US Department of Justice Declares All Online Gambling Illegal

The US Department of Justice has reversed its previous opinion that the Wire Act applied only to sports betting, setting up a showdown with the states which have launched intrastate online gambling markets.

In December 2011, the DOJ’s Office of Legal Counsel (OLC) issued an opinion that interpreted the 1961 Wire Act as only applying to online sports betting. This opinion paved the way for numerous US states to launch intrastate on-line lottery, casino and poker operations within their borders.

On Monday, a brand new OLC opinion surfaced. This new opinion – dated November 2, 2018 and authored by OLC Assistant Lawyer Common Steven Engel – reverses that 2011 opinion.

Each the 2011 and 2018 opinions hinge on what’s basically a query of grammar, particularly, the absence of a comma in the section that prohibits “the transmission in interstate or foreign commerce of bets or wagers or information assisting within the putting of bets or wagers on any sporting event or contest.”

The following clauses prohibit “the transmission of a wire communication which entitles the recipient to receive money or credit because of bets or wagers, or for info assisting within the putting of bets or wagers,” but make no mention of sporting events or contests.

The two DOJ opinions’ grammatical arguments hinge on whether or not the sports wording applies only to the second clause of the first section, or whether or not the sports wording is implicitly understood to also apply to the other 3 prohibitions.

The 2011 opinion concluded the text was ambiguous, and discovered it logical to assume that all the clauses had been sports-related. The 2018 opinion believes there’s no ambiguity within the language and that the 2011 opinion “incorrectly interpreted the limitation.”

The 2018 opinion also finds that absolutely nothing within the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) – which barred financial institutions from processing payments for on-line gambling businesses – modifies the scope of the Wire Act.

The UIGEA contained a few carveouts for particular gambling activities, such as those in which state-approved bets or wagers are “initiated and received or otherwise made exclusively within a single State.” However the 2018 opinion notes that the UIGEA also consists of language clarifying that none of its carveouts alter or limit the current prohibitions under the Wire Act.

The 2018 opinion acknowledges that overturning legal precedents is really a serious matter, and therefore “reaching a contrary conclusion from our prior opinion will also make it more likely that the Executive Branch’s view of the law will probably be tested within the courts.”

Assuming the DOJ finds itself defending its new position in court, it’ll need to overcome the fact that prior federal cases, some involving major bank card issuers, have held that the Wire Act only applies to sports betting.

The 2018 opinion notes that some states relied on the 2011 opinion to launch online lottery and gambling operations, however the OLC does not think “that such reliance interests are adequate to justify continued adherence towards the 2011 opinion.”

There are presently three US states which have launched intrastate on-line gambling operations, while Pennsylvania is/was within the process of launching its marketplace this year, and six US states have launched on-line lottery sales.

It is unclear how much these operations will be impacted by the new ruling, given their inherently intrastate nature, even though significant monetary institutions could once once more turn out to be wary of processing transactions for any domestic online gambling operators. The on-line poker liquidity sharing pact in between Delaware, Nevada and New Jersey is clearly an interstate matter, as would be the national operations of daily fantasy sports operators such as DraftKings and FanDuel.

The 2018 opinion further notes that Congress “retains ultimate authority over the scope from the statute and might amend the statute at any time, either to broaden or narrow its prohibitions.” The new DOJ worldview may provide the justification for some pols to propose enlarging the scope of the federal sports betting bill filed just prior to Christmas.

President Donald Trump’s DOJ has long made clear its interest in ‘revisiting’ the 2011 OLC opinion, which numerous observers viewed as a backscratching payoff to Las Vegas Sands boss Sheldon Adelson, a major GOP sugar-daddy and a bitter foe of all things on-line gambling.

Certain sufficient, Adelson’s Coalition to Quit Internet Gambling (CSIG) instantly issued a press release expressing its pleasure using the new DOJ opinion, calling the 2011 opinion “as problematic legally as it was morally” while calling the new opinion “a win for parents, kids as well as other vulnerable populations.”

Bottom line, the US on-line gambling market now resembles an anthill that some kid bully has just kicked to pieces. However this shakes out, lawyers across the nation are licking their lips in the prospect of all these additional billing hours.

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