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Jonathan ZaunJanuary 25, 2019
January 25, 2019

Pennsylvania iGaming: Intrastate After DOJ Reversal

The fallout from a federal agency’s reversal on internet gambling policy is already affecting states where iGaming has been legalized, throwing a wrench into some Pennsylvania iGaming plans.

It was only last week that the United States Department of Justice (DOJ) made its new interpretation of the federal Wire Act clear, writing that the 1961 law does indeed prohibit all forms of online gambling. The Wire Act – which bans wagers conducted across state lines via telephonic means – had previously been deemed applicable only to sports betting after the DOJ’s Office of Legal Counsel issued a similar policy memo in 2011.

The 2011 opinion, issued under the Obama Administration, had in turn reversed the longstanding policy of applying Wire Act statutes to any gambling activity conducted online.

Within days of the most recent reversal – which widens the Wire Act’s scope to include online casino games, poker, and lottery wagers in addition to sports betting – gaming regulators are already scrambling to adjust the Pennsylvania iGaming law authorized in 2017.

Regulator Orders Pennsylvania iGaming Operators to Go Fully Intrastate

On January 18, Kevin O’Toole – who serves as director of the Pennsylvania Gaming Control Board (PGCB) – sent a letter to casino managers and their respective legal representatives throughout the Keystone state.

With Pennsylvania casinos making the final push to prepare for various online poker room, casino, and sportsbook launches in the first quarter of 2019, O’Toole advised operators to fully comply with the Wire Act’s ban on interstate wagers:

“It is your obligation to comply with the federal law in all respects in establishing your gaming operations which now must be entirely intrastate.

Thus, with any forms of internet or mobile gambling, it appears that diligence in assuring that the transmission of bets and wagers, payments and credits as a result of bets or wagers, as well as the information assisting in placing those bets and wagers, does not cross state lines is paramount.

While we fully recognize that this change may alter the plans of licensees in implementing expanded gaming offerings, it is a change not of the Board’s making but one commanded by the changing interpretation by federal law enforcement authorities.

Following the initial DOJ memo issued last week, Deputy Attorney General Rod Rosenstein issued a second outlining the agency’s intent to draft prosecutorial guidelines for Wire Act violations.

However, in recognition of the abrupt shift in federal policy after a wave of states legalized iGaming in both interstate and intrastate formats following the 2011 opinion, Rosenstein provided a 90-day window for operators to attain full compliance.

In his letter O’Toole used that 90-day window to warn operators that enforcement could begin on April 15 of this year at the earliest. Hoping to avoid any last-minute issues, O’Toole went on to request that iGaming operators in the state provide compliance plans to the PGCB within the next 30 days.

Defining Intrastate Wagers Not as Simple as it Might Appear

Under the 2017 law legalizing Pennsylvania iGaming, players must be physically located within state lines when accessing any online gambling provider.

Unlike fellow iGaming-legal states like New Jersey, Nevada, and Delaware – parties to an interstate online poker player pool sharing compact since last year – Pennsylvania’s nascent industry isn’t connected to other states through similar agreements.

Nonetheless, local gaming operators like Rush Street Gaming – which operates its PlaySugarHouse online casino / sportsbook in New Jersey under the Golden Nugget’s iGaming license – had planned to house servers used for Pennsylvania-based wagering in Atlantic City.

Those plans, made in the name of efficiency, must be scrapped going forward thanks to the DOJ’s sudden reversal.

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