How The DOJ Memorandum Opinion of 2011 Revolutionized State Based Online Gambling Laws

Law BookThe Criminal Division of the Department of Justice has consistently taken the same position regarding the application of the Federal Wire Act as it relates to online gambling. For several decades the DOJ has maintained that all types of US based online gambling are prohibited. Friday, December 23, 2011 changed everything. On this date, the Office of Legal Counsel with the United States Department of Justice released an unexpected Memorandum Opinion regarding their interpretation of the application of the Federal Wire Act. In this statement, they revealed that the new position of the agency is that the prohibitions contained within the Wire Act only apply to betting and wagering made in relation to sports events and contests.

The Office of Legal Counsel is responsible for providing legal advice and assistance to the United States Attorney General and to the President of the United States and his administration. This change in policy came from the senior legal advisors in the United States. The specific question that was being raised at the time the Memorandum Opinion was issued had to do with the legality of online sales of lottery tickets by Illinois and New York to their own residents. It was questionable at the time as to whether or not these sales violated the Federal Wire Act, hence clarification was sought on the application of the law itself. However, the Memorandum had a much further reaching effect on the legal landscape of online gambling within the U.S.

What Changes Did The DOJ Legal Opinion of 2011 Allow?

The overall effect of the DOJ’s change in policy concerning the Federal Wire Act opened the door for each individual state to determine their own destiny with regards to online gambling. While clearly online sportsbook gambling was still going to be out of the picture for US based interactive gaming, casino, poker, bingo and lottery options would be on the table for consideration. This change in policy ensured some specific reforms with regards to how the DOJ would interact with states’ rights concerning online gambling.

For one, the Department of Justice would no longer criminalize non-sports related gambling simply because it was facilitated through the use of telephones or the Internet. Secondly, the DOJ would no longer compel individual states to prohibit the legal sale of lottery tickets online. Lastly, the DOJ would no longer prohibit states from legalizing and regulating online gambling for their residents at their pleasure.

As would be expected, a few kinks have arisen. One example is New Jersey’s efforts to legalize limited sports betting within their state. Having successfully launched an online casino and poker gambling initiative, the state of New Jersey has tried to also integrate a new sports betting industry within their gambling market, something that is prohibited online by the Wire Act, and offline by the 1992 PASPA Law.

It is only natural for the states to try to spread their wings a little further than allowed, especially after creating an exciting new infrastructure designed to handle new forms of gambling. As a pioneer in online gambling, NJ simply kept the momentum going and has effectively ignited discussions and debates on the constitutionality of PASPA in relation to states’ rights. The emergence of legal Fantasy Sports has contributed to the controversial divide that sports betting has driven within the US gambling market. We have approached unchartered territory that will likely take several years in which to iron out all the kinks.

Which States Have Legalized Some Form Of Online Gambling Following The 2011 Ruling From The DOJ?

Thus far, New Jersey, Nevada and Delaware have each passed legislation that regulates and legalizes either casino or poker online gambling. In addition, all three of these states has also launched successful online gambling initiatives and is participating in limited cooperative interstate gambling with each other. At this time, Pennsylvania and California have both recently passed bills that will position them to enter the online gambling market within their respective territories. Discussions are taking place in a handful of other US states currently poised to explore possibilities for their own gambling expansion initiatives.

What Remains Unchanged?

While the change in position by the Department of Justice may have effectively ushered in the dawn of a new era of legal interactive gaming in the United States, some things remain unchanged. The clarification regarding the application of the Federal Wire Act does not affect the federal prosecution of instances of violating other federal laws relevant to internet based wagering. For example, it is still illegal to operate an online gambling site in the United States when it violates state law in the location for which it is conducted. Therefor, if someone were to operate an online casino in a state that has not specifically legalized online casino gambling, they would be violating the Illegal Gambling Business Act 18 U.S. Code § 1955 and would be subject to federal prosecution under this law.

It will also be necessary for states that have legalized online gambling within their borders to find ways to offer account funding for players while still complying with the Unlawful Internet Gambling Enforcement Act, which restricts US banks and credit card companies from processing gambling related transactions. This is an area that New Jersey, Nevada and Delaware have all struggled with.

Another element that the DOJ’s policy change does not affect is offshore online gambling. US federal laws do not reach beyond the borders of the United States. They also do not prohibit US players from engaging in online gambling entertainment that is provided by a licensed and regulated gambling site that is located outside of the US. The 2011 DOJ Memorandum Opinion does not impact access by US players to offshore gambling sites that are licensed to provide their services to players around the world.

Oppisition To The DOJ's New Legal Opinion - Enter RAWA

The Restoration of Americas Wire Act also known as (RAWA) is a bill which was introduced by Senator Lindsey Graham of South Carolina, and Utah Representative, Jason Chaffetz. This bill would essentially rewrite the Federal Wire Act making most forms of online gambling illegal, even if it were legal on the state level. This is the Sin Police at it again rescue to save us from our immoral selves.

What Changes Could Be Forthcoming Based On The New DOJ's Position On The Federal Wire Act?

As more states step forward to explore the online gambling arena, it is possible that Congress will be compelled to become involved to the extent of establishing consistent standards by which the states should operate. It is possible even that these events will lead to a uniform development of Federal online gambling laws that apply to all states in the US. Some states are already acting cooperatively within the industry through interstate online gambling compacts, such as New Jersey, Nevada and Delaware. This can all be achieved much more easily through Federal guidelines for regulating and legalizing state based online gambling businesses. Currently, the new era of state licensed online gambling is being developed and shaped through the ingenuity of individual states that are pioneering the online gambling industry within the US.