The US Department of Justice released a new opinion on the Wire Act stating that the 1961 law restricts all forms of online gambling, not just sports betting.
The opinion from the Office of Legal Counsel reverses the Obama administration opinion by the DOJ in 2011 that the Wire act only applies to gambling on sports.
While such opinions do not amount to settled law, they are intended to set the direction of enforcement efforts for the DOJ.
The federal government’s change in interpretation of the Wire Act could put existing online gambling operations at risk. In particular, online poker that pools liquidity across borders, like the tri-state agreement of Nevada, New Jersey and Delaware, and the nationwide contests of Daily Fantasy Sports.
However, even online gaming that exists only in one state (such as casino games and intrastate poker) but whose data flows over communication lines that veer across state lines and back, could be at risk.
Even if online poker operators are able to find solutions to keep intrastate games running, it has been shown that online poker needs liquidity to thrive, and such circumstances would not only harm existing operations, but they would also remove the incentive required for lawmakers in other states to look to regulate online poker as a means of generating much-needed state revenue.
In its opinion, the DOJ acknowledges that its latest opinion is quite different than its 2011 opinion.
“We do not lightly depart from our precedents, and we have given the views expressed in our prior opinion careful and respectful consideration. Based upon the plain language of the statute, however, we reach a different result,” reads the official DOJ document, dated November 2, 2018 and released and first published by Online Poker Report.
“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling,” the opinion continues. “We further conclude that that the 2006 enactment of UIGEA did not alter the scope of the Wire Act.”
The view that the Unlawful Internet Gaming Enforcement Act (UIGEA) does not alter the scope of the Wire Act may be particularly troubling for the Daily Fantasy Sports industry, which was one of the industries afforded an exemption from the 2006 law.
Companies most affected by the new DOJ opinion—such as Caesars and 888 which currently offer online poker that spans three states on the All American Poker Network—will probably look to the courts to for a ruling before ceasing operations. The biggest immediate risk could come from banks and payment processors looking to stay on the right side of the law.
One of the biggest reasons that online gaming—particularly online casino games, online poker, Daily Fantasy Sports and most recently online sports betting—has fared so well is because of the accessibility of financial transaction processing by players.
In addition to not having to jump through hoops to get money on and off online gaming sites, utilizing common payment vehicles such as bank cards and popular online wallets like PayPal has also added a sense of legitimacy to some online gaming brands, a factor that has increased traffic on the sites.
However, barring any major changes by the financial institutions and as the gaming industry absorbs the news, consults with legal counsel and plans a path forward, consumers will likely continue to patronize online gaming sites as usual.