The U.S. Department of Justice’s Office of Legal Counsel reversed a 2011 opinion that the Federal Wire Act applies only to sports betting, potentially throwing the small U.S. Internet gaming market into question.
The 23-page opinion is dated Nov. 2, 2018 but became public Monday. It was posted to the Justice Department’s website long after it was distributed. In the opinion, attorneys wrote, “Based on the plain language of the issue, we reach a different result” than the December 2011 opinion concerning the 1961 Act. That decision, under President Barack Obama’s Justice Department, marked a dramatic shift in policy.
“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 (Unlawful Internet Gambling Enforcement Act) did not alter the scope of the Wire Act.”
The new Justice Department opinion could apply the Wire Act to any form of gambling that crosses state lines, including online gaming.
Following the 2011 decision, New Jersey, Nevada and Delaware legalized online gaming. Nevada’s online gaming activity is restricted to poker only. Pennsylvania lawmakers legalized Internet gaming last year as part of an overall gaming expansion, but websites have been slow to launch.
How to interpret the decision
The Justice Department’s opinion led to wide range of opinions late Monday on what the ruling means.
“Given that DOJ now believes the Wire Act prohibits non-sports related wagering, state regulators and interstate gaming operators will have to digest the opinion and consider the particular implications to each state and operator,” said Mark Clayton, co-chair of the Global Gaming Law Practice for Greenberg Traurig.
Eilers & Krejcik Gaming analyst Chris Grove said the opinion places “many conflicting aspects” into play.
“It’s our belief that we’ll see the heart of this issue head to the courts sooner rather than later,” Grove said. “The opinion seems to create more headaches for products that clearly share liquidity across state lines. We also expect it to further delay Pennsylvania’s rollout of online casino gambling.”
Washington D.C.-based gaming attorney Jeff Ifrah said two appellate court decisions support the 2011 interpretation of the Wire Act.
“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,” Ifrah said. “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.”
American Gaming Association spokeswoman Caroline Ponseti said the Washington D.C. organization is “reviewing the opinion and the implications to the casino gaming industry, consumers and the eight states that currently offer legal, regulated sports gaming.”
Backing the ruling
The Coalition to Stop Internet Gambling, an advocacy group funded by Las Vegas Sands Corp. Chairman Sheldon Adelson that has long sought a reversal of the 2011 Wire Act opinion, applauded the ruling. In a statement, the organization said the Justice Department’s 2011 opinion “was as problematic legally as it was morally.”
A spokeswoman for Las Vegas Sands declined comment and referred questions to the Coalition.
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.”
Lincoln added, “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.”
One gaming industry source, who disagreed with the new Wire Act interpretation, put blame on the current administration in Washington D.C.
“Notwithstanding President Donald Trump’s previous casino involvement, former Attorney General Jeff Sessions and other conservatives have made no secret of their desire to use the Wire Act as a means to limit all forms of online gambling,” the source said. “We have now seen the results.”
Current online gaming operations
Nevada’s online poker market has shrunk to just one company – Caesars Entertainment.
New Jersey, however, has the most active Internet gaming business of any state. According to the New Jersey Division of Gaming Enforcement, gaming revenue from online wagering was $298.7 million in 2018, a 21.6 percent increase from 2017. Since its launch in 2013, Internet gaming in New Jersey has generated more than $1 billion in revenue.
Nevada, Delaware and New Jersey have interstate online gaming agreements that allows Internet poker players to compete across the three states.
Caesars Entertainment, which operates Internet gaming in both Nevada and New Jersey, declined comment Monday.
“(We) will take some time to review opinion and get outside legal advice,” said Seth Palansky, who is the head of communications for the Caesars’ owned World Series of Poker.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
