Lack of Clarity on the Law
There were significant changes in favor of gambling policies across the US during 2018. Many states made casinos legal, as well as sports betting and online gaming. This includes states that traditionally have been conservative when it comes to gambling expansion, such as Mississippi and West Virginia.
However, there was a major setback to this positive momentum when the US department of justice (DOJ) went public with its new opinion on the 1961 Wire Act.
The Act was originally brought in to combat criminal enterprises that were profiting from gambling. However, it is now largely outdated in an age of online gambling.
In December 2011, the DOJ’s Office of Legal Counsel stated its opinion that the Wire Act in its form was only applicable to sports betting. Therefore, states could freely legalize online gambling, except for sportsbooks, if they wished to do so.
Changing Opinion
In May 2018, when the federal ban on sports betting was overturned, many believed this meant that online sports betting was then legal. However, the DOJ is now saying that its 2011 opinion “incorrectly interpreted the limitation.”
The change of opinion was made in November 2018, but was only made public on January 14. The new opinion effectively implies that no online gambling should be allowable.
Unsurprisingly, the sector reacted strongly to this news. Major gambling stocks saw their prices fall and talk of legal action began immediately. It looks like this issue will now be sorted once and for all in the court’s system.
There have been legal cases in the past that set the precedent for the Wire Act only being applicable to sports betting. Many states launched their online gambling laws on the basis of the 2011 opinion.
Lawsuits Begin
States that now have legal online gambling are looking to protect themselves, and reacted strongly to the new opinion.
New Hampshire quickly said it was going to sue the DOJ. Shortly after, it was joined by Pennsylvania and New Jersey, two states that majorly rely on gambling revenues. Michigan is also now on board.
An amicus brief was submitted by the Michigan Lottery. This means that if it gets acceptance, it too can take part in the legal battle.
There was a request from Pennsylvania to be made a co-plaintiff in the case. However, Judge Paul Barbadoro denied this request.
There are now 11 states and Columbia District enjoined in the lawsuit. These states are Virginia, Vermont, Tennessee, Rhode Island, North Carolina, Mississippi, Kentucky, Idaho, Delaware, Colorado and Alaska.
A major legal battle is on the horizon for the DOJ.
Federal Judge Seeks Clarity
A federal judge is trying to get to grips with the chop-changing by the DOJ with regard to its Wire Act opinion. He wants to know what effect the new opinion could have on the state lotteries that sell tickets online.
If state lotteries are affected by the new opinion, this will mean the loss of hundreds of millions of dollars in funds going towards good causes.
As per Associated Press data, states could lose net profits of more than $220m each year if online lottery tickets are no longer legal. A blanket ban on lotteries would wipe away $23bn in profits each year.
Currently, seven states sell lottery tickets online. Six of them give $224m to various social programs annually. Michigan mainly gives its funds to public education programs, whereas Pennsylvania focuses on helping elderly residents. Georgia is the one state of the seven that does not fund programs.
The federal judge has given the DOJ until the end of April to clarify its opinion on the Wire Act. There is no indication as to what will happen if the DOJ does not respond to this order in time.
Many believe the DOJ will concede on the online lottery issue, but press ahead to get rid of other forms of online gambling.
