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Wire Act: DOJ Reverses iGaming Legalization Opinion

Following weeks of whispering as to the Department of Justice’s (DOJ) willingness to once again ban online gambling on the federal level, the hammer has finally come down. In an opinion dated November 2 of 2018, which was only made public last week, the DOJ’s Office of Legal Counsel revised a previously issued interpretation of the Wire Act.

Under the 2011 opinion, the Wire Act of 1961 – a federal law prohibiting gambling-related business from being conducted across state lines via telephonic means – was ruled to be applicable only to sports betting. Prior to the 2011 opinion, the DOJ loosely connected the Wire Act to all forms of online gambling – including poker, casino games, lottery ticket sales, and sports betting.

Obama Admin DOJ Determined Limited Wire Act Scope

But when the DOJ under the Obama Administration took a second look, the Office of Legal Counsel determined that the Wire Act’s scope should be limited specifically to sports betting. This opinion paved the way for individual states to establish their own laws and regulations pertaining to any other form of iGaming.

Within two years of the 2011 opinion’s release, Nevada, New Jersey, and Delaware capitalized by legalizing online poker and/or casino gaming. As of today, that trio has since been joined by Pennsylvania, while several states have also legalized online sports betting courtesy of last year’s landmark ruling by the U.S. Supreme Court.

Nonetheless, the Trump Administration’s DOJ reversed course last week, writing that the Wire Act does indeed ban any and all gambling activity conducted via the internet:

“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling.

We further conclude that that the 2006 enactment of UIGEA did not alter the scope of the Wire Act.”

Rosenstein Provides 90-Day Window for Operators to Comply

As of now, there is no clear consensus on how the most recent opinion will affect statewide iGaming industries.

Thanks to an interstate gaming compact forged last year between Nevada, New Jersey, and Delaware, sites like WSOP.com and 888 Poker may already be in violation of the law.

But with several federal courts – including the Fifth Circuit and the First Circuit Courts of Appeals – previously ruling that the Wire Act’s ban is exclusive to sports betting, the new opinion is likely to face several challenges before it can be implemented.

In recognition of this legal quagmire, acting Attorney General Rod Rosenstein issued a memo clarifying that the new opinion will take effect after a 90-day window:

“As an exercise of discretion, Department of Justice attorneys should refrain from applying Section 1084(a) in criminal or civil actions to persons who engaged in conduct violating the Wire Act in reliance on the 2011 OLC opinion prior to the date of this memorandum, and for 90 days thereafter.

A 90-day window will give businesses that relied on the 2011 OLC opinion time to bring their operations into compliance with federal law.

This is an internal exercise of prosecutorial discretion; it is not a safe harbor for violations of the Wire Act.”

Sheldon Adelson’s Anti-iGaming Crusaders Celebrate Reversal

Reversing the 2011 Wire Act opinion has long been a pet project of Sheldon Adelson, the billionaire casino mogul and owner of the Las Vegas Sands Corporation who vehemently opposes all forms of iGaming.

Under the auspices of an Adelson-funded lobby group known as the Coalition to Stop Internet Gambling (CSIG), lawmakers on Capitol Hill and DOJ policymakers have been under pressure to reexamine the issue for the last eight years.

In a press release issued by CSIG, the group praised the DOJ for seeking a renewed federal ban on iGaming:

“CSIG is pleased to see today’s decision by the Department of Justice to reverse an Office of Legal Counsel opinion that was as problematic legally as it was morally.

Today’s decision seamlessly aligns with the Department’s longstanding position that federal law prohibits all forms of internet gambling, as well as with Congress’s intent when it gave law enforcement additional tools to shut down the activity through the overwhelmingly-passed Unlawful Internet Gambling Enforcement Act in 2006.

Today’s landmark action to rightfully restore the Wire Act is a win for parents, children and other vulnerable populations.”