Online Gambling in the USA Under Threat by DOJ Reversal

Online Gambling in the USA Under Threat by DOJ Reversal

The U.S. Department of Justice (DOJ) issued a new opinion last week effectively reversing the Office of Legal Counsel’s 2011 position that prohibitions from the U.S. Federal Wire Act 1961 are limited to sports gambling.

DOJ Reversal Not yet Law

The DOJ’s reversal makes the Act applicable to any form of online gambling that occurs across state lines, including online-lottery-games and online-poker. The DOJ opinion also appears to create a prohibition on out-of-state transmissions used to receive money or credit from wagers unless it is legal to place bets in both places.

While the DOJ opinion does not yet amount to a settled Federal law, this type of opinion is intended to set the agenda for the direction of law enforcement efforts for the DOJ.

How the DOJ Reversal Might Affect you

Any Federal Government change in the interpretation of the Wire Act could put existing online gambling operations under threat. In particular, nationwide Daily Fantasy Sports (DFS) competitions and the online poker liquidity pools that are shared across borders like the tri-state agreement of Nevada, New Jersey and Delaware, could be at risk.

Even online gaming that exists only in one state (such as casino games and intrastate poker) but whose data flows over communication lines that cross state lines, could also be threatened under the new interpretation of the law.

Even if online poker operators are able to find technological solutions to keep intrastate games up-and-running, previous-studies-and-experience shows that online poker needs liquidity to continue to grow.

If allowed to play out unimpeded, these type of DOJ recommendations would not only harm existing operations, however, they may also potentially remove the revenue generation incentives required for legislators in other states looking to license-and-regulate online poker and casinos.

The DOJ Explanation

The DOJ openly acknowledges that its latest opinion is a diversion from its previous 2011 opinion, in the document dated November 2, 2018;

“We do not lightly depart from our precedents, and we have given the views expressed in our prior opinion careful and respectful consideration. Based upon the plain language of the statute, however, we reach a different result,” reads the official DOJ document.

“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,” the opinion continues. “We further conclude that that the 2006 enactment of UIGEA did not alter the scope of the Wire Act.”

In 2011, the Department’s Office of Legal Counsel (OLC) issued a memo stating that the Act’s ban on interstate gambling applied solely to sports betting. At that time, the Illinois and New York lotteries sought clarification from the DOJ on whether out-of-state payment processors could be used for lottery subscriptions made across state lines. As a result of that memo, a handful of states including Delaware, New Jersey, and Nevada, passed legislation to legalize online gaming.

What Now?

The DOJ indicated in last week’s opinion that it expects legal challenges to the reversal of the OLC’s 2011 memo. Expect strong pushback to come from members of Congress, in addition to the states directly affected by any manifestation of the DOJ reversal into law.

However, as the gaming industry absorbs the news and consults with legal counsel and plans a path forward, consumers will very likely continue to patronize online gaming sites without any major changes.

The negative opinion at its most powerful may alter how online gaming is conducted, however, given the legal precedence/s before it, online gambling looks set to thrive in whatever form that takes.