Opinion Opens Door to More Internet Gambling

The U.S. Department of Justice said the Wire Act only covers sporting events.

In a reversal from its long-standing interpretation, the U.S. Department of Justice has determined online gambling does not violate federal laws as long as it is conducted on non-sports. The decision could spur a boost in gambling, mainly through state lotteries.

The Dec. 23 announcement, first reported by the Wall Street Journal, illustrates an interpretation by the Obama administration that reverses the way the law prohibiting illegal bookmaking was interpreted by previous administrations. The decision appears to open the door to state lotteries being able to proceed with offering online poker games.

Written by assistant attorney general Virginia Seitz, the decision came in response to requests from Illinois and New York on whether Internet gambling violated the Wire Act or the Unlawful Internet Gambling Enforcement Act. Seitz said the federal laws prohibit online gambling on sporting events but not lotteries.

“The ordinary meaning of the phrase ‘sporting event or contest’ does not encompass lotteries,” Seitz said in the 13-page opinion. “Accordingly, we conclude that the proposed lotteries are not within the prohibitions of the Wire Act.”

Pari-mutuel wagering on horse races has been the only legal form of online wagering in the U.S. Advance deposit wagering is legal across state lines.

“Another fly has been thrown into the Internet gambling ointment,” American Horse Council president Jay Hickey said Dec. 27. “The recently released memorandum from the Department of Justice concludes that the Wire Act does not prohibit states from selling lottery tickets to in-state adults over the Internet, even if the Internet transmissions necessary to complete the transactions cross state lines, because the lottery bets do not relate to a sporting event or contest and therefore fall outside the Wire Act prohibitions.

“This settles a long-time debate about whether the Wire Act applies to all forms of wagering or just sports betting. The memorandum does not specifically get into the relationship between the Unlawful Internet Gambling Enforcement Act and the proposed Internet lottery transactions, but notes there is an exemption in UIGEA for intrastate activities, as proposed here.

“The DOJ statement alludes to this and clarifies some of the issues surrounding (the Wire Act) and these transactions. The position appears to lay a foundation for states to offer lottery sales and perhaps other forms of wagering over the Internet provided they are intrastate, don’t involve sports betting, and are not barred in the state.”

The Wire Act was clarified in 2001 to specifically allow interstate account wagering. The horse racing industry sought the language to ensure activities permitted under the Interstate Horse racing Act were legal.

Hickey and other officials are taking time to digest the opinion, which does not address pari-mutuel horse racing and the Wire Act.

“Clearly this will bring even more Congressional focus on this issue in the months to come,” Hickey said.

Nelson Rose, a professor at the Whittier Law School who often writes about Internet gambling, said the Department of Justice decision will lead to an explosion of online gambling, both within and between states.

“The United States Department of Justice has given the online gaming community a big, big present, made public two days before Christmas,” Rose wrote at his gamblingandthelaw.com website. “President Barack Obama’s administration has declared, perhaps unintentionally, that almost every form of intrastate Internet gambling is legal under federal law, and so may be games played interstate and even internationally.

Rose suggested the action has eliminated “almost every federal anti-gambling law that could apply to gaming that is legal under state laws.”

Tom LaMarra contributed to this story