Will Justice Department Have a Different Outlook on Online Gambling?

December 2018 brought waves of shock to the US online gambling community when the US Department of Justice (DOJ) announced its decision to reverse their previous rule made in 2011 which proclaimed that the Wire Act of 1961 pertained only to sports gambling. This new decision ruled by the US Department of Justice put many state legislators in an awkward position as they were busy working on and trying to decide on the future of online gambling for their citizens.

What was The Wire Act of 1961?

The Wire Act of 1961 was passed by the federal legislation with the aim of banning US residents from using money wiring systems to fund their gambling accounts. PayPal and debit cards were not in existence yet at that stage, so money wiring systems referred to third-party transfers (Western Union), credit cards, or bank wires. It is also worth noting that since the internet gambling industry was not up and running yet (36 years away from existence) that “gambling accounts” mainly referred to bookies.

What would the new rule mean?

The new December 2018 opinion would mean that all currently existing forms of online gambling would be under the federal ban, along with sports gambling. No deposits will be allowed from customers to online casinos, horse racing websites and lottery sites via any method of wire transaction having an ultimately and profoundly negative impact on gamblers and online gambling providers alike. Under this rule, gamblers only options would be to make in-person deposits to fund their gambling accounts, of which online gambling operators will be required to provide and make available to their customers.

Co-founding director of the University of New Hampshire School of Law Sports Wagering and Integrity Program, Daniel Wallach, stated that the DOJ’s opinion would have an immediate and chilling effect of the various states being able to conduct lotteries online. He mentioned that it is obvious that the lotteries that do online sales is the most impacted stakeholder and that they are the most likely stakeholder to challenge this opinion in court.

Unhappy New Hampshire Lottery Commission

The New Hampshire Lottery Commission was unhappy with and took offense to the ruling issued by the Department of Justice, considering that the NHLC heavily relies on the funding of lottery players who fund them online in support of the New Hampshire Lottery. The NHLC cited that the DOJ opinion could subject their employees to prosecution, will create uncertainty regarding whether they should cease operations and mentioned that the new ruling would cost the state more than $9- million per year. They went on to mention that they would like to take action to protect public education as the new rule from the DOJ would put millions of dollars of school funding in a risky situation and said it was their responsibility to stand up for the rights of students.

The NHLC was not addressed directly by the DOJ in their decision, however the DOJ was not willing to take any risks and wanted to safeguard themselves. Due to this, they sent a request for an injunction against the DOJ which was sent to a federal court so that it could be adjudicated.

Judge Paul Barbadoro issued a ruling in support of the NHLC’s position this past weekend, stating that he declares the Wire Act will only apply to transmissions relating to bets or wagers on sporting events or contests.

How will US states working on legalization solve the problem of funding?

The US gambling community welcomes this news for the time being. Funding options, for a number of states who are currently trying to work on the legislation regarding legalization of online and sports gambling, is one of the last obstacles they face before things start properly coming together. The largest lobbying group of the US Casino Industry, The American Gaming Association, mentioned that they are reviewing the implications the DOJ opinion would have on consumers, the industry, as well as the eight states who are currently offering fully legal and regulated sports gaming.

Department of Justice vs the States

The Department of Justice must now make a choice between either appealing to the US Supreme Court for accepting the lower court’s ruling, thus reversing its reversal. However, the great majority of US states support online gambling – if the Department of Justice wants to take the issue further, the states will be ready to fight back. When looking at the bigger picture, it is probably better for Attorney General William Barr to retract what was clearly a bad opinion for the country as a whole.

Not everyone is against the DOJ opinion

Former US Senator Blanche Lincoln of Arkansas and Advocacy Group Coalition to Stop Internet Gambling cheered the new DOJ opinion, stating that they believed the previous opinion was both legally and morally problematic. They also said that they believed the new opinion was a win for children, parents and other vulnerable populations.

What’s next?

We are ultimately unsure as to whether the Department of Justice will end up changing their decision or outlook on the matter and are as anxious to hear the answers as everyone else involved or interested. We are hopeful that the matter will be resolved in a way that appeases both sides of the bargain.

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Shihaam Isaacs

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