Supreme Court of Washington Upholds State Ban On Internet Gambling
The Supreme Court of Washington has upheld the state’s ban on Internet gambling here in Rousso v. State.
The only issue before this court is whether Washington’s ban on Internet
gambling is an unconstitutional infringement of the dormant commerce clause.
See U.S. Const. art. I, § 8, cl. 3. The commerce clause grants Congress the
authority “[t]o regulate commerce with foreign nations, and among the several
states, and with the Indian tribes.” Id. The Supreme Court interpreted a dormant
commerce clause from this text, reasoning since Congress has the power to
regulate interstate commerce, states are precluded from doing so by enacting
laws or regulations that excessively burden interstate commerce.…
Determining whether Washington’s ban on Internet gambling violates the
dormant commerce clause is a multistep analysis. Outlined briefly, we must first
determine whether Congress has granted the states authority to regulate Internet
gambling. If it has, the dormant commerce clause does not apply and RCW
9.46.240 is upheld. See Ne. Bancorp, Inc. v. Bd. of Governors, 472 U.S. 159,
174, 105 S. Ct. 2545, 86 L. Ed. 2d 112 (1985).If Congress has not, the dormant commerce clause applies, and we must
determine (a) whether the language of the statute openly discriminates against
out-of-state entities in favor of in-state ones or (b) whether the direct effect of the
statute evenhandedly applies to in-state and out-of-state entities. Bostain v. Food
Express, Inc., 159 Wn.2d 700, 718, 153 P.3d 846 (2007).If the statute does not openly discriminate and applies evenhandedly, it
does not violate the dormant commerce clause if (1) there is a legitimate state
purpose and (2) the burden imposed on interstate commerce is not “‘clearly excessive'” in relation to the local benefit. State v. Heckel, 143 Wn.2d 824, 832-
33, 24 P.3d 404 (2001) (quoting Franks & Son, Inc. v. State, 136 Wn.2d 737,
754, 966 P.2d 1232 (1998)); accord Pike v. Bruce Church, Inc., 397 U.S. 137,
142, 90 S. Ct. 844, 25 L. Ed. 2d 174 (1970).
If the statute openly discriminates or does not apply to in-state and out-of-
state entities evenhandedly, it is upheld only if it is necessary to achieve an
important state interest unrelated to economic protectionism. Mt. Hood
Beverage Co. v. Constellation Brands, Inc., 149 Wn.2d 98, 110, 63 P.3d 779
(2003) (citing New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 274, 276, 108 S.
Ct. 1803, 100 L. Ed. 2d 302 (1988)).… I. Has Congress expressly authorized the state regulation of Internet
gambling?Congress has the authority to regulate matters affecting interstate commerce and also the authority to delegate such regulation to the states. See
Ne. Bancorp, Inc., 472 U.S. at 174. If Congress grants the states authority to
regulate a certain matter, a state’s regulation is consistent with the commerce
clause. Id. “[B]ecause of the important role the Commerce Clause plays in
protecting the free flow of interstate trade,” Congress’ delegation of that
authority must be “‘unmistakably clear.'” Taylor, 477 U.S. at 138-39 (quoting
South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 91, 104 S. Ct. 2237,
81 L. Ed. 2d 71 (1984)).
Here, the State argues two Congressional acts manifest “unmistakably
clear” intent to delegate to the states the authority to regulate on-line gambling.
Neither of these acts manifests such intent. The acts cited recognize and
expressly preserve a state’s authority to criminalize some or all gambling
activities within the state’s borders, but nothing more.
The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA),codified as 31 U.S.C. §§ 5363-5367, prohibits any person engaged in the
business of gambling from accepting money in any form for participation in
unlawful Internet gambling. Id. § 5363. The UIGEA recognizes that some types
of bets are rendered unlawful under state law, id. § 5362(10)(A), and clarifies
that it does not alter any state gambling laws, id. § 5361(b). Nowhere does the
UIGEA permit the states to regulate gambling activities outside their borders or
without regard to the commerce clause.
The federal wire act of 1961 (Wire Act) criminalizes the use of wire
communication facilities2 to place bets through interstate or foreign commerce.18 U.S.C. § 1084(a). The Wire Act then clarifies it does not prevent
transmission of information assisting the placement of bets from a state where
the bet is legal to another state where it is legal. 18 U.S.C. § 1084(b). Again, the
Wire Act recognizes the states’ authority to regulate the type of gambling
permitted within its borders, but does not delegate any authority to regulate
interstate commerce with impunity.
Congress has not delegated to the states its authority to regulate interstate
Internet gambling. The dormant commerce clause is applicable here, as the
Court of Appeals correctly held. See Rousso, 149 Wn. App. at 351-57.
II. Does RCW 9.46.240,3 by its language or effect, discriminate against
interstate commerce in favor of in-state economic interests?2 A “‘wire communication facility'” is any instrumentality used to transfer
information by wire, cable, or a like vehicle. 18 U.S.C. § 1081.3 Whoever knowingly transmits or receives gambling information by
telephone, telegraph, radio, semaphore, the internet, a
telecommunications transmission system, or similar means, or
knowingly installs or maintains equipment for the transmission or
receipt of gambling information shall be guilty of a class C felony
subject to the penalty set forth in RCW 9A.20.021. However, this
section shall not apply to such information transmitted or received
Because a statute that discriminates against interstate commerce is subjectto heavier scrutiny under the dormant commerce clause, we must first determine
whether RCW 9.46.240 discriminates in its language or direct effect.4 See, e.g.,
Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579,
106 S. Ct. 2080, 90 L. Ed. 2d 552 (1986); Bostain, 159 Wn.2d at 718. Here, the
language of RCW 9.46.240 is not discriminatory; it equally prohibits Internet
gambling regardless of whether the person or entity hosting the game is located
in Washington, another state, or another country.
Neither does RCW 9.46.240 have a direct discriminatory effect on
interstate commerce. The statute prohibits Internet gambling evenhandedly,
regardless of whether the company running the web site is located in or outside
or equipment installed or maintained relating to activities
authorized by this chapter or to any act or acts in furtherance
thereof when conducted in compliance with the provisions of this
chapter and in accordance with the rules adopted under this chapter.RCW 9.46.240.
4 The question here is not whether the State discriminates between Internet poker
and Internet wagering on horse racing, for example. First, the relevant
discrimination here is against interstate commerce for the benefit of in-state
economic interests, not discrimination among various forms of wagering.
Second, the legislature is permitted to ban activities piecemeal when not for the
purpose of simple protectionism — for instance, to limit the prevalence of
wagering or to limit on-line wagering only to already highly regulated areas. See
RCWA 9.46.240 Notes; Clover Leaf Creamery Co., 449 U.S. at 467, 471-72.
the state of Washington. See Brown-Forman Distillers Corp., 476 U.S. at 579.The effects imposed on in-state and out-of-state entities engaging or that would
engage in Internet gambling are the same. See CTS Corp. v. Dynamics Corp. of
Am., 481 U.S. 69, 87-88, 107 S. Ct. 1637, 95 L. Ed. 2d 67 (1987); Clover Leaf
Creamery Co., 449 U.S. at 471-72. RCW 9.46.240 is not discriminatory under
the dormant commerce clause.
Rousso argues RCW 9.46.240 is discriminatory because the Internet
gambling ban excludes Internet gambling web sites, all of which are out-of-state
businesses,5 from the Washington market while leaving untouched an alternative
service — in-state, “brick and mortar” (i.e., where individuals are physically
present) gambling businesses. This argument misconstrues and misapplies the
test under the dormant commerce clause in several ways.
First, Rousso misapprehends what constitutes a direct discriminatory
effect on interstate commerce. The question is how the effects of the ban are
imposed on in-state and out-of-state entities, not what the effect is on those
entities’ revenue. The ban on Internet gambling has the same effect on all
entities, regardless of origin: a ban on the transfer of gambling information via
5 This is an unsurprising statement since running such a web site in Washington
would constitute a felony under RCW 9.46.240, preventing Washington
businesses from entering the Internet gambling market.
the Internet.The Supreme Court addressed this distinction in CTS Corp., 481 U.S. 69.
There, state regulations hindering hostile takeovers of Indiana companies were
deemed nondiscriminatory because they imposed the same effects on in-state and
out-of-state entities. 481 U.S. at 87-88. It was immaterial to the Court’s
consideration that the majority of entities seeking to effectuate a hostile takeover
of an Indiana corporation were out-of-state, and thus the law, as applied, would
affect out-of-state entities more often. Id. at 88.
Second, Rousso alleges direct discrimination because banning Internet
gambling will have a secondary effect of promoting in-state, Internet gambling
substitutes — such as brick and mortar gambling. But this misses the mark on two
counts. Internet gambling and brick and mortar gambling are two different
activities, presenting risks and concerns of a different nature, and creating
different regulatory challenges; a state can regulate different activities
differently. The dormant commerce clause only prevents a state (under most
circumstances)6 from discriminating based on whether the business is in-state or
out-of-state. Again, RCW 9.46.240 treats all entities engaging in Internet
6 A discriminatory state law can still be upheld where it is necessary to achieve an
important state interest unrelated to economic protectionism. See, e.g., Mt. Hood
Beverage Co., 149 Wn.2d at 110.