New Jersey Sides With New Hampshire In Wire Act Legal Battle

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Just in case the rather decisive U.S. District Court ruling that vacates a curious — and rather easily confused — Department of Justice interpretation of the Federal Wire Act of 1961 isn’t enough, New Jersey Attorney General Gurbir Grewal on Wednesday filed an amicus, or “friend of the court” brief, to the First Circuit Court of Appeals that added more reasons to the pile.

Last June, Judge Louis Barbadoro ruled that the Wire Act applies only to sports betting, agreeing with a 2011 Department of Justice opinion and rejecting a 2018 DOJ interpretation that appears so broad that online poker, online lottery, and even  traditional lottery ticket purchases might run afoul of the law.

That concern prompted the New Hampshire Lottery to file a lawsuit in 2019, and the court accepted its  reasoning.

But there’s more, Grewal writes in his brief. While Grewal agrees with the judge’s opinion, he said that the “reliant interests” of New Jersey also must be considered.

And with that, Grewal produced a series of financial figures related to New Jersey’s legalization of online poker and many other forms of online casino gaming that have been enjoyed by the state’s residents and visitors since 2013.

(See a list of the legal online gaming sites in New Jersey here.)

New Jersey’s online casino gaming stake, by the numbers

“Were the iGaming industry to close abruptly, New Jersey would suffer a devastating setback,” Grewal wrote in the 20-page filing.

“Over a three-year period, iGaming has produced over $100 million in revenue for the State, and the industry is growing at a 27 percent annual rate.

“The 2018 Reinterpretation, if upheld, could force New Jersey to shutter its iGaming industry, lest the operators and supporting partners risk federal felony prosecution, as well as civil liability. If that were to transpire, the financial loss to the State would be substantial.

“New Jersey’s State government would lose an estimated $60 million in tax revenue a year; New Jersey’s DGE [Division of Gaming Enforcement] would lose an estimated $6.7 million in fees annually; at least 300 jobs would disappear; companies that have established offices in New Jersey for the operation of online gaming would shut down, with additional job losses resulting; and the in-State private sector would lose their iGaming business to illegal offshore sites. This is in addition to the immense waste of time and resources that went into building the industry, which would have been for naught.”

Grewal said that nearly 60 companies have applied as casino service industry enterprises to conduct internet gaming, 48 companies have applied for licenses to conduct iGaming as ancillary casino service industry enterprises, and “approximately 573 vendors” have filed with the state to conduct iGaming-related business.

Grewal estimates that since its inception iGaming has “directly and indirectly created 3,374 jobs and paid $218.9 million in wages to employees in New Jersey.”

From 2014 to 2016 — the first three full years of online casino gaming — total sales came to $1 billion and produced $124.4 million in tax revenue to the state and local governments, Grewal added. And from November 2013 to the present, DGE has collected a total of $35 million in licensing and other fees.

A simple matter of fairness, AG says

“The DOJ’s reinterpretation of the Wire Act should be rejected not only because its statutory arguments are flawed, but also because its change of position ignores the harms that would result from reasonable actions taken by the States in reliance on DOJ’s 2011 Opinion,” the brief continued.

“The implementation of iGaming required significant upfront capital investments in facilities, equipment, and technology by the State, operators, and ancillary companies, as well as immense time, effort, and resources, requiring countless hours of work. Capital investments, although not comprehensively computed, are estimated to be in the tens of millions of dollars.”

Grewal asked the First Circuit Court to consider that if a panel reverses the lower court opinion, such a ruling “has the potential to end New Jersey’s iGaming industry … lest the operators and supporting partners risk federal felony prosecution, as well as civil liability. … Both the actual and the opportunity costs of this wasted effort, taken in good faith reliance upon DOJ’s earlier position, would be staggering.”

The prevailing belief in the online gaming industry — and among some in Congress — is that the DOJ reversal came at the behest of Las Vegas billionaire Sheldon Adelson, who is adamantly against online casino gaming.

As the owner of the Sands casino in Nevada, Adelson’s view of what he sees as competition — as well as a public scourge, he says — is one now rejected by most of his brick-and-mortar casino industry colleagues. The latter group now sees online casino gaming as a way to engage a younger audience that doesn’t find trips to a casino as appealing as many of their parents and grandparents did.

Whatever happens at the First Circuit level, this case has “legs,” as they say. Who predicted this case will wind up in the U.S. Supreme Court? Why, none other than Judge Barbadoro himself.

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John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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