Online Gambling Opponents’ Flawed Wire Act Argument

John Mehaffey December 13, 2013 1127 Reads

There seems to be some confusion about the Wire Act in the U.S as it pertains to online gaming.  Some of the misunderstanding is coming from opponents of online gambling that are using the December 2011 Department of Justice (DOJ) opinion and a possible future reversal as ammunition to further their cause.

That DOJ opinion was in reference to state lotteries that were asking to use the Internet to sell lottery tickets and had concerns about using payment processors and other online services outside of the home state.  The DOJ opinion clarified that the Wire Act only applied to sports betting.

Today’s online gambling opponents like to reference this decision as if it changed the world of online gambling.  Online gambling was already approved and live in Nevada when this opinion was released and it was not online poker.  Online and mobile sports betting, specifically ruled illegal under the Wire Act, was thriving in the only state where single game wagering is legal.

How was this possible?

The official name of the Wire Act is the Interstate Wire Act.  The law covers exactly what it implies; interstate betting.  It starts with this text:

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility 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, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

(Source: Findlaw.com)

There is not much ambiguity there and it seems clear to laymen that the Wire Act only covers interstate sports betting.  There was some debate about this under previous administrations, but one thing that was agreed on by all is that intrastate gambling is not covered in any way.  This was evidenced at the time in Nevada.

Nevada apps and websites available before Wire Act opinion released

Several Nevada companies launched sports betting apps and websites before the December 2011 DOJ opinion was released.  These were all approved by the Nevada Gaming Control Board.

American Wagering, later acquired by William Hill, launched the first Nevada sports betting app in August 2010.  Station Casinos launched its Sports Connection website in 2010 and later rolled out an app.  In October 2011, Cantor Gaming introduced its sports app that could be used anywhere in Nevada.  Cantor had been offering in-game betting on devices within its properties since 2009.

Cantor Gaming launched its PocketCasino product in January 2010.  According to a press release, this product was initially available only on the Venetian and Palazzo properties.

One threat that came up during Tuesday’s committee meeting is that Congress might pass a law to ban online gambling that would affect anything already in place or the DOJ could reverse course and suddenly decide the December 2011 opinion was invalid.  Both of these seem implausible.

Assuming the Nevada apps and websites were not flouting the Wire Act, and there is no evidence that they were, it seems obvious intrastate online gaming is not covered by the law.  At this point, only three states have regulated online gambling and it is all intrastate so any change of opinion in the Wire Act would not affect these games or any similar ones that are live at the time.

A change in federal law or DOJ opinion may change any interstate compacts at the time, however, there is precedent in grandfathering states when a federal gambling law is enacted.

The Professional and Amateur Sports Protection Act (PASPA) of 1992 halted the spread of sports betting in the U.S.  It gave an exemption to Delaware, Montana, Oregon and Nevada.  These states offered sports betting before PASPA was enacted.  It also gave states one year to legalize sports betting provided casinos were legalized for at least ten years in the state.  This carve-out was tailored for New Jersey, which failed to legalize sports betting at the time.

New Jersey is now challenging PASPA in an attempt to allow sports betting in the state.  The case will be heard by the Supreme Court in the near future.  New Jersey lost previous rulings on the way to the nation’s highest court.  Four states have filed amici curiae (“friends of the court”) briefs in support of New Jersey’s right to legalize sports betting.

Any attempt by Congress or the DOJ to interfere with existing gaming is certain to find its way to through the court system, especially if intrastate gambling is targeted.  Let us not forget the National Governor’s Association, which opposes any restriction taking away a state’s right to offer online gaming.

A change in DOJ opinion would have little effect on existing interstate gaming.  Nothing will not happen without a fight.  If there was a threat, the DOJ might end up in a situation it has always seemed to avoid; a legal precedent on Internet gambling.

(Updated Dec 14)

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