Interstate Online Poker and Casinos Banned in US
U.S. gambling operators have 90 days to comply with a Department of Justice memo which bans interstate online casino and poker betting. on Tuesday, US Deputy Attorney General Rod Rosenstein issued a memo stating companies had a 90-day window to “adjust their operations” to comply with the DOJ opinion, which was issued Monday.
The legal opinion the US Justice Department issued on Monday stated that federal law prohibits any form of interstate wagering which crosses state lines. The Monday opinion reversed a 2011 legal opinion issued by the Department of Justice which allows online casinos and poker rooms.
The decision is seen as threatening the burgeoning US legal online gambling industry, because New Jersey, Nevada, Delaware, and Pennsylvania legalized and regulated online gambling in the years since. Also, several states (Georgia, Illinois, New Hampshire) have launched online lottery ticket sales, which also could be affected by the decision.
In the news media, the decision — which was rendered by the Criminal Division of the Justice Department — is seen as a complete reversal of the 2011 DOJ opinion by former Assistant Attorney General Virginia A. Seitz.
Interstate Online Gambling is Ended
A close reading of the 2019 opinion leaves indicates the reversal might not be complete, but further clarifications by Rod Rosenstein or Assistant Attorney General Brian Benczkowski (Criminal Division) might be needed to know for certain. Also, lawsuits by states or gaming companies might clarify the issues at stake.
Both memos suggest that interstate online gambling is affected — that is clear. If the transactions of an online casino or a poker site cross state lines, then those would be illegal under the new enforcement policies. Transactions which stay within a single state sound like they would be protected by state laws.
Single-State iGaming Might Survive
Thus, single-state sports bets handled by New Jersey, Delaware, Nevada, and Pennsylvania sound like they would remain legal under the new policy. The companies which handle those bets — 888, PokerStars, Paddy Power, William Hill — would need to assure their telecommunications do not cross state lines before they reach a player’s desktop computer or mobile smartphone.
If companies make certain they comply with that limitation, then it sounds like they should be legal under federal law. Several forms of gambling which were legal before are undoubtedly illegal under the new DOJ policy.
MSIGA Takes a Mortal Blow
For instance, the Multi-State Internet Gambling Association (MSIGA), often known as the interstate poker company, signed by Nevada, Delaware, and New Jersey are illegal. The MSIGA allows the three states to combine each other’s poker communities, which helps foster more poker events, bigger prize pools, and more guaranteed money. Sharing poker liquidity no longer will be an option.
That also means talk of Pennsylvania or even the United Kingdom signing poker compacts with the MSIGA states are impossible. State lottery companies which sell online tickets also must comply with the law, so a variety of lottery companies will need to invest in the technology and third-party testing to assure the do not violate federal laws.
Gaming Companies Take a Hit
Even if the law still allows intrastate online casinos, sportsbooks, and card rooms, the news has had a definite chilling effect on investment in gaming companies this week. When news broke, shares for William Hill dropped as much as 3.5%. Shares of GVC Holdings, the owner of Ladbrokes, fell by nearly 3%. Paddy Power-Betfair fell by over 2.1%, but improved moderately after its low. MGM Resorts saw a 1.3% decline.
If a more limited interpretation of the 2019 DOJ opinion holds, those companies’ long term outlook might improve. Most planned on expanding with land-based sportsbooks and in-state mobile sports betting apps, which would not be affected in the case of a limited interpretation.
If the Department of Justice announces a comprehensive ban on all online gambling like the one which existed from the time UIGEA went into effect in 2007 and Eric Holder’s Department of Justice reversed the decision in 2011, then it would put all those companies’ investments and business strategies in danger. That would open a round of lawsuits involving a wide range of online gambling interests.
Rod Rosenstein’s Anti-Online Gambling Past
For those who follow US gambling news for the past decade, Rod Rosenstein’s role in this week’s announcement is no surprise. While most media attention focuses on Rosenstein’s role in the Mueller investigation and whether he is pro-Trump or pro-Democrat, the current Deputy Attorney General had a long history as a law-and-order Republican prosecutor in his 12-year stint as the US Attorney in Baltimore.
In 2012, it was Rod Rosenstein who brought an indictment against former Bodog founder Calvin Ayre in the US District Court in Baltimore. That case remained active until early 2017, when Rosenstein was tapped by President Donald Trump to be the Deputy Attorney General. Rosenstein’s replacement gave Mr. Ayre a slap on the wrist in the case, which was dismissed. The US government even acknowledged the Canadian billionaire’s right to engage in online gambling businesses, if he so-wished.
Rosenstein is not the only high-ranking DOJ official in the Trump administration with an anti-online gambling outlook. Former Attorney General Jeff Sessions claimed in his confirmation hearings he was “shocked” to hear the 2011 DOJ opinion.
Jeff Sessions’ Role in Monday’s Opinion
That led many to speculate Jeff Sessions might reverse the opinion. Sen. Lindsey Graham (R-South Carolina) and Sen. Dianne Feinstein (D-Carolina) wrote a letter asking Sessions to reverse DOJ policies on online gambling. In fact, that is exactly what Jeff Sessions did.
The New York Times reported that Monday’s opinion was written and sealed on November 2, 2018 — five days before Jeff Sessions was fired by President Trump. It appears the decision was made before Matt Whittaker became Acting Attorney General.
Justice Department’s Criminal Division
The official subdivision of the Justice Department to write the opinon was the Criminal Division, currently led by Assistant Attorney General Brian Benczkowski. Mr. Benczkowski was criticized by Democrats as an unsuitable candidate for the Criminal Division, because he did not have experience in criminal law or prosecution before he was chosen for the job. The Democrats also pointed out that, in his role as a Kirkland & Ellis lawyer, Brian Benczkowski was the lawyer for Alfa Bank — a controversial Russian bank which had unexplained communications with the Trump Organization in the months leading up to the 2016 election.
The big winner in Monday’s decision was Sheldon Adelson, the top GOP donor who has waged a 5-year war against online gambling. After Delaware, Nevada, and New Jersey legalized online poker, Adelson said he would spend “whatever it takes” to ban online gambling in all 50 states. The Justice Department’s reversal appears to be the result of 5 years of lobbying and over $200 million in political contributions, but Sheldon Adelson got the result he wanted.