A memorandum of opinion from the Department of Justice (DOJ) publicized in January would essentially overturn an earlier DOJ decision from 2011 that has been used as the legal basis for several states to legalize non-sports online gambling and by several state lotteries to offer games online.
The January opinion was delayed from taking effect for 90 days to provide time for states and industry participants to adjust to its planned impact. Efforts are underway in several states and by industry participants to prevent the implementation of the new opinion or to limit its effects.
Historical perspective
Adopted in 1961, the Wire Act prohibited horse racing and sports gambling over the U.S. communications system and aimed to combat organized crime. With the emergence of the Internet, the law was used to crack down on early efforts at online gambling, whether or not it involved horse racing or sports gambling. The 2011 opinion by DOJ held that the Wire Act only prohibited sports gambling and has resulted in the growth of non-sports-related online lotteries and betting on online games, such as poker.
New opinion creates uncertainty.
The gaming industry, financial institutions, state lotteries, and states with or planning online gaming are assessing the potential impacts of the new DOJ opinion on a market that has created billions of dollars in revenue from online gaming activities initiated after the 2011 opinion.
In-state online gaming relies on the Internet and/or wired and wireless communications lines to route transactions and may be subject to the new interpretation of the Wire Act. Additionally, many physical gaming locations rely on communications systems to enable digital wallet transactions by on-site players and for specific casino offerings such as wide area progressive slot machine jackpot systems that electronically link multiple casinos within a state.
Efforts Underway to Overturn New Opinion
Opposition to the new opinion has been swift. Following is a summary of critical activities underway to prevent the recent view from taking effect:
New Hampshire Lottery lawsuit: the state Lottery filed suit in Federal court on February 15 to bar enforcement as it applies to state lotteries. The lawsuit asserts that the new DOJ opinion could jeopardize all lottery sales, including traditional and online, and mobile sales, potentially impacting $90 million in state revenue annually.
NeoPollard, the technology and service provider to the New Hampshire Lottery: the vendor filed suit the same day as the Lottery, making similar arguments and asking for similar relief from enforcement of the new opinion.
New Jersey Legislature: New Jersey State Senate President Sen. Stephen Sweeney requested that the DOJ rescind the new interpretation and, should that not happen, wrote that the state of New Jersey is prepared to take legal action. He described the new interpretation as “arbitrary and capricious” and asserted that Wire Act prohibitions are limited to gambling on sporting events or contests. A key advisor to Sweeney also recommended that the legislature seek assurance from the DOJ confirming that mobile sports betting within the state falls within the safe harbor provisions of the UIGEA regarding exempting intrastate transactions from being considered unlawful internet gambling.
New Jersey and Pennsylvania Attorneys General: The AGs of New Jersey and Pennsylvania on February 5 objected to the new opinion in a joint letter to DOJ. They requested that it be withdrawn or that DOJ guarantee it will not bring enforcement actions against companies acting lawfully under state statutes.
FOIA request regarding lobbying involvement: New Jersey AG Grewel also filed a Freedom of Information Act request for records related to the opinion. He cited reports that the effort behind the new opinion was derived from lobbying pressure rather than intervening facts or law.
North American Association of State and Provincial Lotteries: NASPL membership includes most U.S. and Canadian lotteries and IGT, Scientific Games, and Intralot associate members. The organization stated on February 4 asserting the new opinion will be substantially detrimental to the lottery industry as a whole, including traditional and online lotteries, which in the U.S. generate $23 billion in annual revenue used to fund good causes within lottery jurisdictions.
MGM CEO Jim Murren: The CEO of one of the most prominent gaming organizations asserted that the opinion is poorly written and unenforceable. Still, as read, “it would mean that Powerball, as it exists in 44 states in the United States, isn’t legal anymore.”