The US Department of Justice has reversed its stance on whether or not the Wire Act applies to forms of gambling other than sports betting. In an opinion issued this afternoon, the DOJ stated it now believes the Wire Act does apply to other forms of gambling beyond sports betting.
For a quick recap, the Wire Act was passed in 1961 and states that it is illegal for anyone “engaged in the business of betting or wagering” to use “wire communications” to transmit “wagers or information assisting in the placing of bets or wagers on any sporting event or contest.”
The federal government for years interpreted the Wire Act to apply to all forms of gambling – sports betting, casino games, poker, lotteries and so on. The Wire Act therefore stood as the primary obstacle to states legalizing online casinos, poker sites, lotteries and sportsbooks.
In 2011, the Department of Justice gave gaming proponents a major victory when it issued an opinion stating the DOJ now interprets the Wire Act as applying only to sports wagers. The 2011 opinion cleared the way for states such as New Jersey, Nevada and Delaware to legalize online casinos and poker rooms.
Online sports betting remained under the purview of the Wire Act, but the 2018 Supreme Court decision to overturn a different federal law (PASPA) gave states just enough legal room to pass laws legalizing online and in-person sports betting. The Wire Act remained a concern, but states pressed forward confident that the Wire Act did not apply to sports wagering operations kept within state lines.
Today’s opinion reverses the 2011 decision. Once again, the Department of Justice is of the opinion that the Wire Act applies to all forms of gambling. One of the key paragraphs from today’s opinion reads as follows:
“The Criminal Division has asked us to reconsider our 2011 Opinion. We do not lightly depart from our precedent. But having reconsidered our conclusion, we now reach a different result. The 2011 Opinion, in our view, incorrectly interpreted the limitation on “any sporting event or contest” (the second “sports-gambling modifier”) to apply beyond the second prohibition that it directly follows: the prohibition on transmitting “information assisting in the placing of bets or wagers.”
You can read the full opinion here.
Not surprisingly, the Coalition to Stop Internet Gambling applauded the new opinion today. The group, formed by casino billionaire Sheldon Adelson, released a statement praising the decision. It reads in part:
“CSIG is pleased to see today’s decision by the Department of Justice to reverse an Office of Legal Counsel opinion that was as problematic legally as it was morally.
“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.”
What the DOJ Opinion Means for Online Gambling and Sports Betting
The new DOJ opinion comes at an awkward time for states that have legalized online gambling, online sports betting, online poker or all of the above. With New Jersey’s online casino industry running since 2013 and raking in more than a billion dollars’ worth of revenue since then, plenty of people in the Garden State are probably not too happy right about now.
The release of the new opinion is too recent for us to draw any firm conclusions regarding potential impacts. What happens next depends largely on actions taken by the DOJ, lawmakers in states with online gambling and industry stakeholders.
The primary issue at hand here is how intrastate online gambling is impacted by the opinion. The Wire Act specifically applies to interstate wagers (read: wagers that cross state lines), so on a casual reading, that wouldn’t impact online wagers that take place entirely within a state. However, that may not be true.
Most online wagers, even if they take place entirely in-state, can be argued to cross state lines due to the way the internet routes information. If a person located in New Jersey places a mobile wager with a sportsbook also located in New Jersey, the information related to that wager will almost always cross state lines at some point.
Even more concerning is today’s opinion indicates state-sanctioned online lotteries may now be in violation of the Wire Act. One paragraph in particular is cause for concern:
“We acknowledge that some may have relied on the views expressed in our 2011 Opinion about what federal law permits. 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.”
What we can say for sure is the new opinion has suddenly introduced a great deal of uncertainty into the whole online gambling landscape. Even if licensed gaming sites are able to continue as normal after the opinion, payment processors may become skittish and once again revert to declining payments to betting sites out of an abundance of caution, making it difficult for many players to deposit.
It may also be safe to speculate this decision will add momentum to the calls for the federal government to step in and regulate sports betting. The American Gaming Association and some state lawmakers oppose federal intervention, but the DOJ’s action today offers some ammunition to those who argue Congress is needed to provide uniformity and clarity. Plus, Congress can easily amend the Wire Act, UIGEA and other gaming laws as needed to give online gaming firm legal footing.
Are there any bright spots here?
While today’s opinion is definitely a negative development for those who enjoy the freedom of doing what they wish with their own money, you might be able to find some optimistic takes on the development if you squint hard enough.
First, the new DOJ opinion is likely to rally a large contingent of pro-gaming types. Today’s decision poses a serious threat to lawmakers, gambling operators, state lottery directors, poker players, gamblers and sports bettors. This development could be the last straw that finally motivates everyone to get on the same page and form a unified front against gaming prohibitions.
Too many people have serious money on the line to meekly accept the opinion and go home. Not only have numerous gaming companies invested significant sums of money into the growing industry, but lawmakers have gotten their first tastes of revenue online gaming and will surely find it unsavory to see their diligent efforts on the legislative front go to waste after making so much progress.
Something else worth keeping in mind is that the Wire Act still applied to sports betting all this time, yet that did not stop states such as New Jersey, Pennsylvania and West Virginia to pass bills legalizing online and mobile sports betting. The revised opinion appears to have expanded the scope of the Wire Act beyond the 2011 opinion, though, so it is no sure thing that online sports betting will skate by unscathed. This Twitter thread offers a couple of takes on that whole angle.
Overall, this is a bad development for online gaming but probably not end-the-world bad. This will almost certainly lead to new legal battles that will eventually provide more clarity. In the meantime, we’ll find out more as industry insiders pour over the decision and publish their own reactions.