One thing seems clear about Monday’s Department of Justice opinion — nobody knows exactly what it means for online gambling in the United States. It could turn out to be one of the darkest days in the history of online gambling or it could basically nothing.
Although the outlook of online gambling in the United States is very unclear after the opinion, some types of online gambling look particularly vulnerable under the Department of Justice’s, particularly any online gambling that crosses state borders. How precisely the DOJ defines gambling as crossing a state’s borders will be central to the debate.
What is the Wire Act?
In the early days of online gambling, the Wire Act — which originally passed in 1961 — was often pointed to as the law that made online gambling illegal in the United States. That position was further strengthened with 2006’s UIGEA, which effectively made gambling laws easier to enforce. That all changed in December 2011, when the US Department of Justice came out with an opinion that the Wire Act was only applicable to sports betting.
The law is nuanced, especially in today’s climate, but it essentially said that real money wagers could not take place over communication wires across state lines. Due to the fact the legislation was enacted before the internet, online gambling opponents say that the law was intended to be implied for all forms of wagering. Gambling proponents generally believe the law was limited to sports betting, a position the DOJ concurred in 2011, which was also supported by case law.
While the original opinion was not legally binding, the move essentially gave states more comfort in regulating online gambling and companies more will to push for regulation. States have been begun merging liquidity.
What does the new DOJ opinion do?
As stated in the revised opinion, the DOJ now believes that most forms of online gambling are applicable to the Wire Act. Instead of just sports betting being illegal under current law, the law could potentially be applied to all forms of online gambling, at least according to the DOJ.
This potentially puts into jeopardy a wide range of online gambling including, but not necessary limited to:
- Online poker
- Online casinos
- Online sports betting
- Daily fantasy sports
- Online lotteries
The exact reach is not known and will undoubtedly soon be challenged in court. In addition, the opinion is not legally binding and does not establish a precedent. The DOJ is merely stating an opinion that it now believes that not just sports betting is covered under the law. The actual practical implementation is another thing, with much of the possible impact coming from the perception of the opinion.
Most observers agree that interstate gambling is the most obvious loser from the opinion. Interstate gambling is generally defined as online gambling that occurs between states. The most obvious current example is interstate poker, where players compete against each other in different states. In this case, this is an example of betting and wagering that is clearly crossing state lines. The multi-state player pool that exists between Delaware, New Jersey and Nevada could be severely threatened by this opinion and effectively halt any new states merging player pools.
What is less clear is the impact on intrastate gambling — wagering that effectively occurs within a state — the player placing the bet is located in the same state where the bet is accepted. Some online gambling opponents may argue that all forms of online gambling crosses state lines due to the way the internet is routed, so it is therefore illegal. Many reasonable interpretations, however, declare that is not within the spirit on intrastate wagering.
Does server location matter? Does the form of online gambling matter> These are all questions of the nuances of the interpretation that is sure to be part of the debate in the coming weeks, months and years.
What about the PA Online Lottery?
Perhaps one of the safest forms of gambling from the DOJ opinion, although arguably still vulnerable, is the PA Online Lottery.
In most, if not all cases, bets are placed and accepted within the state with servers located in the state. States with online lotteries include Georgia, Illinois, Kentucky, Michigan, New Hampshire and Pennsylvania. In addition to the games being effectively located within a state’s borders, the coalition of states already offering online lottery sales can’t be discounted. And given the success of the programs so far, raising millions of dollars in tax revenue, more states are surely going to want their own piece of the pie.
The Pennsylvania Gaming Control Board is also signaling that the state will not go without a fight. In some of their first comments since the opinion was released, state regulators said that they feel comfortable moving forward with the state’s online gambling launch, expected to occur early this year.
Online lottery games — which is the only form of PA online gambling currently live — were not specifically addressed by the PGCB. However, given their stated position on online gambling legality, it would be a fair assumption that the PA Online Lottery will also continue to offer games to players, at least for now.