What’s Next For Legal Online Gambling In Wake Of New Wire Act Opinion?

Posted By Steve Ruddock on January 15, 2019 - Last Updated on January 16, 2019

Last month, we learned of the existence of a Department of Justice Office of Legal Counsel opinion that would reverse the 2011 OLC opinion on the Wire Act that greenlit states to legalize intrastate online lottery, casino and poker games.

That opinion has been formally introduced.

The new opinion, dated Nov. 2, 2018 (during the tenure of former Attorney General Jeff Sessions), is a blanket reversal of the 2011 OLC opinion.

“We conclude that the prohibitions of 18 U.S.C. § 1084(a) are not uniformly limited to gambling on sporting events or contests. Only the second prohibition of the first clause of section 1084(a), which criminalizes transmitting “information assisting in the placing of bets or wagers on any sporting event or contest,” is so limited. The other prohibitions apply to non-sports-related betting or wagering that satisfy the other elements of section 1084(a). We also conclude that section 1084(a) is not modified by UIGEA. This opinion supersedes and replaces our 2011 Opinion on the subject.”

The opinion goes on to caution states that have legalized online gambling since the 2011 opinion:

“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 does it mean for online gambling in the US?

Taken at face value, every state offering online gambling (lottery, casino games, poker, sports betting and perhaps daily fantasy sports) is in violation of federal law. New Jersey’s 2013 online gambling law that legalized NJ online casinos is under scrutiny.

In fact, a strict reading of the opinion could extend to all sorts of things, including casino promotions that cross state lines and retail lottery ticket sales that can be routed to out-of-state processing centers.

The most at-risk targets include:

  • The current Nevada-Delaware-New Jersey interstate compact that allows the three states to pool online poker players.
  • Daily fantasy contests.
  • The sale of interstate lottery tickets over the internet.

Fortunately, we’re likely not to be dealing with face value.

Unless it’s ready for a long battle in the courts (fighting an uphill battle against precedent and the overwhelming majority of legal opinions), the DOJ is unlikely to adhere to a strict, absolutist reading of the opinion. And if enough pressure mounts, the DOJ could simply pull the opinion.

Or Congress, once it is no longer in shutdown mode, could take matters into its own hands and amend and clarify the antiquated federal gambling laws.

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It will all come down to enforcement

How the DOJ chooses to enforce the opinion will likely determine the response from online gaming states and what happens next.

States that have legalized marijuana run afoul of existing federal drug laws; the DOJ has decided not to enforce those laws.

There’s a good chance it will do the same with online gambling, considering:

  • There are active, legal online gambling industries in Nevada, Delaware and New Jersey.
  • Legal online sports betting is available in three states: Nevada, New Jersey, and West Virginia — and counting.
  • Eleven states sell online lottery products: Georgia, Illinois, Kentucky, Michigan, New Hampshire, Pennsylvania, North Carolina, North Dakota, Maine, New York, and Virginia.
  • Daily fantasy sports is expressly legal in 19 states.

It doesn’t appear that the DOJ will use a strict interpretation of the opinion.

“The change here will have some impact, but it doesn’t mean that large swaths of gambling that were once legal are now illegal and vice versa,” a Justice Department official familiar with the matter told the Washington Post. “Not to say that there couldn’t be some situation where this extends the reach; this is just one more tool.”

Couple that with the following passage in the opinion itself and it’s pretty clear that the DOJ isn’t prepared to die on this hill:

“… courts may entertain challenges to the government’s view of the statute’s scope in such proceedings. While the possibility of judicial review cannot substitute for the Department’s independent obligation to interpret and faithfully execute the law, that possibility does provide a one-way check on the correctness of today’s opinion…”

Get ready for a legal battle anyway

Unfortunately, even if the opinion is only loosely enforced, it will have an impact.

An unenforced or loosely enforced opinion is a lot like a schoolyard bully in that the threat of action will keep state lawmakers, operators and payment processors cowed.

That could lead to two devastating effects:

  • The increased confusion created by the opinion will slow, if not completely halt, future online gambling legalization efforts.
  • It will make existing payment processors very skittish when it comes to processing online gambling transactions. The loss of payment processors would be as harmful as an actual prohibition.

As such, online gaming states are unlikely to go quietly into the night. It wouldn’t be surprising to see states like New Jersey take the initiative and challenge the opinion, even if the DOJ doesn’t try to shut down its legal online gambling industries.

And they have something of a layup case against an opinion that is on a very shaky legal footing.

Courts could strike down the opinion on the grounds that:

  • Like the 2011 OLC opinion, and as most legal scholars believe, the Wire Act only applies to sports betting; or
  • The routing of information or data that begins and ends in the same state doesn’t constitute interstate gambling even if it crosses state lines, or that the UIGEA safe harbor clause for that data does apply to the Wire Act.

Opinion is unlikely to impact legal online gambling

Furthermore, there’s no need for legal online gambling states to hit the panic button.

As opponents of online gambling have long stated, OLC opinions do not carry the force of law.

And as attorney Thomas A. Decker told the Pennsylvania legislature in a 2017 letter from the Coalition for a Safe and Regulated Internet:

“The CSIG memo focuses on the unremarkable conclusion that an opinion distributed by OLC does not bind federal courts or receive more than the type of legal deference that might be afforded a law journal article or position paper. This is true and remains true in the event of any future OLC Opinion that disagrees with the currently stated OLC position.”

Decker also said:

“Furthermore, no state or state actors that pass laws legalizing online gaming would face criminal prosecution by DOJ. There is no record of nor legal precedent for DOJ to criminally prosecute a state legislator or state official for passing a state law that is later held to be preempted by federal law. Such a prosecution would not be in keeping with the First Amendment or the reservation of powers enshrined in the Tenth Amendment.”

Bottom line

The issuance of the opinion isn’t a positive development by any stretch of the imagination. Certainly, it has NJ online gambling sites in its crosshairs to some extent.

How impactful it will be will largely depend on whether it’s just lip service to the powerful interests that pushed for it, or if the DOJ plans on trying to dismantle the legal online gaming industries of more than a dozen states.

The most likely scenario is the opinion:

  • Has little to no impact on current online gaming states;
  • Harms ongoing efforts at legalization in other states; and
  • Forces the courts and/or Congress to fix the country’s federal gambling laws.
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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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