The federal Department of Justice has reversed a previous 2011 opinion on the 1961 federal Wire Act that paved the way for several states to create online lotteries and in three states online casino and poker games.
The original opinion held that the Wire Act applied only to sports betting that involved bets and information crossing state lines. The new opinion states that the Wire Act can be applied to any type of online gambling that crosses state boundaries.
“Based on the plain language of the issue, we reach a different result” than the 2011 opinion, the new opinion reads.
“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling,” Justice Department attorneys wrote. “We further conclude that that the 2006 enactment of the Unlawful Internet Gambling Enforcement Act did not alter the scope of the Wire Act.”
The opinion says that only one aspect of the original Wire Act applies to transmitting information on sports betting. Other prohibitions in the act can be applied to other forms of gambling, the DOJ said.
The opinion was dated November 2, but not released until last week. Reportedly, Deputy US Attorney General Rod Rosenstein has issued a memo to delay implementation of the opinion for 90 days to allow the gambling industry to react. But reaction is difficult since the industry doesn’t know what the specific rules might be or how the DOJ would enforce the decision.
Some—particularly former Congressman Ron Paul—pointed the finger at Las Vegas Sands Chairman Sheldon Adelson, who has long opposed the legalization of online gaming. Adelson contributed over $100 million in last year’s election, and $10 million to President Donald Trump in 2016.
Adelson has lobbied hard to have online gambling banned in the U.S., but has not had luck getting a bill through Congress. Some critics say the new DOJ opinion was issued simply to appease Adelson and as an attack online gaming from a new direction.
“Why should the financial urges of one casino owner trump the constitutional rights of the individual states and the choices of their residents?,” wrote Paul, an advocated of limited government. “Trump was elected to drain the swamp, not fill it. If his DOJ, which has frequently
abandoned and ignored his policies since he was elected, effectively tramples on states’ rights, it will mark yet another stain on his administration’s legacy that will not be ignored.”
D.C.-based online gaming attorney Jeff Ifrah told CDC Gaming Reports, “The revised opinion does not reflect the thoughtful and more careful analysis issued by the two highest federal courts of appeal that have reviewed this precise question. This opinion standing alone, of course, changes nothing and is of no significance or value. It is unfortunate that the Office of Legal Counsel appears to have been manipulated to issue an opinion for purely political purposes.”
Nevada Congresswoman Dana Titus also denounced the opinion.
“Though the full impact of this reckless DOJ reversal remains to be seen, we can be certain that it will inject uncertainty into a well-regulated market and push consumers back into the black market.” Titus said in a press release. “Unfortunately, the Trump Administration only supports states’ rights when it is politically convenient. Despite this setback, I will continue to lead the fight in Congress to ensure states like Nevada can decide what is best for them on the question of online gaming.”
Though the opinion itself doesn’t carry the weight of law, it immediately calls into question the legality of online gaming, especially online poker where three states—Nevada, New Jersey and Delaware—are already sharing player pools across their boundaries. However, the opinion also could impact several states that offer online lotteries, especially if information is routed to out-of-state processors.
After the 2011 opinion, Nevada, New Jersey and Delaware legalized online gaming. Nevada limited online play to poker, but New Jersey and Delaware also legalized online slots and casino games. Pennsylvania has also legalized online gaming, but potential sites are still being licensed.
In these cases, online casino gaming is “ring-fenced” or limited to players within the states borders through geolocation programs. However, New Jersey, Nevada and Delaware signed a player sharing agreement for online poker in an attempt to increase poker pools.
New Jersey, which saw online casino gambling bring in $300 million in 2018 and has also started online sports betting, is likely to oppose the opinion and any possible enforcement steps by the DOJ. The state just won a lengthy court battle to overturn the Professional and Amateur Sports Protection Act, which essentially banned sports betting in all but four states.
Former New Jersey state Senator Ray Lesniak, who spearheaded the state’s online betting legislation and efforts to defeat PASPA, told the website NJ Online Gambling that the state will challenge the opinion in court if Congress doesn’t move to clarify the law.
“Looks like I will have to go to court again to straighten out the Justice Department’s overreaching on states’ rights as I did with sports betting,” Lesniak told the website via email. “This opinion is outrageous. It puts state lotteries at risk and state revenues. If Congress won’t fix it, I will through the judicial process.”
Several states have instituted online lotteries, but again, they are usually limited to players within the state. However, it is unclear how the opinion would affect playing inter-state lotteries such as Powerball and Mega-Millions.
The use of geolocation programs could limit the effect, if any, the new opinion has on existing online lottery and gambling operations limited to individual states.
“It is too early to speculate what, if anything, will come from the Department of Justice’s latest interpretation of the Wire Act,” said David Briggs, CEO of geolocation company GeoComply in a press statement. “Regardless of this new opinion from DOJ, it remains true that, based on existing federal statutes, any state is free to authorize online wagering, as long as they put in place the appropriate safeguards to ensure compliance with an intra-state system.”
However, other analysts said that the new opinion raises questions about any exchange of information and technology that crosses a state line and speculated that the opinion could have a chilling effect on other states implementing online gaming. Most expect the nascent online gaming industry in Pennsylvania to be delayed.
The new opinion could also affect daily fantasy sports in some markets. Though the 2006 federal Unlawful Internet Gaming Enforcement Act did include an exemption for DFS games, the industry does take players on an interstate basis. This could lead to problems in states where attorneys general maintain DFS games are gambling.
The opinion could also raise red flags for banks and payment processors who have already been squeamish about money transfers involving internet gaming.
The new opinion, however, should not affect parimutuel betting on horseracing across state lines as such bets are regulated under a different federal law—the 1978 Interstate Horseracing Act.
In its opinion, the DOJ acknowledged that the reversal would create uncertainty in the online gambling market.
“We acknowledge that some may have relied on the views expressed in our 2011 opinion about what federal law permits,” the opinion says. “Some states, for example, began selling lottery tickets via the internet after the issuance of our 2011 opinion. But in light of our conclusion about the plain language of the statute, we do not believe that such reliance interests are sufficient to justify continued adherence to the 2011 opinion.
“Moreover, if Congress finds it appropriate to protect those interests, it retains ultimate authority over the scope of the statute and may amend the statute at any time, either to broaden or narrow its prohibitions,” the opinion said.
The American Gaming Association took a few days to evaluate the decision, coming in the first week of the tenure of new CEO Bill Miller. Sara Slane, the organization’s senior vice president of public affairs who led the sports betting legalization effort, weighed in.
“It is unfortunate that the Department of Justice departed from well-established practice in reversing its previous opinion without a compelling reason to do so,” she said in a press release. “However, the 2018 OLC opinion does not impact the ability for states and tribes to legalize and regulate gaming on a state-by-state and tribal basis, or for companies to provide the exciting products and entertainment experiences our customers want.
“With over 4,000 regulators and billions of dollars allocated to compliance, casino gaming is one of the most highly regulated industries in the country and for decades has provided its customers with cutting-edge products in a safe, regulated environment pursuant to state, tribal and federal law. We will work with all stakeholders to preserve the ability of states and Tribes to regulate gaming, and we encourage DOJ to investigate and shut down illegal, unregulated gambling operators who prey on consumers.”
The new opinion brought reaction from the Coalition to Stop Internet Gambling, an advocacy group funded by Adelson.
In a press statement, the group said the DOJ’s 2011 opinion was “was as problematic legally as it was morally.”
Former U.S. Senator Blanche Lincoln of Arkansas, in a statement provided by the Coalition, said Justice Department’s action “to rightfully restore the Wire Act” was “a win for parents, children and other vulnerable populations.”
“Today’s decision seamlessly aligns with the department’s longstanding position that federal law prohibits all forms of internet gambling, as well as with Congress’s intent when it gave law enforcement additional tools to shut down the activity through the overwhelmingly-passed Unlawful Internet Gambling Enforcement Act in 2006,” the statement said.
Other reactions simply highlighted the state of uncertainty the new opinion creates in the gambling industry.
Chris Grove, a gaming industry analyst with Eilers & Krejcik, said in a tweet Monday, “Rapid read from legal types is that the decision is a negative for regulated online gambling and that we’re likely headed to the courts.”
Jennifer Roberts, associate director of UNLV’s International Center for Gaming Regulation and a gaming law professor at UNLV and Utah, also tweeted on the opinion.
“Oh boy! This new #WireAct opinion is a doozy. R.I.P. to internet gambling, online lottery, and possibly DFS and any Internet, email, or social media-based marketing campaign for casinos. Might be time to amend!!”
