Online Gambling Industry Takes Political Hit

This guest post is brought to you by Richard Newman. He is an attorney at Hinch Newman LLP focusing on the U.S. advertising and digital media matters. 

On the heels of the U.S. Supreme Court and federal legislators paving the way for state-regulated gambling in the United States, the U.S. Department of Justice (DOJ) has now surprisingly turned the issue upside down.

Alas, the Wire Act, which prohibits interstate wagering.

A November 2, 2018 opinion has suddenly surfaced that the federal Wire Act (18 U.S.C. § 1084) applies to any form of gambling that crosses state lines, not merely sports betting.  The opinion stands in stark contrast to a 2011 opinion that “opened the door” to today’s state-regulated online gambling.

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The 2011 opinion abandoned the prior expansive interpretation of the Wire Act and limited its application to only sports wagering.  Despite the fact that Justice Department guidelines are to be given “great weight and should not be lightly departed from, the Justice Department – in what many believe to be a politically driven move by powerful gaming interests – has now concluded that the statutory prohibitions of the Wire Act are not uniformly limited to gambling on sporting events or contests.

According to Gambling.com: “Las Vegas Sands CEO Sheldon Adelson has obsessively fought to prevent online casino gaming. Though real-world examples show online gaming actually increases casino company revenues, the 85-year-old Adelson fears more dollars spent through the internet will mean fewer dollars spent within his physical properties.”

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On January 15, 2019, the DOJ announced that illegal online gambling enterprises shall – as a matter of prosecutorial discretion and not a safe harbor – have ninety (90) days to comply with federal law or risk prosecution under the Wire Act.

At present, Delaware, Nevada, New Jersey, and Pennsylvania permit online gambling.

What’s next?

Naturally, the question now becomes this.  What about purely intrastate activities that rely on out-of-state servers?  What about interstate payment processors that permit users to fund accounts via credit cards or online banking?

Even the Department of Justice has acknowledged that legal challenges appear imminent.

Reaching a contrary conclusion from our prior opinion will also make it more likely that the Executive Branch’s view of the law will be tested in the courts. . . Under our 2011 Opinion, the Department of Justice may not pursue non-sports-gambling-related prosecutions under the Wire Act.  But under the conclusion we adopt today, such prosecutions may proceed where appropriate, and 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 faith-fully execute the law, that possibility does provide a one-way check on the correctness of today’s opinion, which weighs in favor of our change in position.

In the meantime, the online gambling industry – including poker, lotteries and potentially even daily fantasy sports – hopes that federal authorities – including FTC CID lawyers that actively police the online gambling activities of children – will exercise some degree of prosecutorial discretion while it awaits Department of Justice enforcement guidelines.

What are the risks for affiliates?

  • It can outlaw poker, casino games and lotteries conducted online.
  • Gambling business might no longer be able to use wire communication facilities to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.”
  •  Wire communications that could allow to “receive money or credit”, either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers” can also be banned.

 

Attorney advertising. Informational purposes only. Not legal advice.