A PRESENT FROM THE DOJ: INTERNET LOTTERIES (AND POKER?) ARE LEGAL


Shortly after news of the US Department of Justice’s (DoJ) clarification of the 1961 Wire Act, esteemed gaming expert, I Nelson Rose, offered his view of the events and their implications.


THE UNITED STATES DoJ has given the online gaming community a big, big present, made public two days before Christmas. President Barack Obama’s administration has just declared, perhaps unintentionally, that almost every form of intra-state Internet gambling is legal under federal law, and so may be games played interstate and even internationally. Technically, the only question being decided was “Whether proposals by Illinois and New York to use the Internet and out-of-state transaction processors to sell lottery tickets to in-state adults violate the Wire Act.” But the conclusion by the DoJ that the Wire Act’s “prohibitions relate solely to sport-related gambling activities in interstate and foreign commerce,” eliminates almost every federal anti¬gambling law that could apply to gaming that is legal under state laws.

If the Wire Act is limited to bets on sports events and races, what other federal anti-gambling statutes are left? There are prohibitions on interstate lotteries, but Powerball and the other multi-state lotteries show how easily these can be gotten around, even before Congress passed an express exemption for state lotteries. And poker is not a lottery under federal law. So, all that are left are the federal laws designed to go after organised crime. These all require that there first be a violation of another law, like the Wire Act, the federal anti-lottery statutes, or a state anti-gambling law. If a state has expressly legalised intra¬state games like poker, as Nevada and the District of Columbia have done, there is simply no federal law that could apply.

If the bettors and operator are all in the same state, and the gambling does not involve a sports event or race, the Wire Act cannot be used against the operator, even if phone wires happen to cross into another state. And if the state legislature has made the online game legal, it does not violate any other federal anti-gambling law. I suppose it is possible that the DoJ could argue that poker is a “sporting event or contest.” But the language of the Wire Act prohibits “information assisting in the placing of bets or wagers ON any sporting event or contest.” If poker is a contest, it is one where players bet IN the contest, not on it. Anyway, the DoJ held that the Wire Act was designed to go after bookies taking bets on horseraces and football games, etc, not other forms of gambling.

Beneficiaries

The immediate beneficiaries will be the Nevada-licensed private operators, since that jurisdiction is the furthest ahead. The state lotteries in Illinois, New York and New Hampshire will also initiate or expand their online games. After all, most of the provincial lotteries in Canada are already operating Internet poker.

I believe this will be a major incentive for the other states looking at legalising intra-state poker and other games. First will probably be Iowa. The State Legislature mandated a report, which has already been submitted, concluding that intra-state poker can be operated safely and will raise money. The Iowa Legislature meets for a short period at the beginning of the year, so it has to act quickly, or it will be passed by other states in 2012.

Those other states are California and New Jersey. California is desperate for any source of revenue, and it has so much legal gambling that the only question is which operators are going to be the big winners. The Democratic-controlled Legislature in New Jersey approved intra-state online gaming, but the bill was vetoed by Governor Chris Christie (R.-NJ). Christie understands his state needs the money, so he will probably help put the issue on the ballot in November. In November 2011, the voters of New Jersey approved sportsbetting. There is no reason they would not also approve Internet casinos. It will be interesting to see if the main author, state senator Ray Lesniak (D.-Union), will limit online patrons to New Jersey, as his original bill stated, or, if he will accept players from any other state and nation where Internet gambling is legal.

Once these jurisdictions open their online games, even if limited to players who are physically within the state, operators will push for compacts to allow interstate Internet poker among the legal states. And other states, like Florida, will jump on the bandwagon.

What impact will all this have on proposed federal laws?

Proponents are trying to spin the DoJ opinion. But the reality is that Congressional advocates, like Barney Frank (D.-Mass.) and Joe Barton (R.-Tx.), have had some of the wind knocked out of their sails. Since states are now clearly free to legalise intra-state online poker, and perhaps even interstate, there is not as much reason to even bother with a federal law. Opponents, like Jon Kyi (R.-AZ) and Frank Wolf (R.-VA), might get some leverage for their attempts to expand the Wire Act to cover all forms of gambling.

But, Congress has passed literally no substantive laws since the Republicans took over the House of Representatives in January 2009. There is as little chance of this Congress passing a new Unlawful Internet Gambling Enforcement Act as there is its passing a repeal of the UIGEA.

The interesting question is what the Majority Leader of the US Senate, Harry Reid (D.-NV) and Kyi, the number two Republican in the Senate, will do. They had sent a letter asking the DoJ for clarification of its position on Internet gambling. They now have their answer, though it may not have been what they had wanted.

My bet is that they, and Congress, will continue to do nothing, while Internet gambling explodes across the nation, made legal under state laws.
 
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