U.S. DoJ Reverses Its Stance On Internet Gambling

Fans of internet gambling in the United States received an early Christmas gift on Friday as the United States Department of Justice revealed that it has drastically changed its opinion on internet gambling.

In a legal opinion posted on Friday, the DoJ said that online betting that does not involve sports wagering falls outside of the reach of federal law. U.S. Deputy Attorney General James Cole wrote, “The Department’s Office of Legal Counsel has analyzed the scope of the Wire Act, 18 U.S.c § 1084, and concluded that it is limited only to sports betting,”

The implications of the legal opinion could have a very wide effect on the internet gambling industry, as many businesses could flood back into a market that was largely abandoned after the passing of the Unlawful Internet Gambling Enforcement Act of 2006.

The opinion coincides with many different court decisions. Some industry analysts speculated that this opinion may be part of the government's acceptance that legalized online poker may be near passage in the United States.

Previously, the DoJ had alleged that the Wire Act of 1961 applied to all internet gambling. In 2007 then U.S. Attorney Catherine Hanaway testified before Congress that:

“The Department of Justice’s view is and has been for some time that all forms of Internet gambling, including sports wagering, casino games and card games, are illegal under federal law. While many of the federal statutes do not use the term ‘Internet gambling,’ we believe that the statutory language is sufficient to cover it,”

“As we have stated on previous occasions, the department interprets existing federal statues, including 18 U.S.C. Sections 1084, 1952, and 1955, as pertaining to and prohibiting Internet gambling.”

The new legal opinion concludes by saying:

“We conclude that the Criminal Division’s premise is incorrect and that the Wire Act prohibits only the transmission of communications related to bets or wagers on sporting events or contests."

“The Wire Act’s legislative history reveals that Congress’s overriding goal in the Act was to stop the use of wire communications for sports gambling in particular. Our conclusion that subsection 1084(a) is limited to sports betting finds additional support in the fact that, on the same day Congress enacted the Wire Act, it also passed another statute in which it expressly addressed types of gambling other than sports.”

Many industry insiders are hailing this change of face as a milestone moment for the online gambling industry. John Pappas of the Poker Players Alliance said, "This is a much needed clarification of an antiquated and often confusing law. For years, legal scholars and even the courts have debated whether the Wire Act applies to non-sporting activity. Today’s announcement validates the fact that Internet poker does not violate this law."

“The PPA commends Assistant Attorney General Seitz for recognizing this. However, this ruling makes it even more important that Congress acts now to clarify federal law, and to create a licensing and regulation regime for Internet poker, coupled with clear laws and strong enforcement against other forms of gambling deemed to be illegal.”

Pappas said that the PPA still would prefer to see a federal basis for legalizing online poker than a state by state model. He qualified his opinion by saying, "This (opinion) will provide policy makers at both the state and federal level with the legal confidence to move forward with licensing and regulation of online poker and other non-sporting activity within their respective jurisdictions. However, it is our hope that our federal policy makers see this as an incentive to move quickly to enact federal licensing and regulation before various states produce a mix of individual state schemes that may not be the best model to serve consumers."

The American Gaming Association also released a statement regarding its preference for a federal solution, saying:

The Department of Justice’s interpretation regarding the scope of the federal Wire Act validates the urgent need for federal legislation to curb what will now be a proliferation of domestic and foreign, unlicensed and unregulated gaming websites without consistent regulatory standards and safeguards against fraud, underage gambling and money laundering."

“Federal legislation that protects states’ rights can establish uniform safeguards to protect U.S. consumers, keep children from gambling on the Internet, and provide the tools law enforcement needs to shut down illegal Internet gambling operators. Federal guidelines also would prevent fraud and money laundering, address problem gambling and ensure players aren’t being cheated."

“These federally-mandated protections are vital no matter the interpretation of the Wire Act, and they must be enacted in order to avoid a patchwork quilt of state and tribal rules and regulations that would prove confusing for customers and difficult for law enforcement to manage.”