Internet Gambling

I Colorado’s Limited Gaming Act Versus Internet Gambling

The premise underlying this article is that there are areas of conflict between the regulated gambling permitted by the laws of the states and the largely unregulated gambling that can be engaged in on the Internet. In order to understand these conflicts one must first take a brief look at these two different gambling regimes. What follows is a relatively simple examination of the broad outlines of Colorado’s gambling laws [5] and a comparison of gambling under those laws with gambling as it can take place on the Internet.

  1. Colorado’s Limited Gaming Act of 1991

The basic goal of Colorado’s Limited Gaming Act is to produce a gaming industry in Colorado that is profitable and beneficial to both the communities where the gaming takes place and to the state as a whole. [6] In order to achieve this goal, the public must have confidence and trust in the industry since an industry plagued by cheating and criminal elements produces little economic benefit for the communities where it is located. [7] Public confidence and trust in the gambling industry depends on fostering three somewhat interrelated beliefs. First, the public must trust that the games themselves are legitimate and second, that a winner will be paid those winnings to which she is entitled. Third, the public must believe that persons involved in the gambling industry are free from the influences of organized crime, in the case of casino owners, operators, employees, and cheating, in the case of casino patrons.[8]

5 Colorado’s Limited Gaming Act regulates the legitimacy of the games in several ways. First, gamblers are only permitted to engage in three general types of gambling: blackjack, poker, and slot machines. [9] Second, and perhaps most importantly, gamblers are limited to a maximum bet of five dollars. [10] Third, with respect to slot machines the law mandates that the amount of winnings paid out by a machine is to be at least eighty-percent of the total amount of money paid into the machine. [11] Finally, the large majority of the remaining laws dealing with the legitimacy of the games are laws prohibiting various forms of cheating. [12] These sections prohibit unfair practices by gambling device manufacturers, casino owners or operators, casino employees, and players, in an effort to ensure that each individual player enjoys a relatively equal opportunity to win.

In addition to being confident that the games they play at casinos are fair, players also want to be sure that the moneys they win will be paid to them. The best way to promote player confidence is to make sure that casinos maintain adequate cash reserves in order to meet all payout obligations to casino patrons. [13] Pursuant to this goal of financial soundness, the Limited Gaming Act has three major provisions: first, every casino licensed pursuant to the Limited Gaming Act must keep a complete and accurate record of all gambling transactions, and those records must be open and available for inspection by the Division of Gaming [14] at the division’s request; [15] second, casinos are prohibited from extending credit to their patrons;[16] and third, any licensee who willfully refuses to pay winnings to a winner is guilty of a class one misdemeanor. [17] Again, these provisions are designed to ensure that the public is confident that casinos are not defrauding their customers by means of questionable financial practices.

The bulk of Colorado’s Limited Gaming Act is concerned with ways of fostering public confidence in the integrity of casinos and casino employees. The legislative declaration of the Act states that, for limited gaming in Colorado to succeed, the public must be confident that “gaming is free from criminal and corruptive elements.”[18]

Under the Limited Gaming Act, anyone desiring a gaming license must apply to the Colorado Limited Gaming Control Commission (“Gaming Commission”). [19] A prospective licensee must demonstrate that she possesses “good moral character” in order to obtain a license. [20] Accordingly, the Gaming Commission is required to deny licensure where the applicant’s background reveals that the applicant has been convicted for any one of a number of gambling and gambling-related offenses. [21]

The prospective licensee may appeal the Gaming Commission’s initial denial of licensure. However, such appeals face an uphill battle. The legislature has declared that:

No applicant for a license or other affirmative commission approval has any right to a license or to the granting of the approval sought. Any license issued or other commission approval granted pursuant to the provisions of this article is a revocable privilege, and no holder acquires any vested right therein or thereunder. [22]

Thus, the Division of Gaming and the Gaming Commission are given wide latitude by the legislature in its licensing and revocation powers.

10 Furthermore, Colorado courts have been reluctant to overturn the decisions of the Gaming Commission. In Feeney v.Colorado Limited Gaming Control Commission , a licensee appealed the Gaming Commission’s decision to revoke his license because of failure to pay back child support and taxes. [23] The Colorado Court of Appeals upheld the Gaming Commission’s decision, ruling that “the Gaming Commission acted within the scope of its statutory authority to determine that prompt payment of child support and taxes is in the public interest of the state.” [24]

In addition to overseeing the licensing of casino employees, the Division of Gaming and the Gaming Commission are also responsible for the licensing of the casinos and gambling machine manufacturers.[25] In 1997, the Gaming Commission issued its first denial of a request for license renewal by a gambling machine manufacturer. [26] The Gaming Commission accused the manufacturer of allowing the founder of the company, a man alleged to have connections with “career offender cartels,” [27] to maintain a position of influence within the company. [28] The Gaming Commission has

also issued fines to companies that have failed to abide by the Limited Gaming Act and the regulations promulgated pursuant to that Act. [29]

The picture that emerges from the above examination is one of a gambling industry that is strictly regulated by two agencies that have been given sweeping powers by both the legislature and the courts to promote the honesty and integrity of that industry. As will be shown, the level of regulation imposed on Internet-based casinos is minimal compared to that in Colorado, and this lack of regulation makes such casinos incompatible with Colorado’s current gambling policies. [30]