Wire Act Opinion Clouds Future of Online Gambling

Wire Act Opinion Clouds Future of Online Gambling

The Federal Wire Act of 1961 prevents all forms of online gambling, according to a revised opinion by the U.S. Justice Department released to the public earlier this week. Though the opinion, a reversal of a 2011 interpretation, has no immediate impact on the growing American online gaming market, it has sent the industry into a tizzy as stakeholders and elected officials await further clarification.

If the more conservative interpretation holds and the Justice Department begins enforcement, it would all-but outlaw poker, casino games and lotteries conducted online. Interstate sports betting in all forms was already explicitly banned.

Opinions like these are non-binding and don’t carry the weight of law, so it remains to be seen when, or if, any impact takes place. That uncertainty itself has been enough to scare online gaming, which has just emerged in the U.S. over the past few years.

”I think that's the concern is that it just makes it so broad now that now we’re just left up to guessing what the Department of Justice will do for enforcement,” said Jennifer Roberts, Associate Director of the International Center for Gaming Regulation.

Justice Department officials under the Obama Administration previously ruled the Wire Act only applied to sports betting, and that all other forms of online gaming were exempt. Enacted before the internet’s creation and as a means to combat organized crime, it had been used up until the revised 2011 ruling to restrict online gaming.

That reversal in 2011 gave greater confidence for online gaming purveyors in the U.S. as they no longer had to fear a shutdown from the government.

Several states subsequently created or are set to open internet-based poker and casino markets. That includes multiple states with online lottery games, as well as an interstate poker player liquidity sharing agreement between Delaware, Nevada and New Jersey. Pennsylvania is also set to launch its online casino and poker markets.

The Supreme Court decision earlier this year to strike down the federal ban on sports betting further energized and expanded the industry nationwide for both in-person and online gaming. More than two-dozen states additional have taken up or announced plans to consider gaming expansion bills this year.

All of this could be jeopardized by the DOJ opinion.

The reinvigorated momentum for gaming of all types subsequently revived interest in existing gambling statutes from opponents. Some industry observers believe political pressures played a role in the DOJ opinion as well.

How A Political Donor Influenced Gaming Laws

The surprise reversal has been pinned by some on a casino magnate – and his millions of dollars spent to thwart online gaming.

Las Vegas Sands CEO Sheldon Adelson has obsessively fought to prevent online casino gaming. Though real-world examples show online gaming actually increases casino company revenues, the 85-year-old Adelson fears more dollars spent through the internet will mean fewer dollars spent within his physical properties.

One of the richest people in the world, Adelson has increasingly funneled money to politicians who support his crusade against online gambling.

That list notably includes President Donald Trump, as well as South Carolina Sen. Lindsey Graham , who has publicly urged the DOJ for years to revise its decision to little avail up until this opinion, was announced. He also pushed legislation to broadly outlaw online gaming, which gained little traction on Capitol Hill.

The head of the Senate Judiciary Committee, which holds confirmation hearings for top justice department officials, Graham said he would again push for a Wire Act reinterpretation during the hearings for Attorney General nominee William Barr, which began Jan. 15.

The Wire Act opinion was issued in early November of last year, perhaps not coincidently just days before then-Attorney General Jeff Sessions was fired by Trump. Sessions had said during his own confirmation hearings he hoped to revise the 2011 Wire Act opinion.

The Washington Post reports DOJ officials denied any outside influence from Adelson, or anyone else, a response that has garnered skepticism from many in the industry.

Even Some current members of Congress struck back against the ruling.

"Unfortunately the Trump Administration only supports states’ rights when it's politically convenient,” said Nevada Rep. Dina Titus in a statement. She promised to push lawmakers to assert state-level authority over online gaming authorization.

Not surprisingly, Adelson’s Coalition to Stop Internet Gambling lauded the announcement in a statement. Former Arkansas Sen. Blanche Lincoln, writing on behalf of the organization, said the original opinion was “as problematic legally as it was morally.”

”Today’s landmark action to rightfully restore the Wire Act is a win for parents, children and other vulnerable populations,” Lincoln said in the statement.

The long-term impacts of the DOJ ruling remain to be seen, but its certain new legislation on the Hill, as well as debates in courtrooms, are sure to follow.

What’s Next for Online Gaming?

Deputy Attorney General Rod Rosenstein asked the Department of Justice to hold off on implementing the new opinion for 90 days to allow affected parties to come into compliance. These parties will undoubtedly seek to use that time to better understand its practical ramifications – and to make sure the ruling doesn’t come to fruition at all.

One solution would be an act of Congress that overrides the DOJ opinion and clarifies the Wire Act. But with the federal government in the midst of the longest partial shutdown in its history, and lawmakers from both parties increasingly reluctant to pass legislation on anything, it could be a difficult process. Previous efforts to pass federal sports betting laws have gained little momentum.

That leaves the courts. Potential litigants will need legal standing, or to have some sort of adverse effect from the new law in order to file a lawsuit. That could come, for example, should government officials shut down the interstate poker compact between New Jersey, Nevada and Delaware. In that case, one or likely all of the states would assuredly sue to prevent their agreement from termination.

It remains to be seen if the Justice Department would take that step. Just because an opinion deems it illegal, it doesn’t mean it will come under enforcement.

”There is plenty of illegal gambling activities occurring anyway that they just didn't have the resources to enforce against, so will that suddenly change? I don't see it,” Roberts said. “I think the federal government is going to be focused on higher priorities.”

Even the language of the Wire Act itself is up to debate. Much of the opinion centers around a series of commas that officials there now interpret as a measure to prohibit all forms of online gaming. This counters arguments on the same exact language just a few years earlier.

”So we're stuck with an ambiguous opinion that declares the law is clear and unambiguous,” Roberts said.

That ambiguity could be the biggest factor. With the enforcement and interpretation of the law now up in the air, states that may have otherwise considered gambling bills may put those on hold until they receive further clarification.

The opinion casts unwonted uncertainty into a multi-billion dollar industry that saw record-setting revenues in 2018. A broad, restrictive interpretation of a law passed more than half a century ago could scuttle much of that progress in 2019.

Gambling stakeholders will undoubtedly fight to keep their piece of the lucrative market, but this singular legal opinion from the federal government rocks online gaming in the U.S. for the moment and up until and after its ramifications are fully understood.

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