While state lawmakers in Michigan were working on the passage of comprehensive online gambling legislation, the Department of Justice (DOJ) was rumored to be exploring a renewed federal ban on all forms of iGaming.
The bill in Michigan was successfully passed by the state legislature, before being shot down by the Governor’s veto, but the issue of states legalizing and regulating the iGaming industry may be a moot point if the DOJ reverses course.
The crux of the issue is a federal law known as the Wire Act of 1961, which prohibits sports bettors and bookmakers from conducting wagering or related business across state lines via telephonic means. After the advent of online gambling, the DOJ ruled that the Wire Act applies to all forms of gambling, while equating the use of a telephone with an internet connection. This opinion formed the basis of a federal ban of online gambling until 2011, when the DOJ reversed course by limiting the Wire Act’s purview to sports betting alone.
States have since been free to set up legal iGaming industries, with Delaware, Nevada, and New Jersey launching online poker and casino platforms beginning in 2013. Pennsylvania also voted to legalize iGaming in 2017, and sites like PokerStars are expected to go live early next year.
In an article titled “Department of Justice Preparing to Reverse Opinion That Wire Act Only Applies to Sports Betting,” published by Online Poker Report on December 19, author Dustin Gouker speculates that the DOJ could be on the urge of reversing the 2011 opinion:
“The new opinion could come down this week.
The exact content of the opinion is unknown, and OPR has not seen the actual opinion. It’s also not a guarantee that the opinion is ultimately issued, sources tell OPR.
If the opinion comes down, it would likely be buried later this week, just before the Christmas holiday.”
Two days after his article was published, Gouker issued a tweet confirming that acting Attorney General Matt Whitaker had rescinded 69 prior DOJ rulings – but the 2011 opinion was not among them.
In a letter sent to Deputy Attorney General Rod Rosenstein on November 15, Congressman Jim Sensenbrenner (R-5) of Wisconsin openly questioned the validity of the DOJ’s current stance on the Wire Act:
“As you are well aware, until 2011, the federal government consistently interpreted the Wire Act to prohibit all forms of gambling involving interstate wire transmissions, including transmissions over the Internet.
Reversing its own long-standing interpretation, the Office of Legal Counsel issued an opinion stating that the Wire Act only bans sports betting and does not apply to online gambling.”
Sensenbrenner’s interest in the PASPA opinion stemmed from a hearing held by Judiciary Subcommittee of Crime, Terrorism, Homeland Security, and Investigations on September 27 with the subject line “Post-PASPA: An Examination of Sports Betting in America.”
As he later wrote to the DOJ’s second-in-command, Sensenbrenner fears that an era of legal online gambling will facilitate a litany of exploitative actions from criminal groups and unscrupulous operators:
“During the hearing, we heard testimony that a significant portion of sports betting is projected to occur of the Internet on mobile devices.
Such wagering … will allow for exploitation of Internet gambling by criminal and terrorist organizations to obtain funds, launder money, and engage in identity theft and other cybercrimes.
Since Congress is examining the totality of sports betting in light of the Supreme Court’s PASPA decision, it would be beneficial to have answers to the following questions.”
Sensenbrenner went on to pose three direct questions to Rosenstein and the DOJ, asking if it supports the 2011 opinion, whether the DOJ is offering any guidance to states where sports betting is legal, and what consequences can be anticipated if Congress fails to act.