Google, Yahoo! and Microsoft Pay Online Gambling Fines

2007 December 19, Jonny Vincent

Microsoft Corp, Yahoo! and Google have paid uncontested fines worth $31.5 million to resolve US DoJ claims that they promoted online gambling in the US.

US Attorney Catherine Hanaway, of the Eastern District of Missouri, announced today the online giants entered into settlements to finalize the claims.

Microsoft was hit hardest, paying total fines of $21 million. $4.5 million of that heads into US government coffers, with $7.5 million to go to the International Centre for Missing and Exploited Children (ICMEC) and $9 million for an online, public service advertising campaign "to inform an educate a target audience comprised of college level or younger people that online gambling enterprises are illegal under U.S. law".

The US DoJ claims Microsoft's crime was accepting payments from online gambling businesses for the purposes of advertising between 1997 and June 2007. Procuring participants for illegal activity is unlawful under the Federal aiding and abetting statute, 18 U.S.C., Section 2.

Yahoo! was faced with the same allegations of illegal activity. Yahoo! will pay $3 million directly to the US government and $4.5 million worth of online advertising for a public service advertising campaign.

Google will pay $3 million to the US government.

According to the DoJ press release:

"These settlements involve corporate conduct the Government found in violation of the Federal Wire Wager Act, federal wagering excise tax laws, and various states' statutes and municipal laws prohibiting gambling. Unregulated commercial gambling is illegal throughout the United States."

The US Department of Justice press release claims that Microsoft, Google and Yahoo! all paid the fines without contesting or admitting to wrongdoing.

"These sums add to the over $40 million in forfeitures and back taxes this office has already recovered in recent years from operators of these remote-control illegal gambling enterprises," said Hanaway. "Honest taxpayers and gambling industry personnel who do follow the law suffer from those who promote illegal online behavior."

These charges stem from the highly controversial Wire Act of 1961 – it is important to note the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) did not make online gambling illegal, merely the processing of payments to online gambling companies that did not receive a special carve-out like the US online horse racing industry.

For what it's worth, the WTO recently ruled the UIGEA was in violation of international trade law and the US is negotiating compensation claims with other WTO members as a result.

The fines do not bode well for European companies PartyGaming and 888, who are both in negotiations with the US DoJ over their activities in the US prior to withdrawing from the US market last year. Their competitors continue to operate in the US succesfully, with no apparent decrease in the number of US players gambling online.