DOJ 2019 Legal Opinion and its Affect on US Online Gambling

The 2019 Department of Justice Opinion of the Federal Wire Act reverses the 2011 DOJ Formal Opinion that revolutionized state-based gambling laws.

LawbookIn 2019, the US Department of Justice (DOJ) reversed their interpretation of the 1961 Federal Wire Act and their 2011 Formal Opinion on the law. On January 14th, 2019, the Justice Department released a new Opinion on their 2011 stance regarding the Wire Act which rocked vendors, businesses, and states involved in the gambling industry. The new Opinion comes before the one-year anniversary of the Supreme Court removal of the Professional and Amateur Sports Protection Act (PASPA), a law which limited the domestic offerings of sports betting.

What Did The Wire Act Do?

The 1961 Federal Wire Act was an essential tool at curbing the illicit money-making tactics of the mafia. The Wire Act posed prohibitions on betting information from being transmitted on any wired communication network such as telegraph or telephone within the US or its territories. After prohibition ended and the mob could no longer make money off illegally selling alcohol, the mob largely profited off underground gambling opportunities like point shaving and game fixing as big money was involved with betting.

Under the Kennedy administration, the Wire Act was signed into law and was very effective at reducing the profitability of the mafia and their capability to abuse sports and gambling.

The 2001 DOJ Opinion Of The Federal Wire Act

Under the George W. Bush Administration, the Justice Department placed an additional prohibition on the Wire Act. The Office of Legal Counsel and DOJ interpreted the Wire Act to include the internet and expanded its prohibition to include US-based online casino and poker gambling.

The 2011 DOJ Opinion Of The Wire Act

In 2011, under the Obama Administration, the Department of Justice revisited the 2001 DOJ stance on the Wire Act. The DOJ released their 2011 Opinion Memorandum and stated that the prohibition on state-based online gambling would be limited to sports gambling specifically.  At the time PASPA was still in effect, effectively prohibiting sports betting in most of the United States.

This new interpretation of the Wire Act would allow individual states to determine their own fate regarding state-regulated online gambling entertainment, with the exception of sports betting. Domestically operated online casinos and poker rooms began emerging in several regions, with the first states to pioneer this new industry being New Jersey, Nevada, and Delaware. The sports betting prohibition within the Wire Act fell away when PASPA was repealed, leaving the primary application of the Federal Wire Act as simply prohibiting state based sportsbooks from accepting bets across state lines.

The 2019 DOJ Stance

At the beginning of 2019, the DOJ dropped a bomb on the industry and the nation as many states prepared to introduce new gambling legislation in the form of a 2019 DOJ Opinion of the Federal Wire Act, some with online and mobile capabilities. Under this new Opinion, all gambling information for state-regulated operations, whether for online or in-person gambling, systems, data, and processors must be located within a state’s borders and not cross state lines.

The industry was given 90 days to adjust their systems and meet the new compliance standards. Several states have had already formed and launched interstate compacts with shared player pools and would be impacted immediately.  We anticipate lawsuits from multiple parties to emerge. This stance does not impact access to legally licensed offshore gambling sites.

FAQs

How Will The New DOJ Opinion Effect On The Industry?

The new DOJ motion inconveniences the industry and raises costs as these last-minute compliances must meet new standards set by the Department of Justice’s 2019 Opinion on the Wire Act. Essentially, numerous businesses must install servers, arrange payment processors, and 3rd party information vendors within every state they are operating any gambling services in. This industry effect also expands to states with gaming compacts, tribal casinos, land-based casinos, poker sites, sportsbook lounges, lotteries, and racetracks like Caesars, Hard Rock, Churchill Downs, the Powerball, and much more.

Is Anyone Challenging The Opinion?

Several states have put forth collecting domestic business information and complaints, as well as, preparing and meeting with lawyers in order to sue the new 2019 DOJ Opinion. However, the may be exactly what the reversal intended. there are many anti-gambling expansion sentiments in government due to bias politicians and this highly inconvenient new compliance standard may have just been a way to halt the nation’s progressive expansion toward gambling.

What Started The Reversal?

The Criminal Division Department of the DOJ under the Trump administration asked the Office of Legal Counsel (OLC) to reconsider their 2011 stance. Under this request, the DOJ and OLC reviewed the Wire Act and the 2011 Opinion memo and released their own Opinion which we have attached above.