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), entitling him to (among other things) a declaration that his credit card debt was unenforceable. Although the district court dismissed the action with prejudice, this has not deterred others from filing similar actions.
12. Since the filing of Providian and Jubelirer, a number of similar actions have ensued. The growing number of suits has prompted the Judicial Panel on Multidistrict Litigation to transfer cases filed against Visa and MasterCard to the Eastern District of Louisiana.
13. In light of the mounting litigation and proposed legislation on this issue, the purpose of this article is to examine existing laws, policies, and causes of action relating to the enforceability of Internet gambling debts. Part II describes the variety of parties and relationships that may surround an Internet gambling debt obligation. Part III discusses the various legal theories, policies, and causes of action. Part IV summarizes and then concludes that existing laws and policies present significant obstacles to the enforcement of Internet gambling debts. Furthermore, it notes that these laws and policies pose significant risks to the Internet Gambling Industry and to the financial institutions involved in financing on-line wagers.
14. After entering an Internet casino web site, gamblers may use one or more methods to fund wagers on-line: credit cards, debit cards (including off-line or check cards and on-line or ATM cards), wire transfers, checks and money orders, digital cash, and other forms of electronic payment such as smart cards, Cybercash, and the establishment of electronic accounts.
15. Credit cards are the most widely used means of funding wagers at Internet casino sites. Typically, an Internet gambler uses his or her credit card to fund a newly created on-line electronic account, and then uses the funds in the electronic account to place bets. In-turn, the casino credits or debits the electronic account (not the credit card) with winnings and losses. For example, Casino-On-Net, which is licensed in Antigua and Barbuda and purports to be one of the first on-line casinos, provides for the establishment of a Global Electronic Currency (GEC) account at InterSafe Global, LLC. The Internet gambler funds the GEC account using a credit card, and then uses the GEC to purchase products and services supplied by any merchant approved by InterSafe. These products and services include the gambling services provided by Casino-On-Net.
16. Underlying the credit card transaction is a merchant account established by the Internet casino, or an electronic account service provided through a financial institution that is a member of a credit card association such as Visa or MasterCard. The account is governed by a merchant agreement pursuant to which the merchanteither the casino or the electronic account service providerpays a percentage of its credit card revenues to the merchant bank, and through which other rights and obligations (e.g., use of the Visa trademark) may flow. In addition, the Internet gambler possesses a credit card account established under a cardholders agreement with a financial institution that is also a member of the same credit card association.  The gambler incurs charges on the account, to fund wagers with the casino or to fund the electronic account, and is obligated under the agreement to repay amounts charged plus interest. When the gambler enters the credit card information to fund a wager or electronic account, the gamblers card issuer is electronically contacted through the card networks transaction processing service, to verify the account number, expiration date, and credit availability.  If everything checks out, the service will authorize and process the transaction.  The service will collect the money from the gamblers credit card issuer (which bills the gambler on the next statement) and deposit the money in the casinos or electronic account service providers merchant bank account, less transaction fees.
17. Accordingly, several complex relationships may be involved with or govern an Internet gambling debt arising from the use of a credit card. The most significant is the contractual relationship between the Internet gambler and the card issuer. This is essentially a contract for a loan between the two parties, in accordance with the terms and conditions of the cardholders agreement. Other relationships may include those between the gambler and the Internet casino or the account service (notwithstanding the credit card obligation); between the account service (e.g., InterSafe Global GEC) and the Internet casino; between the merchant bank and the casino or the account service or both; between the credit card network and the merchant bank or the card issuer or both; between the merchant bank and the card issuer; and between the payment processing service and the merchant bank or the card issuer or both.
18. Debit-based systems include bank or prepaid accounts, which typically involve ATM or check cards, as well as prepaid stored value or smart cards. Although they do not involve the extension of credit per se, these systems are covered by agreements between the account or cardholder and the issuing institution, and embody claims against the issuer when they are utilized to transfer preexisting funds to designated accounts. Internet gamblers may use these debit-based systems to fund bets directly with Internet casinos or transfer funds to electronic wagering accounts such as the InterSafe Global GEC account referred to above. Therefore, under these systems, there may be relationships concerning payment obligations between the gambler and the Internet casino or the account service; between the account service (e.g., GEC) and the Internet casino; between the issuing institution and the casino or the account service or both; between the payment processing network and the issuing institution and the financial institution servicing the casino or the electronic account service; and between the issuing institution and the financial institution servicing the casino or the account service. Debit transactions, though, are not a common occurrence in connection with Internet gambling because of security concerns stemming from required disclosures of PINs and other sensitive account information.
19. Digital or on-line currency involves stores of cash that can be spent on-line in anonymous peer-to-peer transactions without involving the use of a bank or other traditional payment system. Perhaps the most widely publicized version is eCash. It is a system for making anonymous electronic payments using digital coins. An individual opens an account with a financial institution, and then electronically submits the coins to the institution for assignment of value. The institution debits the account, and the coins may then be used to purchase goods and services anonymously.  The coins are backed by an obligation from the financial institution that assigned the value to the coins. As with debit-based systems, the coins embody claims against the issuer when they are utilized to transfer preexisting funds to designated accounts. Accordingly, they give rise to the same types of relationships as debit-based systems. Digital currency systems have not been successful, and are apparently not being used by casinos.
20. Internet gamblers may also fund wagers using other, more traditional methods. These include payment by check or money order, or transfer by wire of funds to open a wagering account with an Internet casino or electronic account service, as well as subsequent payment of gambling losses incurred at an Internet site on credit, though it is doubtful that any casinos offer the latter as an option. A variety of payment obligations can result, most notably those between the gambler and Internet casino.
21. Most, if not all, states have enacted laws that declare invalid or unenforceable, contracts based on gambling. Furthermore, courts generally refuse to enforce such contracts on the grounds that they either involve illegal subject matter or violate public policy. This defense to enforcement may exist even in states where some forms of gambling or the particular type of gambling for which the loan was made are legally authorized in the state.
22. While issues concerning the legality and enforceability of gambling debts turn on the specific facts of each case, as well as on the particulars of the applicable laws and public policies of the jurisdiction involved, one author who has performed a comprehensive analysis of federal and state cases discussing or determining the enforceability of such debts has observed the following generalizations and distinctions:
In determining whether a debt involves a gambling purpose and thus whether the issue of its legality or enforceability may be raised, courts rely on highly fact-sensitive criteria such as the location or time of the loan transaction, restrictions on the debtors use of the funds, and the mental state of lenders or other claimants to determine whether they had knowledge of the purpose of the loan ... courts have recognized the rule that a debt will not be unenforceable if the lender or its subrogee does not know the illegal purpose of a loan.
Courts may reach different outcomes depending on whether a loan is made to fund present or future gambling activities, or to pay an existing or antecedent debt.
23. Generally, loans for present or future gambling activities are unenforceable, often on the ground that the lender is particeps criminis in the gambling venture. However, courts have been split on whether the debt is recoverable if the lender knows of, but does not share in, the gambling purpose. Some courts have recognized that relief should be awarded to the lender because, for example, a governing statute did not apply, or because the lender did not aid or abet the gambling activity. Other courts have taken the view that enforcement should be denied.
24. With respect to loans in connection with antecedent debts, some courts have taken the view that the existing obligation is not connected with the loan, or that it represents a new obligation, or that the lender knew of the intended purpose of the loan but did not participate in the gambling activity. Other courts have held that a lenders mere knowledge of the gambling purpose bars enforcement of the debt. However, where the lenders involvement has included extraction of an interest or take in the wagering, courts have uniformly denied relief to the lender, characterizing the lender either as aiding and abetting the gambling activity, or as engaging in a joint venture with the borrower.
25. Although Internet technology may add to the complexity and number of relationships (contractual or otherwise) arising from a gambling debt, nevertheless the above principles apply to the analysis of the enforceability of Internet gambling debts. Furthermore, they are reflected both in the causes of actions filed, and in the limited case law that closely addresses this issue.
26. Perhaps the most significant issue involving an Internet gambling debt is the degree of nexus it has to the gambling activity. Establishing that the debt involves a contract that is distinct from the gambling activity, may serve to rebut arguments that it is illegal, void, or unenforceable. The decision in Cie v. Comdata Network, Inc. illustrates this approach.
27. In Cie, the plaintiffs obtained loans at legal gambling establishments in the form of cash advances on their credit cards, and used the advances to wager bets. To obtain the advances, the plaintiffs ran their credit cards through an automated electronic apparatus owned and operated by Comdata Network, Inc. (Comdata). The apparatus was located within casinos, at or near the gambling cages. The apparatus issued checks drawn on the account of Comdata. The plaintiffs then endorsed the checks in exchange for gambling chips, betting vouchers, or cash. The plaintiffs brought a class action suit against the credit card issuers and Comdata, seeking a declaratory judgment that the advances constituted void and unenforceable gambling loans. The court applied the following reasoning to hold that section 28-7(a) of the Illinois Gambling Act, which generally declares gambling contracts null and void, was inapplicable:
The plain language of section 28-7(a) limits its applicability to those contracts in which the lender participated in the unlawful gambling enterprise. There was no wager between Cie and the defendants herein. Instead, the Credit Card Defendants advanced Cie a loan through their agent, Comdata, which was to be repaid regardless of whether Cie won or lost. For Cie to claim this transaction is an illegal gambling contract misses the entire process of how the debt was incurred pursuant to a cardholders agreement wherein the card issuer promises to advance the cardholder funds up to a given limit and the cardholder promises to repay the loan (presumably with interest) . . . This is a simple contract having nothing whatever to do with gambling. Accordingly, the general rule regarding gambling contracts in section 28-7(a) does not apply to cash advances such as those obtained by Plantiff Cie.
28. In contrast to Cie, however, a Massachusetts court took a somewhat different view in a case involving a similar set of facts. In Connecticut National Bank of Hartford v. Kommit, the plaintiff, a Connecticut bank, brought an action against Massachusetts residents seeking to recover monies advanced to them on their credit cards through an automated teller machine located in an Atlantic City, New Jersey casino. The defendants used the advanced monies for gambling at the casino. The laws of Massachusetts, New Jersey, and Connecticut provided that contracts to pay money knowingly lent for gambling were void. However, the New Jersey law excepted loans made for casino gambling in Atlantic City. The cardholders agreement provided that the laws of Connecticut would govern any dispute. Reversing the lower courts decision in favor of a summary judgment motion filed by the bank, and applying Connecticut law, the appellate court ruled that the banks alleged and unrefuted deliberate allowance of credit from the machine in the gambling area of the casino is a circumstance from which the essential element of the defendants defense to the action, knowledge, could (but need not) be inferred.
29. Cie and Kommit did not involve Internet gambling. However, the facts bear significant similarities to Internet gambling scenarios, particularly because credit cards are the most widely used method to fund wagers over the Internet. Cie generally supports the view that an Internet gambler who uses his or her credit card to fund a wager, is entering into a separate, independent contract for a loan that is enforceable regardless of the Internet gambling activity involved. Kommit tends to refute this view.
30. There are, however, some unique circumstances to Internet gambling wagering that may serve to strengthen the nexus of the debt to the gambling activity, apart from the analyses employed in these decisions. In Cie as well as Kommit, the gamblers could have just as easily taken their cash advances and used them for purposes other than wagering, such as purchasing a meal or theater ticket. Put another way, the advances were not restricted in any way. In contrast, Internet casino sites do not realistically afford this degree of latitude. There is no intermediate step involved in the provision of cash to the gambler, who is then free to rethink his or her decision to wager, or who may never have intended to use the money to gamble in the first place. With Internet gambling, the gamblers only conceivable purpose for logging onto a site and providing his or her credit card information is to fund bets directly, or to create and fund an electronic account from which to wager bets. The scheme and mechanisms of the site effectively restrict the gambler to such a purpose and activity.
31. Where an intermediate electronic account is established pursuant to a credit card charge (as opposed to a direct credit card payment to a casino), the nexus between the credit card debt and the gambling activity diminishes. This is particularly true when the electronic account service allows for the procurement of a wide range of products and services, not just gambling. This is probably the reason why sites such as Casino-On-Net promote services such as the InterSafe Global GEC account service, which purports to allow account owners to purchase products and services supplied by any merchant approved by InterSafe.
32. Moreover, a merchant agreement may allow the casino web site to display prominently a credit card association trademark (e.g., Visa) as a convenient method to wager on-line, thereby potentially inducing the consumer to engage in Internet gambling. In addition, merchant banks levy their fees by taking a percentage of the business transacted through the merchant account. The banks typically have actual or constructive knowledge of the nature of an Internet casinos activities through the application process (which includes assigning codes for business activities). And of course, the credit card issuer charges interest on unpaid charge balances. Together, these factors suggest a degree of participation by the credit card institutions in the Internet casinos activity.
33. These distinctions are of obvious relevance to the question of the nature and independence of an Internet gambling debt obligation. Furthermore, they may apply in varying degrees to obligations between parties other than an Internet gambler and a credit card issuer, such as the electronic account service and the Internet casino. They also may apply in circumstances involving other wagering mechanisms such as debit-based systems and electronic cash, where contractual payment obligations may exist or arise.
34. Although it addresses the plaintiffs Racketeer Influenced Corrupt Organizations (RICO) claim on a Rule 12(b)(6) motion to dismiss, the courts opinion in Jubelirer may also shed further light on how credit card and other debts incurred in connection with Internet gambling may be viewed by courts. In dismissing the RICO claim, the court reasoned:
A RICO enterprise must be an ongoing structure of persons associated through time, joined in purpose, and organized in a manner amenable to hierarchical or consensual decision making. [sic] But the allegations of the complaint make clear that there is no structure for hierarchical or consensual decision making. There is nothing more than a simple contract for services of a type entered by millions of others. Defendant MasterCard operates a computer system for processing consumer purchases. It offers these services for a fee to merchants throughout the world and more than 10 million merchants contract for them. Defendant MasterCard also contracts with lenders such as defendant MBNA to allow their customers to purchase goods and services from MasterCard associated merchants. Defendant MBNA collects the debt incurred by its customers regardless of the authorized merchant from whom the customer purchased the goods or services, no doubt giving little thought to the ten million MasterCard merchant subscribers except to the extent that the broad array of participating merchants is appealing to its customers. There is no hierarchical or consensual decision making. Each party conducts its own affairs, which include certain contracts for services with others.
35. It is important to note that the court was ruling on a criminal RICO charge, which requires a greater degree of participation than might otherwise be required in a standard civil contract action. Nevertheless, the courts characterization of the credit card transaction as a simple contract for services of a type entered into by millions of others suggests that such transactions should be considered independent of any other related on-line gambling activities. However, the Jubelirer and Cie analyses are not as persuasive in cases involving less traditional debt transactions, particularly where the Internet casino may have strong ties to the financial services institution.
36. Issues concerning the enforceability of gambling debts stemming from questions of illegality may be couched in various ways. They include whether the underlying gambling activity is legal, whether such contracts or their enforcement violate public policies, and whether the contract itself is illegal.
38. An illegal contract is usually defined as a contract whose enforcement would contravene a public policy proclaimed by a legislative or judicial body. Obvious violations of public policy include contracts that offend a legislative statute or a constitutional provision, whether criminal or otherwise.
39. Illegality in contracts, however, also extends to activities that may not ordinarily be considered illegal because they are not sanctioned by a penalty other than judicial non-enforcement. Sources of contractual illegality include violations of the common law and community norms. Other contracts are illegal because the actual agreement violates public policy and thus is unenforceable even though the consideration, either given or promised, is completely legal in and of itself. A contract also may be labeled illegal, despite the fact that both the actual agreement and the performances given as consideration are perfectly legal, by reason of the wrongful purpose of one or both parties in making it.
40. Thus contractual enforcement or validity depends on the degree of nexus to the illegality. The nexus may be quite direct as when the performance given as consideration is offensive to public policy in and of itself.
41. These principles manifest themselves in relevant case law as well as in more recent causes of action that have addressed the issue of the enforceability of Internet gambling debts. For example, in Domingue v. Dickinson, an action by a lender against the administrator of a deceased debtors estate, the court held that the lender knew that the loans were to be repaid from illegal gambling winnings. Thus, the obligations were void because the cause or reason for the loans was illegal. The court explained that an obligation cannot be valid without a lawful cause, and the cause of an obligation is unlawful when its enforcement would create a result that is either prohibited by law or violates public policy.
42. More recently, the plaintiff in Marino v. American Express Travel Related Services Company, Inc., et al., filed an action seeking, inter alia, to bar the recovery of debt he incurred on his card as a result of Internet gambling. The plaintiffs complaint alleged that the defendants violated Californias Penal Code and Business Professions Code.
43. As discussed in the following section, there are numerous federal and state laws and policies upon which the enforceability of an Internet gambling debt may be challenged because of issues relating to the legality of the subject matter involved.
44. A number of leading gaming experts have written about the legality of Internet gambling under federal laws. Most notably, the federal Wire Act is cited as the federal law that bears the greatest likelihood of application to Internet Gambling. It provides, in relevant part:
Whoever, being engaged in the business of betting or wagering, knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
45. The provisions of the Wire Act apply to those who are in the business of operating an Internet casino, but not to the casual bettor. However, there are issues concerning the extent to which the Wire Act would apply to bets on non-sporting events or to circumstances where Internet gambling is legal in both the originating state or foreign country and the receiving state.
46. In addition, there are a host of other federal criminal laws that may potentially apply to Internet gambling activities, including the Professional and Amateur Sports Protection Act, the lottery ticket transportation statute, the Interstate Transportation of Wagering Paraphernalia Act, the Travel Act, the antigambling provisions under the Organized Crime Control Act, the federal aiding and abetting statute, the general conspiracy statute, the money laundering statute, and the Racketeer Influenced and Corrupt Organizations Act (RICO). Moreover, since 1995 a number of bills have been introduced that would expressly ban many forms of Internet gambling. On July 17, 2000, Congress nearly passed H.R. 3125, the Internet Gambling Prohibition Act of 2000, which required a 2/3-majority vote. The strong vote in favor of the bill (245 to 159) suggests that some form of federal legislation addressing Internet gambling is likely.
47. Three states, Nevada, Louisiana, and Illinois, have passed laws banning Internet gambling operations, and legislation is under consideration in Arizona, California, Hawaii, Indiana, New York, and Pennsylvania. Furthermore, Attorneys General in Minnesota, Missouri, Florida, Indiana, Texas, Rhode Island, and Kansas have opined that Internet gambling is illegal, and the States of Minnesota, New York, Missouri, and Wisconsin, have successfully litigated against Internet gambling entities.
48. In addition to the laws referenced above, various consumer protection and business fraud laws may provide grounds for asserting illegal subject matter. For instance, in Providian the defendant cited, inter alia, violations of Californias Unfair Business Practices Act and the Fair Debt Collection Practices Act, as grounds for relief.
49. The borderless nature of the Internet further complicates the question of the legality of on-line gambling. Most Internet gambling operations are physically located outside of the United States, and many foreign jurisdictions license or allow Internet gambling. In addition, not all states have legislation expressly addressing the legality of Internet casino gambling, though one scholar opines that careful analysis of federal laws, and state statutes and constitutions, suggests a presumption of illegality, with the universal requirement of explicit state constitutional and/or statutory authorization, in order for gambling to be legally conducted within a state. Consequently, it is common for Internet gambling operators to argue that their casinos are not illegal because the physical operation and gambling actually occur in a foreign jurisdiction where the activities are licensed or are otherwise not illegal.
50. Nevertheless, apart from complicated questions over whether personal jurisdiction may be legally or actually asserted, legal precedent makes it clear that the gambling activity is deemed to take place in the state where the gambler is physically located, regardless of where the computer servers are located and licensed. Accordingly, the laws of the United States and of the state where the gambler is located when he or she enters a casino web site, apply to the question of whether the Internet gambling activity is legal. Recent cases are illustrative.
51. In People v. World Interactive Gaming Corp., the operators of an Internet gambling casino argued that although they permitted New York residents to log in and gamble in their Internet casino, they did not violate New York law since the gambling was alleged to occur offshore in Antigua where the computer servers were located. In rejecting this argument, the court held that [t]he act of entering the bet and transmitting the information from New York via the Internet [was] adequate to constitute gambling activity within New York State.
52. In U.S. v. Cohen, the co-owner and operator of an off shore gambling business licensed in Antigua, was indicted for alleged violations of the Wire Act arising from accepting bets from the United States over the Internet and telephone. The defendant argued his actions were not illegal because section 1084(b) of the Wire Act exempted transmission of betting information between a state and a foreign country where betting was legal. He further maintained that he did not violate the statute because betting was legal in both New York and Antigua. However, his defenses were rejected, and a federal jury in New York convicted him of violating the Wire Act.
53. As a practical matter, the applicability of U.S. and state laws, rather than personal jurisdiction, is the crucial factor in a domestic action concerning the enforceability of an Internet gambling debt. An action brought in the United States to collect a debt, is a state law contract claim in which a defense based on federal law does not support federal jurisdiction. Any party seeking to enforce such a debt in the United States against a U.S. citizen would be required to submit to the jurisdiction of the court. At that point, the principal issue becomes whether or not applicable laws render the subject matter of the contract illegal or in violation of public policy.
54. As is apparent from the discussion above, a growing number of laws may be cited in order to bar enforcement of a debt on grounds of illegality. These laws have supported the increasing number of cases involving Internet gambling debts and similar obligations.
55. For example, in Cheyenne Sales, LTD. v. Western Union Financial Services Intl., the plaintiff, a Jamaican business that distributed monies to bookmakers, sought to enjoin Western Union from terminating a service contract the plaintiff had entered into with Western Union to receive payments from United States residents through Western Unions Quick Collect wire transfer service. Holding that Western Union was legally and logically justified in terminating all Quick Collect service to the plaintiff, the court observed: The right and duty of a telephone, telegraph, or other wire service company to refuse service used, or to be used, in furtherance of illegal gambling operations, has been generally recognized, and is well-established.
56. In Providian, the defendant sought to enjoin Providian, Visa, MasterCard, and other named financial institutions from profiting from illegal gambling on the Internet. In Marino, the plaintiff alleged that the defendant credit card institutions allowed the plaintiff and other consumers to obtain
loans for Internet gambling and the placement of bets, through the use of AMEX and Discover credit cards (issued to the consumers by the Consumer Banks) at various Internet gambling casino web sites incurring substantial illegal gambling debts arising form the extension of credit by AMEX and Discover and the Consumer banks and Merchant Banks.
57. It is significant that Internet gamblers have not only sought to bar the enforcement of debt obligations against them on traditional legal or public policy grounds, but they have also attempted to utilize the provisions of RICO as a cause of action against credit card companies. Under RICO, a racketeering activity includes any act that is indictable under the Wire Act and the Travel Act. It provides, in relevant part, that:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprises affairs through a pattern of racketeering activity or collection of unlawful debt.
RICO further defines:
an enterprise as any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity;
a pattern of racketeering activity as at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years ... after the commission of a prior act of racketeering activity;
an unlawful debt as a debt (A) incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof ... and (B) which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof . . . .
58. Penalties for violations of RICOs criminal provisions include imprisonment as well as asset forfeiture and forced dissolution. However, in addition to criminal sanctions, RICO also provides for a private cause of action that includes treble damages plus costs and fees, including attorneys fees. 
59. In Jubelirer, recognizing the appeal of such a draconian cause of action, the plaintiff alleged, inter alia, that MasterCard and MBNA participated in financing his Internet gambling in violation of RICO. Addressing this cause of action, the court enunciated the four principle elements of the claim: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Furthermore, it observed that a RICO enterprise must be an ongoing structure of persons associated through time, joined in purpose, and organized in a manner amenable to hierarchical or consensual decision making. The court, however, rejected the plaintiffs cause of action, and dismissed it with prejudice, finding that the plaintiff merely alleged facts making it apparent that the only relationship between the on‑line casino and the defendants is a routine contractual relationship for the provision of consumer financing. That relationship does not constitute a RICO enterprise and the performance of such services does not constitute the operation or management of an enterprise. The court also dismissed the plaintiffs claim that the defendants were liable for aiding and abetting a RICO violation, finding that no such cause of action exists.
60. The Jubelirer analysis is consistent with the traditional principles regarding the enforceability of gambling debts as well as contractual obligations generally. It focuses on the nexus between the debt obligation and the Internet gambling activity. This analysis indicates that issues concerning illegality as they relate to Internet gambling debt enforceability ultimately depend on such factors as the degree of knowledge, participation, and relationship a particular creditor or other financial services institution may have with the Internet gambling operation.
61. Therefore, financial institutions such as credit card companies with no actual or constructive knowledge of Internet casino gambling activities, and no involvement with Internet casino operations beyond that routinely engaged in with other types of merchants, face a minor risk that Internet gambling debts owed to them by cardholders may be barred or give rise to allegations of criminal conduct or both. In contrast, financial institutions that knowingly allow their services to be employed at Internet gambling sites, and have agreements with Internet casino operators that suggest greater participation in Internet gambling operations, face an increased risk of such an outcome.
62. Despite its fervent dismissal of the plaintiffs cause of action, Jubelirer has not put an end to RICO actions against credit card institutions by Internet gamblers who have incurred debts at on-line casinos. Instead, plaintiffs have subsequently filed numerous similar complaints, presumably in the belief that they can establish a sufficient nexus between the credit card institutions services and the Internet gambling activity.
63. It is important to note that parties seeking to bar the enforceability of an Internet gambling debt on grounds of illegality may need to overcome the consequences of their own conduct. Under the in pari delicto doctrine, an Internet gambler who engages in Internet gambling that is deemed illegal, may be barred from asserting, for example, a RICO cause of action due to his or her own involvement in the illegal activity. Although the court in Jubelirer did not reach this issue, it was raised by the defendants, and is a theory that may be asserted to rebut a defense to gambling debt enforceability.
64. As indicated above, applicable laws and public policies vary from state to state. Given their historic leading role in adopting and enforcing gambling laws, states may afford unique causes of action barring enforceability of gambling debts. The emergence of Internet gambling adds to this multifarious landscape. In Illinois, for example, statutory law provides that a party may seek recovery of his or her gambling losses in excess of $50 from the winner thereof, plus costs. If within 6 months that party does not initiate action to recover such losses, any person may bring an action to recover three times the amount lost. Recently, a plaintiff filed a state action pursuant to this statute against several credit card companies, seeking, among other things, recovery of Internet gambling losses incurred through credit card charges.
65. Issues concerning the legality and enforceability of gambling debts turn on the specific facts of each case as well as the particulars of applicable laws and public policies. However, in many circumstances, existing laws and policies may be invoked to challenge the legality and enforceability of Internet gambling debts. They may even give rise to affirmative causes of action. The outcome depends on the degree of nexus between the debt obligation and the Internet gambling activity.
66. Consequently, notwithstanding the enactment of new legislation, these laws and policies pose significant risks to the Internet Gambling Industry and to financial institutions involved in financing on-line wagers. As a result, financial institutions have begun altering their practices to avoid the risks associated with debts relating to Internet gambling. If this trend continues, the lifeline of Internet gambling may be cut.
 National Gambling Impact Study Comm., 106th Cong., National Gambling Impact Study Final Report, ch. 1, at 4 (Comm. Print 1999) [hereinafter NGISC Report].
 See Anthony N. Cabot & Kevin D. Doty, Internet Gambling: Jurisdiction Problems and the Role of Federal Law, 1 Gaming L. Rev. 15, 16 (1997).
 See NGISC Report, supra note 2, ch. 3, at 1-3.
 Anthony N. Cabot, The Internet Gambling Report: The Emerging Conflict Between Technology, Policy and the Law, 8 (1997).
 See NGISC Report, supra note 2, ch. 5, at 4-6; William N. Thompson, Ricardo Gazel, & Dan Rickman, Social and Legal Costs of Compulsive Gambling, 1 Gaming L. Rev. 1 (1997).
 See, e.g., NGISC Report, supra note 2, ch. 5, at 1-2; Anthony N. Cabot, Federal Gambling Law 19-20 (Trace Publications 1999) (1999); I. Nelson Rose, The Law of Internet Gambling, Gambling and the Law, 6-7, at http://www.gamblingandthelaw.com/Internet.html (June 15, 1999); Joseph M. Kelly, Internet Gambling Law, 26 Wm. Mitchell L. Rev. 117, 118-19 (2000).
 NGISC Report, supra note 2, ch. 5, at 1.
 See id. at 7-12.
 Id. at 12.
 H.R. 4419, 106th Cong. (2d Sess. 2000).
 Congressional Panel Seeks to Ban Credit, Debit Card Use for Online Gambling, Card News, June 28, 2000.
 A.B. 2179, 2000 Sen. (Cal. 1999).
 See Cabot, supra note 7, at 23 (Gambling is essentially a financial issue, not a moral phenomenon).
 Internet Gambling Funding Prohibition Act: Hearing on H.R. 4419 Before the House Comm. on Banking and Financial Service, 106th Cong. (2000) (Testimony of Hon. Gregory A. Baer, Assistant Secretary for Financial Institutions, Dept. of the Treasury).
 Michael P. Sullivan, Private Contests and Lotteries: Entrants Rights and Remedies, 64 A.L.R.4th 1021, 1029 (1988 & Supp. 2000); Mark Pettit, Jr., Freedom, Freedom of Contract, and the Rise and Fall, 79 B.U. L. Rev. 263, 319-20 (1999).
 James L. Buchwalter, Right to Recover Money Lent for Gambling Purposes, 74 A.L.R. 5th 369 (1999); Sullivan, supra note 17; Pettit, supra note 17.
 Providian Natl Bank v. Haines, No. CV9808858 (Cal. Super. Ct. July 1998); NGISC Report, supra note 2, ch. 5, at 10; Paul Hugel & Joseph Kelly, The Internet, Gaming, RICO and Credit CardsA Legal Analysis, 11th International Conference on Gambling and Risk-Taking, at 3, June 15, 2000, available on tape at http://wwwunr.edu/gaming.
 See Counterclaim at 2, Haines v. Providian, No. CV9808858 (Cal. Super. Ct. July 1998).
 Hugel & Kelly, supra note 19, at 3-4 (citing MasterCard to Introduce Rules for Internet Gambling, RGT News, July 9, 1999, http://www.rgtonine.com/newspage/artlising.-cfm/3423 (last visited Nov. 15, 1999)); see also, Max Beer, Warning Light for Online Gambling: Can Creditors Collect on Debts?, S.F. Examiner, July 10, 1999, at A1.
 See Visa Settles CA Suit over Credit Card Gambling Debt, 4 No. 8 ANGILR 6 (1999).
 Hugel & Kelly, supra note 19, at 4.
 Jubelirer v. MasterCard Intl, Inc., 68 F.Supp. 2d 1049 (W.D. Wis. 1999).
 Id. at 1051.
 See, e.g., Marino v. American Express Travel Related Serv. Co. Inc., et al., No. CV996166 (CA Sup. Ct., Marin Cty., complaint filed Dec. 6, 1999); Brown v. MasterCard Intl, Inc., No. CV99-A-778N (M.D. Ala., complaint filed July 22, 1999); Eisele v. VISA Intl Serv. Assn, et al., C.A. No. 3:99-4669; Eisele v. VISA Intl Serv. Assn, et al., C.A. No. 4:99-3829 (N.D. of Cal.); Eisele v. VISA Intl Serv. Assn, et al., C.A. No. 1:99-4833 (N.D. of Ill.); Eisele v. MasterCard Intl, Inc., et al., C.A. No. 1:99-8743; Eisele v. MasterCard Intl, Inc., et al., C.A. No. 1:99-8784; Eisele v. MasterCard Intl, Inc., et al., C.A. No. 1:99-8785 (S.D. N.Y.); Maple v. Capitol One Bank, et al., C.A. No. 2:99-665 (N.D. Ala.); Freeman v. Providian Natl Bank, et al., C.A. No. 2:99-108 (N.D. Ala.); Freeman v. Citibank Corp., et al., C.A. No. 2:98-3029 (N.D. Ca.); Donald H. Jones, Jr. v. VISA Intl Serv. Assn, et al., C.A. No. 2:99-785 (N.D. Ca.). According to Mealeys Cyber Tech Litigation Report, Vol.2, No. 1, available at http://www.mealeys.com, on Mar. 1, 2000, these cases were consolidated and transferred to the U.S. District Court for the Eastern District of Louisiana.
 In re Visa Intl Assn Internet Gambling Litig., 2000 U.S. Dist. LEXIS 2272 (Mar. 1, 2000); In re MasterCard Intl, Inc., Internet Gambling Litig., 2000 U.S. Dist. LEXIS 2276 (Mar. 1, 2000).
 See the Rolling Good Times site for links to Internet casino sites at http://www.rgtonline.com (last visited Aug. 15, 2000).
 See NGISC Report supra note 2, ch. 5 at 3; I. Nelson Rose, Internet Gambling: Domestic and International Developments, SC91 ALI-ABA 131, 134 (1998); Baer, supra note 16.
 Baer, supra note 16.
 Hugel & Kelly, supra note 19, at 9.
 See http://www.visabrc.com/; also BankOne Merchant Payment Center web site http://merchsvc.mercantec.com/merchconnect/payment/paymentfaq.html (last visited Aug. 9, 2000).
 See FDIC consumer protection site http://www.fdic.gov/consumers/consumer/news/cnspr00/cvrstry.html (last visited Aug. 15, 2000).
 See id.
 See id; see also Childers, supra note 36.
 See id.
 See id. A credit card payment is typically processed through a transaction processing service such as PaymentNet or CyberCash. This service, in turn, sends the transaction to a payment-processing network like FirstData, for authorization.
 See Kerry Lynn Macintosh, Symposium: The New Money, 14 Berkeley Tech. L.J. 659, 662 (Spring, 1999); Irving J. Sloan, The Law and Legislation of Credit Cards: Use and Misuse 5-13 (1987); David A. Szwak, Credit Cards in America, 13 J. Marshall J. Computer & Info. L. 573 (Summer, 1995). See also, e.g., Anastas v. American Sav. Bank, 94 F.3d 1280, 1285 (9th Cir. 1996); Feder v. Fortunoff, Inc., 494 N.Y.S.2d 42 (1985).
 See Baer, supra note 16; Mark Grossman & Brian Nelson, Giving Credit, or Cash, to the Net, Legal Times (Feb. 1, 1999).
 See Macintosh, supra note 43, at 662; Task Force on Stored-Value Cards, A Commercial Lawyers Take on the Electronic Purse: An Analysis of Commercial Law Issues Associated with Stored-Value Cards and Electronic Money, 52 Bus. Law. 653, 670 (1997).
 See Baer, supra note 16.
 Seth Godin, Presenting Digital Cash 125, 104-105 (1995).
 See supra note 45, at 661.
 MacIntosh, supra note 43.
 Baer, supra note 16.
 See Childers, supra note 36; Nicholas Robbins, Baby Needs a New Pair of Cybershoes: The Legality of Casino Gambling on the Internet, 2 B.U. J.Sci. & Tech. L. 7, (1996).
 Baer, supra note 16 and accompanying text.
 Buchwalter, supra note 18 and accompanying text.
 Buchwalter, supra note 18.
 See id.
 See id.
 See id.
 Cie v. Comdata Network, Inc., 275 Ill. App. 3d 759, 656 N.E.2d 123 (Ill. App. 1 Dist. 1995), appeal denied, 165 Ill. 2d 423 (1996).
 Id. at 761, 656 N.E.2d at 125-26 (citations omitted).
 Connecticut Natl Bank of Hartford v. Kommit, 31 Mass. App. Ct. 348, 577 N.E.2d 639 (1991).
 Id. at 353, 577 N.E.2d at 642.
 See also, Srader v. Verant 964 P.2d 82 (N.M. 1998).
 The viability and practicality of the use of a GEC account to purchase other products and services may be questioned, particularly where there may be issues concerning the ties between InterSafe and casino web sites. See, e.g., Complaint 7, Thomas Reuter v. MasterCard Intl, Inc., No. 2000-L-8 (Ill. Cir. Ct. 4th filed Mar. 13, 2000) (alleging ties between InterSafe and Casino-On-Net).
 Jubelirer, 68 F.Supp. 2d at 1052-53 (citations omitted).
 Sullivan, supra note 17, at 1029 (citing 17 Am. Jur. 2d, Contracts 157, 216).
 Juliet P. Kostritsky, Illegal Contracts and Efficient Deterrence: A Study in Modern Contract Theory, 74 Iowa L. Rev. 115, n. 4 (1988) (citing Wade, Benefits Obtained Under Illegal Transactions Reasons For and Against Allowing Restitution, 25 Tex. L. Rev. 31, 31 (1946)).
 Id. (citing 6A A. CORBIN, CONTRACTS 1374, at 4 (1962)).
 Id. (citing CORBIN at 5-6 and E. A. FARNSWORTH, CONTRACTS, note 3, 5.2, at 330-31, 5.5, at 347 (1982)).
 Id. (citing E. A. FARNSWORTH note 3, 5.1, at 327).
 Id. (citing 6A A. CORBIN 1374-75).
 Id. (citing 6A A. CORBIN 1373, at 2).
 Id. (citing 6A A. CORBIN 1518, at 744).
 See id.
 Id. (citing 6A A. CORBIN 1373, at 2).
 Domingue v. Dickinson, 611 So. 2d 796 (La. Ct. App. 3d Cir. 1992).
 Id. at 799.
 Id. at 798.
 Marino v. American Express Travel Related Serv. Co., Inc., et al., No. CV 996166 (Cal. Sup. Ct. Marin Cty., complaint filed Dec. 6, 1999).
 See id., complaint 33-34.
 See, e.g., Rose, supra note 7, at 11-25; Kelly, supra note 7, generally; Cabot & Doty, supra note 4, at 22-28; Joel Michael Schwartz, The Internet Gambling Fallacy Craps Out, 14 Berkeley Tech. L.J. 1021 (Fall 1999).
 18 U.S.C. 1084.
 Cabot, supra note 7, at 22.
 18 U.S.C. 1084.
 Cabot & Doty, supra note 3, at 23-24.
 See id.
 28 U.S.C. 3702.
 18 U.S.C. 1301.
 18 U.S.C. 1953.
 18 U.S.C. 1952.
 18 U.S.C. 1955.
 18 U.S.C. 2.
 18 U.S.C. 371.
 18 U.S.C. 1956.
 18 U.S.C. 1961. See Rose, supra note 7, at 13-16; Cabot & Doty, supra note 3, at 26; Peter Brown, Regulation of Cybercasinos and Internet Gambling, 547 PLI/Pat 9, 21 (1999).
 For an excellent synopsis of legislative efforts, beginning with the first federal bill introduced in 1995 by Senator John Kyl to prohibit Internet gambling, see Rose, supra note 7, at 16 and 22; Kelly, supra note 7, at 134-50; Thomas N. Auriemma, Gambling on the Internet, Report to the International Association of Gaming Regulators (1999).
 H.R. 3125, 106th Cong. (2d Sess. 2000).
 720 Ill. Comp. Stat. Ann. 5/28-1 (West 2000); La. Rev. Stat. Ann. 14:90 (West 2000); Nev. Rev. Stat. Ann. 465.091 (Michie 2000).
 Rose, supra note 7, at 22.
 Kelly, supra note 7, 154-57.
 Providian, No. CV 980858 (Cal. Super. Ct. Marin Cty., cross-complaint filed July 23, 1998).
 NGISC Report, supra note 2, ch. 5, at 5; Schwartz, supra note 84, at 1027.
 See Kelly, supra note 7, at 123-30 (citing Liechtenstein, Australia, Antigua, Barbuda, and Dominica as licensing Internet casinos).
 See supra notes 104 and 105.
 Schwartz, supra note 84, at 1037-38.
 Id. at 1038; Bruce P. Keller, The Games the Same: Why Gambling in Cyberspace Violates Federal Law, 579 PLI/Pat. 227, 230-31 (1999).
 See Cabot & Doty, supra note 3, at 27-30; Brown, supra note 101, at 36-40; Keller, supra note 112, at 257-60.
 See Schwartz, supra note 87, at 1041-43; Brown, supra note 101, at 32-35; Keller, supra note 112, at 259-69.
 People v. World Interactive Gaming Corp., 714 N.Y.S.2d 844, 848 (N.Y. Sup. Ct. 1999).
 Id. at 850.
 U.S. v. Cohen, No. 98 CR 434 (S.D. N.Y. 1998).
 Id., Memorandum of Law in Support of Defendant Jay Cohens Pre-trial Motions at 2.
 U.S. v. Cohen, No. 00-CR-187 (S.D. N.Y. 2000); U.S. Attorneys Office Wins First Federal Net Gambling Case, 4 ANWCCR 14 (April, 2000).
 Jubelirer, 68 F.Supp. 2d at 1054-55.
 Cheyenne Sales, LTD. v. Western Union Fin. Serv. Intl., 8 F. Supp.2d 469 (E.D. Pa. 1998).
 Id. at 474 (citing A.L. Schwartz, Annotation, Right or Duty to Refuse Telephone, Telegraph, or Other Wire Service in Aid of Illegal Gambling Operations, 30 A.L.R. 3d 1143, 1151-52 (1970 & Supp. 1997)).
 See Second Amended Cross-complaint for Restitution, Declaratory Relief, Damages and Injunctive Relief at Paragraph 1, Haines v. Providian (Cal. Super. Ct. Sept. 4, 1998).
 Complaint 24, Case No. CV 996166 (Cal. Sup. Ct. filed Dec. 6, 1999).
 See supra notes 27 and 98.
 18 U.S.C. 1961(1).
 18 U.S.C. 1962(c).
 18 U.S.C. 1961(4).
 18 U.S.C. 1961(5).
 18 U.S.C. 1961(6).
 18 U.S.C. 1963.
 18 U.S.C. 1964(c).
 68 F.Supp. 2d at 1051.
 Id. at 1052.
 Id. (citations omitted).
 Id. at 1053.
 Id. at 1054.
 Hugel & Kelly, supra note 19, at 6; see also, supra notes 26 and 27.
 Literally meaning in equal fault; equally culpable or criminal; in a case of equal fault or guilt. Blacks Law Dictionary 791 (6th ed. 1990).
 Defendants Reply Memorandum in Support of MBNA America Bank, N.A.s Rule 12(b)(6) Motion to Dismiss the Third Amended Complaint and Rule 12(b)(7) Motion to Require Either Joinder of Indispensable Parties or Dismissal of Complaint, at 19.
 See, e.g., Beer v. Landman, 88 Tex. 450, 31 S.W. 805 (1895) (where the court refused to order the return of the collateral notes, but affirmed the trial courts cancellation of the principal note, reasoning that a court may not aid persons who engage in an unlawful gambling transaction in pari delicto).
 720 Ill. Comp. Stat. Ann. 5/28-8(a) (West 2000).
 720 Ill. Comp. Stat. Ann. 5/28-8(b) (West 2000).
 Complaint filed in Reuter v. MasterCard Intl, Inc., No. 2000-L-8 (4th Cir. Ill. March 13, 2000).