Thursday, April 5, 2012

US Department of Justice Changes Stance Regarding Online Gambling

This major change from the US Department of Justice (DOJ) came out just before Christmas last year, but it is important to review just how big that change was. What the DOJ declared in its new opinion was that it practically reversed itself with regard to its position that all online gambling was illegal pursuant to the Wire Act. Its new position is much more rational and based on the law, which is that the Wire Act prohibits interstate sports betting.

Now the Interstate Horseracing Act took care of the issue with horse race wagering, but the prohibition on interstate betting on other sports is still in place. As an aside, interstate betting on dog racing also uses the Interstate Horseracing Act as authorization, but I don't think dog racing was specifically mentioned as an authorized activity. However, no one has been called to account for accepting wagers on dog races across state lines as far as I know.

What does this new opinion do? This opinion really benefits the states and allows them to offer things like internet poker and casino games within their states as the risk of inadvertent communications moving across a state boundary is no longer a legal threat. For the states specifically, the gambling game that is going to be exploited right away is lottery. Interstate lottery ticket sales are going to expand. After that, intrastate internet gambling on poker and casino games will come online, then those games will expand to interstate operations.

The window for Congress to have some federal control of activity historically the province of the states has passed, with the exception of sports betting. That also may be something that will come to an end with the recent passage of a sports betting bill in New Jersey, setting up a potential legal challenge to the federal Professional and Amateur Sports Protection Act (PASPA), which prohibits sports betting in all states but a grandfathered few. Professor Nelson Rose has a great view of the constitutionality of PASPA. He states, "I expect courts will strike down PASPA. Imagine a federal law that allowed only some states to have movie theaters with sound - it just wouldn't hold up." [1]

Now could a new administration reverse this DOJ opinion? Sure, but I don't think so. If states are moving forward with their efforts to expand gambling as a means of raising tax revenues, it would be politically difficult for a new administration to stamp out that activity without leaning on a very weak read of the Wire Act and facing off against multiple states in federal court. Once the horse has left the barn, not easy to get it back in.

Internet gambling is coming to the US, led by the states on a state by state basis. It's about time.


[1] Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 31.


Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 30-31.

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