On Monday, the United States Department of Justice sent shockwaves through the entire gaming industry as it released a new opinion on the scope of the Wire Act.
This newly released opinion now believes that all types of gambling, including betting and lotteries, that crosses state lines is illegal under the Wire Act. It’s a reversal from the 2011 opinion that has been widely accepted and followed even through the overturning of PASPA by the SCOTUS in 2018.
The Federal Wire Act, or Interstate Wire Act of 1961, is a U.S. law that prohibits betting across state borders via the usage of wire communications. This also prohibits sending information to help others place wagers across state borders. The Wire Act was believed to be created as a countermeasure to an industry that was largely controlled by the mob.
Unfortunately, this federal law was created before things like the internet were even dreamed of. So, this act became outdated in some ways and needed further clarification roughly 50 years later.
Before the DOJ gave an opinion on the scope of the Wire Act in 2011, they spearheaded the 2006 Unlawful Internet Gambling Enforcement Act. Also known as the UIGEA, this act barred financial institutions like banks and credit cards from processing payments and transactions to online gambling entities.
It was created during the peak of online poker, which millions of Americans were participating in on a daily basis. This act basically killed online poker and severely wounded online betting at the time. The government believed that the Wire Act and the UIGEA were enough to prevent all illegal online gambling.
Five years after the UIGEA was created, the state of New York requested that the DOJ clarify what the Wire Act actually covered due to the ambiguity found in its wording. After reviewing the Wire Act, the DOJ decided that it pertained to all sporting events and contests.
Therefore, it was believed that the Wire Act only covered sports betting. So, states and gambling businesses operated as such. For example, online poker and casino-style games were once again allowed.
The Professional and Amateur Sports Protection Act of 1992, was adopted in order to ban sports betting and protect the integrity of both professional and collegiate sports. Only Nevada was allowed to have full-scale sports betting at its casinos, while a few other states were allowed certain lottery run sports betting games.
However, after a lengthy legal battle spearheaded by the state of New Jersey, the United States Supreme Court overturned this act in May of 2018.
SCOTUS now gave each state the right to choose whether or not it wanted to legalize sports betting within its borders.
Almost immediately, Delaware and New Jersey were up and running with legal sports betting. Other states like Pennsylvania, Mississippi, Rhode Island, and West Virginia were soon to follow. New Mexico even got in on the action. Currently, there are at least 8 to 10 more states in the process of trying to create a framework and pass legislation for legalized sports betting.
With that said, New Jersey, Nevada and Delaware have all opened up intrastate online poker and casino-style gaming that will be impacted by this recent DOJ opinion.
This new opinion believes that the Wire Act includes all forms of online gambling, not just sports betting. Once again, online poker and casino gaming comes under fire and could be viewed as illegal activities according to the Wire Act. The DOJ’s opinion also discussed the UIGEA and how it hasn’t altered the scope of the Wire Act.
Bottom line, the DOJ and Assistant Attorney General Steven Engel believes there is no ambiguity in the wording of the Federal Wire Act and that this law encompasses any form of gambling or betting.
This is the multi-billion dollar question. More than likely, the DOJ’s latest change of opinions will spark some intense legal battles. For starters, any state that has included intrastate online gambling in their new sports betting operations could potentially face legal issues from the DOJ.
Furthermore, Daily Fantasy Sports could also be directly hindered by the new opinion. This would be a huge catastrophe considering how much money DFS generates a year and how the DFS leaders DraftKings and FanDuel are a major catalyst for the spreading of sports betting throughout America.
The enforcement of the Wire Act against some state’s online gambling activities will end up going to court. There’s no way any state will just roll over and allow the DOJ to prevent tens of millions in revenue.
As of now, there’s no clear-cut answer on when or how the DOJ will enforce their new opinion. One thing is for sure, if they do start cracking down, you can expect numerous lawsuits to pop up throughout the country. With that said, I like the states’ chances of once again defeating federal law just like they did with PASPA in 2018.
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