DOJ creates confusion for US iGaming by reversing Wire Act position

On 14 January 2019, the US Department of Justice (DOJ) issued a new opinion  on the Wire Act 1961. The 23-page opinion, dated 2 November 2018, reversed the DOJ’s 2011 opinion  that “interstate transmissions of wire communications that do not relate to a “sporting event or contest” fall outside the reach of the Wire Act“.

By contrast, the latest opinion states that “having been asked to reconsider, we now conclude that the statutory prohibitions are not uniformly limited to gambling on sporting events or contests“. It concludes by stating that “this opinion supersedes and replaces our 2011 Opinion on the subject”.

Although there had been no specific request from the states to the DOJ for guidance on internet gambling, as had been the case with the 2011 opinion, rumours had been circulating for some time of a change of position, particularly given the vocal opposition to online gambling from some senior figures in the Republican party (like Senator Lindsey Graham) and Sheldon Adelson, one of the largest donors to that party. The Coalition to Stop Internet Gambling, a group funded by Adelson, stated  that it was “pleased” that the DOJ had reversed the 2011 opinion, which it said was “as problematic legally as it was morally”.

So what happens next?

An opinion from the DOJ is not law, so there are now two contradictory opinions from the DOJ on the same legislation. Given that the 2019 opinion argues that non-sports wagering on an interstate basis (i.e. transactions that occur between two different states) is unlawful, this suggests that the current poker sharing agreements (which allow operators in Nevada, New Jersey and Delaware to share liquidity) may be affected. The question of what happens to intrastate transactions (i.e. transactions that occur in only one state) made over the internet is also in question, as the 2019 opinion suggests that criminal charges can be brought even where the interstate transmission of information is incidental to gambling that is lawful under state law. This would also affect online casino, online sports betting and online state lotteries (the source of the requests for the 2011 opinion).

As ever with US iGaming, there is confusion as to what happens next, and a lot more questions than answers. Is the DOJ just signalling what it wants the industry to do, or will it actually prosecute companies involved in online gambling? And if it does prosecute, what types of online gambling will it target? Or will states that believe that the 2019 opinion is wrong seek a “Declaratory Judgement” due to uncertainly over what enforcement action the DOJ might take?

On 5 February 2019, the attorneys general of New Jersey and Pennsylvania, two of the states which had legalised sports betting following the repeal of the Professional and Amateur Sports Protection Act 1992 (PASPA), wrote to the DOJ (the acting Attorney General and the Deputy Attorney General). The letter  stated that the “about-face” in the 2019 opinion “is wrong and raises significant concerns in our states“.

Lawyers and analysts are now speculating, creating uncertainty that may slow, or stop, investment from companies so recently encouraged that the US offered great opportunity after the repeal of PASPA. Federal legislation remains unlikely, given the current stasis in the American political system, although such legislation might not benefit the industry in any case, with the prospect of additional restrictions and sports leagues lobbying for a share of betting revenue. And there would be constitutional implications of the federal government seeking to legislate in an area where the states are traditionally pre-eminent. Indeed, the letters from the attorneys general concludes by stating that the 2019 opinion “undermines the values of federalism and reliance that our states count on.”

It seems like only a court can deliver clarity to the questions above, meaning that litigation is likely in almost any scenario.