The Department of Justice has issued a long-rumored reinterpretation of the 1961 Wire Act, a law that, believe it or not, directly applies to online casino gaming today.
The unveiling of the new interpretation of the law came late Monday, the same day that New Jersey’s legal and regulated online casino industry was revealed to have posted nearly $300 million in 2018 revenue, helping catapult Atlantic City to its best year-over-year gain in total gaming revenue since 1983.
There’s currently no authoritative reading on what the new interpretation means for the industry as the legal fight against it begins to form. The bewildering 23-page memo might have been designed to do just that — create confusion and uncertainty.
I assembled six lawyers to give the definitive answer as the what the new interpretation of the Wire Act means. I ended up with 7 answers (one of the lawyers is from Harvard).
— Richard Schuetz (@Schuetzinc) January 15, 2019
Under the dark cloud that the memo has created, among the online gaming industry’s top concerns right now is the spooking of payment processors. New Jersey, which dominates the regulated online gaming market in the U.S. right now, still has operators that have been working through lingering payment processor issues. New Jersey’s industry is now about five years old.
Another serious ramification is the memo kicking regulated online poker while it’s already down. The activity, once considered to be a massively lucrative opportunity for the casino industry during the height of poker boom, has struggled mightily. It’s offered in just three states: Nevada, New Jersey, and Delaware. Those states share players in an effort to boost the player pool and make the game more attractive to consumers. The memo threatens interstate online poker liquidity sharing.
New Jersey ready for a court fight
The Garden State isn’t going to give up online gambling, as it will exhaust literally every remedy to defeat the attempt to strip it of its right to offer online betting within its borders. New Jersey was successful in May 2018 when the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992, a law that New Jersey had long sought to invalidate.
PASPA’s demise was a victory for states’ rights. Monday’s Wire Act memo is a step backward.
Former New Jersey State Senator Ray Lesniak, who spearheaded the state’s online betting legislation and efforts to defeat PASPA, said New Jersey will head to the courts if Congress won’t clear up the mess that has occurred under the Trump administration.
“Looks like I will have to go to court again to straighten out the Justice Department’s overreaching on states’ rights as I did with sports betting,” Lesniak told NJ Online Gambling via email. “This opinion is outrageous. It puts state lotteries at risk and state revenues. If Congress won’t fix it, I will through the judicial process.”
Lesniak told us just days prior to Christmas, when it was rumored that the new legal interpretation was on the verge of being handed down, that he was worried. Lesniak said then that the state has “great concerns” over what could be in the Wire Act memo. “We will fight it tooth and nail,” Lesniak said.
New Jersey’s Congressional Delegation will be the state’s champion on Capitol Hill, according to Lesniak.
“I would expect that the New Jersey delegation, which is very powerful, would stand up to protect New Jersey’s interest,” he added.
New Jersey will go into the fight with plenty of ammunition, which includes actual legal precedent, which is more powerful than a memo.
DOJ reinterpretation of Wire Act to include online poker and casino games will run into a formidable judicial obstacle: federal case-law (see, e.g., In re Mastercard) that makes clear that the Wire Act only applies to sports betting.
— Daniel Wallach (@WALLACHLEGAL) January 14, 2019
‘Purely political purposes’
A new Wire Act interpretation has long been the Plan B of casino mogul Sheldon Adelson, who has pushed hard for a federal law to “restore” the Wire Act and ban most forms of online gambling. The new memo could effectively delay the state-by-state authorization of betting over the internet, whether it be sports or online casino games. When you can’t score the ultimate victory if the form of a prohibition bill, you turn to inflicting chaos in the industry you oppose in the form of a mind-boggling memo.
Adelson has long pledged to spend “whatever it takes” to stop the regulation of online gaming. He’s a GOP mega-donor and there’s widespread speculation that he effectively bought the new DoJ memo, despite its outrageousness with regard to other court rulings and its violation of states’ rights.
“The revised opinion does not reflect the thoughtful and more careful analysis issued by the two highest federal courts of appeal that have reviewed this precise question,” D.C.-based online gaming attorney Jeff Ifrah told CDC Gaming Reports. “This opinion standing alone, of course, changes nothing and is of no significance or value. It is unfortunate that the Office of Legal Counsel appears to have been manipulated to issue an opinion for purely political purposes.”
The Adelson-funded lobbying group to ban online gambling already had a press release prepared when news of the opinion broke. They knew it was coming.
— Coalition To Stop Internet Gambling (@StopNetGambling) January 15, 2019
Lotteries will become a powerful ally
There’s historically been some friction between the state lotteries and the commercial gaming industry in some jurisdictions. That might all be going out the window now that the new Wire Act interpretation is potentially putting all forms of online gambling in the crosshairs. The memo was dated Nov. 2, just days before Jeff Sessions left his post as Attorney General in the wake of the midterm elections. Sessions is simply anti-gambling.
Most obvious plaintiff to challenge Wire Act opinion: state lotteries that conduct sales over the Internet.
— Daniel Wallach (@WALLACHLEGAL) January 15, 2019
The U.S. casino industry (tribal and commercial) generates more than $70 billion in gaming revenue on an annual basis, roughly the same amount as the U.S. lottery industry. Ten states have online lottery sales, while there are just a handful of states that have legalized some form of internet betting. Several more are considering online casino.
The memo creates uncertainty regarding the multi-state lottery drawings, which have soared to incredible sums in recent years. Last fall, the Mega Millions swelled to roughly $1.6 billion. Mega Millions and Powerball will surely fight tooth and nail as well.
Can it be enforced?
It is unknown how the DoJ will use the memo to begin enforcing its interpretation of the law, if it does at all.
Per the Washington Post (paywall): “Deputy Attorney General Rod J. Rosenstein will issue a memo Tuesday [Jan. 15] directing prosecutors to delay implementing the new opinion for 90 days, so that those who might be afoul of the law can review their operations and adjust. The official said the department will continue to prioritize cases against the most ‘egregious’ offenders.”
It could all be smoke and mirrors, but that still is terrible for businesses.
A spokesperson for the WSOP, which has the only online poker platform to share online poker players between Nevada, New Jersey, and Delaware, said the WSOP is reviewing the memo.
A termination of that liquidity sharing might be the first domino to fall as a result of the memo.
Image via teepublic.com