The geneses for last week’s stunning Department of Justice’s reversal of a seven-year-old interpretation of the Federal Wire Act probably took place in the Las Vegas Sands’ corporate offices shortly after Donald Trump was elected to the White House in November 2016.
If not years earlier.
On Friday, the Wall Street Journal reported that the legal reasoning behind the unusual move that threw into question legality of Internet gambling came from an April 2017 memo drafted by lobbyists for Sands Chairman and CEO Sheldon Adelson. The memo, according to the report, was sent to top Justice Department officials in April 2017 and made a case that the 2011 opinion on the Wire Act by the DOJ was in error.
No one seemed surprised by the news.
Adelson, 85, No. 15 on the Forbes 400 with a net worth of $34.2 billion – and a Republican Party megadonor – has long vowed to spend millions to kill Internet gambling. Adelson believes the activity will diminish results at traditional casinos and could lead to increased problem gambling issues and underage gambling.
In recent years, Adelson has funded the Coalition to Stop Internet Gambling and backed Congressional efforts to restore the Wire Act to its pre-2011 interpretation, known by the acronym RAWA.
That effort failed miserably; two Congressional hearings on RAWA bills were victories for pro-Internet gambling backers.
A December 2015 hearing went completely off the rails for Adelson’s side. Three witnesses, all of whom were opposed to Internet gaming, came off as thoroughly uniformed on the topic. Conservative Republican congressmen, such as Rep. Jody Hice, R-Ga., a Southern Baptist pastor and conservative radio talk show host – on record as opposed to all forms of gambling – thought the proposed legislation violated the 10th amendment, which defines the balance of power between the federal government and the states.
Last September, during a Congressional hearing on the legalization of sports betting, several anti-Internet gambling backers hijacked the room. Jon Bruning, a former Nebraska attorney general and counselor to Coalition to Stop Internet Gambling, used his time to argue for the Wire Act restoration.
Apparently, the Wire Act was already being restored down the street at the Department of Justice.
Adelson and his wife, Miriam, were among Trump’s biggest benefactors in 2016, writing checks for $20 million during the campaign and donating $5 million to the Presidential Inaugural celebration.
When Trump installed anti-gaming U.S. Senator Jeff Sessions from Alabama as Attorney General, industry observers speculated the 2011 Wire Act interpretation’s days were numbered.
The ruling by the DOJ’s Office of Legal Counsel was dated Nov. 2, 2018, five days before Sessions – who had fallen out of favor with the President – was forced from office.
When the Wire Act opinion was released, a Las Vegas Sands spokesman declined comment. Journalists, instead, were sent by the company to another source for comment – the Coalition to Stop Internet Gambling.
Las Vegas gaming attorney Greg Gemignani called the DOJ ruling, “RAWA by opinion.”
The DOJ’s December 2011 Wire Act opinion said the 1961 law applied only to sports betting. The ruling led three states – Nevada, New Jersey and Delaware – to launch Internet gambling activities. Nevada offers only poker, and Delaware’s market is small. New Jersey, however, has generated more than $1 billion in Internet gaming revenue since the state’s 2013 debut.
Pennsylvania is currently in the process of launching Internet gambling as part of the state’s 2018 gaming expansion legislation.
Last week’s decision was not ambiguous. Justice Department lawyers believe the Wire Act covers all forms of gambling.
Elections do have consequences.
Deputy U.S. Attorney General Rod Rosenstein issued a memorandum the day after the ruling last week that delays implementation of the opinion for 90 days, giving “businesses that relied on the 2011 (Office of Legal Counsel) opinion time to bring their operations into compliance with federal law.”
States were left wondering if they will have to shut down their Internet gaming sites – and, if not, what they will need to do to “bring their operations into compliance.”
Gaming lawyers and constitutional scholars are now poring over the 23-page DOJ opinion line-by-line to see if there are other unintended consequences from the ruling, including any potential negative impact on sports betting, which has grown to eight states after the Supreme Court threw out the Professional and Amateur Sports Protection Act last May.
Most believe the matter is headed to federal court, but that could take a while; New Jersey’s legal efforts on behalf of sports betting took more than five years.
Rosenstein wrote that the 90-day window was “an internal exercise of prosecutorial discretion; it is not a safe harbor for violations of the Wire Act.”
So the clock is ticking, and the only ones in the gaming industry smiling are inside the Las Vegas Sands corporate offices.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
