Online poker players received some good news on Tuesday with a federal appeals court ruling that the Wire Act applies only to sports betting.
The Trump-era Department of Justice (DOJ) previously argued that the law applied to all forms of online gaming. The new decision curtails those efforts and opens the door for expanded shared liquidity among legalized states.
The new ruling means poker players may see other compacts in the works. It also frees up the industry for possibly even more growth after a big 2020 that brought record revenues.
Ruling helps online gaming industry including poker
The 2018 DOJ opinion put any kind of interstate gaming compacts in jeopardy. That includes the shared liquidity markets among the legalized online poker states Nevada, New Jersey, and Delaware.
The DOJ’s opinion put a hold on further expansion and jeopardized other forms of interstate gaming, such as multi-state lotteries.
The New Hampshire lottery sued to block the effort and won the first round in court. The new ruling affirms that first decision and now opens the door to expanded interstate compacts.
“This landmark decision is a victory for states’ rights; for clear reading of federal statutes, and for the gaming industry and its customers,” Jeff Ifrah, an attorney affiliated with the case, told Online Poker Report.
“Uncertainty surrounding the ambit of the Wire Act has been a cloud over the Internet gaming industry since 2018. Today’s decision will hopefully put to rest the question of whether federal law prohibits states from licensing Internet gaming within their borders and compacting with each other to allow such gaming on an interstate basis.”
“DOJ doesn’t often lose litigation over the meaning of federal statutes. However, the [Office of Legal Counsel’s] 2018 opinion was so misguided that the court resoundingly rejected it.”
The Wire Act was passed in 1961 and was originally meant to keep Americans outside legalized sports betting states (Nevada) from “calling in” wagers to a casino. A player had to be located at the location he or she made the bet.
Growing the number of states with online poker
What does that mean for poker? Simply put, bigger player and prize pools. The ruling may mean more states decide to jump on the bandwagon as well. These states have already legalized online poker:
- New Jersey (partypoker, WSOP.com/888poker, PokerStars)
- Delaware (888poker)
- Nevada (WSOP.com)
- Pennsylvania (PokerStars)
- West Virginia
These last two have yet to launch but Michigan appears to be getting close. As of now, only WSOP.com had a shared liquidity market. Other poker sites in New Jersey and Pennsylvania currently operate in a “ringed-in” environment.
That means players in those states can only play each other. This ruling clears that out of the way, provided operators meet state requirements.
Combining state player pools
Smaller population states like West Virginia may never have large enough player bases for a ringer-in environment. Major platforms like partypoker and PokerStars may choose not to launch in these states.
However, if those states can be combined with others, these can help create larger numbers of players. A site like partypoker could potentially combine player pools in New Jersey (8.9 million population), Pennsylvania (12.8 million), Michigan (10 million), and West Virginia (1.8 million).
This would expand the company’s reach to a possible 33.5 million. This has a massive impact on the industry with a potential for so many more players getting in the action.
The Wire Act ruling makes way for even more legalized online poker in the US. Legislators in Connecticut, North Dakota, Kentucky, and Indiana are at least showing an interest in joining the online poker club. The ruling may bring even more.
Players certainly benefit from the ruling. This offers the chance for a more competitive environment with more operators chasing potentially larger numbers of players.
An expanded market also offers a chance at more major online events from entities like the World Series of Poker and World Poker Tour.
A look inside the ruling
The 2018 DOJ opinion left many gaming entities in limbo as to whether the new interpretation would be enforced. Some felt it was an effort to specifically target online poker.
As part of the ruling in favor of the New Hampshire lottery, that issue is also cleared up. The court felt entities should not be left in this vague area worried about enforcement.
“New Hampshire and its vendors should not have to operate under a dangling sword of indictment while DOJ purports to deliberate without end the purely legal question it had apparently already answered and concerning which it offers no reason to expect an answer favorable to the plaintiffs,” the ruling notes.
A key phrase from the text of the Wire Act became much of the focus in the case. The act makes it illegal for “the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.”
The decision notes that the “bets or wagers on any sporting event or contest” was critical in the case. Opponents argued that the act was meant for other forms of gaming. However, only sports betting is specifically noted. While the DOJ argued that this phrase applied to other gaming, the court found it did not.
The court referred to a “plain language” reading of the statute. When viewed that way, in essence, the court found there was no other rational interpretation other than Congress’ intent was meant solely for sports betting.
So where does that leave the case? Unless the new Biden DOJ attempts to appeal to the Supreme Court, the case is dead under this administration.
A future administration could try to bring the case before the Supreme Court, but that seems unlikely. Many online poker players will welcome this news.