Doj Online Gambling Opinion

Nearly seven years ago, as American families busily prepared for Christmas, the U.S. Justice Department quietly released a legal opinion reversing 50 years of interpretation of the federal Wire Act. It discarded the position of its own Criminal Division by arguing the law no longer covers internet gambling—as long as the wagers are not on sporting events or contests.

DOJ’s goal: Make an end run around Congress and the courts to help cash-strapped states reap the rewards expected to come from converting Americans’ cellphones into mobile slot machines.

But the world’s most respected financial institutions, including American Express, Bank of America, JPMorgan Chase and Wells Fargo—who unlike DOJ have money on the line—see the situation differently.

There is no indication DOJ, in opening the door to online casinos, gave any consideration to how internet gambling invariably ensnares society’s most vulnerable—underage youth, the poor and problem gamblers.

In the U.K., where online gambling is legal and ubiquitous, victims range from a 13-year-old boy —who lost £80,000 of his parents’ money—to an elderly grandmother whose grandson lost nearly her entire life savings as a result of “an online gambling addiction.” A nonpartisan British think tank concluded “the online gambling industry obtains more than half of its profit from at risk and problem gamblers.”

Maybe this helps explain why these highly respected financial refuse to “process any money interactions on these sites.”

Likely though, the moment leading financial institutions knew to stay clear of online wagering was actually five years before a DOJ attorney decided it was OK for casinos to put slot machines on Americans’ mobile devices—when Congress enacted the Unlawful Internet Gambling Enforcement Act. This law prohibits the use of U.S. financial instruments—credit cards, electronic fund transfers and checks—for “unlawful Internet gambling.”

Congress did not define the term “unlawful internet gambling.” At the time it was understood (as the Justice Department had informed Congress) that all forms of internet gambling were illegal under the Wire Act and other federal statutes. Congress did list some exceptions it did not consider to be covered (such as fantasy sports). But none of those exceptions allow casinos to offer slot machines on Americans’ mobile devices.

In the hopes of exempting themselves from this law, online casinos have spuriously seized upon a narrow “intrastate safe harbor” provision tucked in the legislation. Their assertion of authority is misplaced—as I suspect the lawyers in our nation’s most reputable financial institutions recognize.

The statute’ authors made clear through the legislative history that the safe harbor was merely a technical amendment inserted to ensure that UIGEA did not unintentionally impede retail lottery terminals from interacting with a processing center within the same state or prevent casinos within a state from transmitting data to one another.

As Congress explained: “[t]he safe harbor would leave intact the current interstate gambling prohibitions such as the Wire Act, federal prohibitions on lotteries, and the Gambling Ship Act so that casino and lottery games could not be placed on websites and individuals could not access these games from their homes or businesses.”

Moreover, the Wire Act Opinion—upon which online casinos are hanging their hats—is wrong in its conclusion.

The Wire Act was one of three anti-gambling bills signed into law by President John F. Kennedy—and on the same day, no less. The intent was to sound the death knell for the chief funding source for organized crime: illegal gambling.

Banks, DOJ Opinions Differ on Online Gambling. Read full article. November 30, 2018, 3:00 AM. In the U.K., where online gambling is legal and ubiquitous, victims range from a 13-year-old boy. Although the impact of the new OLC opinion is not yet clear, and much will depend on how the DOJ’s enforcement divisions apply the guidance, the opinion threatens the viability of interstate online gambling platforms and may be only the federal government’s first attempt to discourage the nationwide expansion of legalized gambling following Murphy.

From Day One, all three laws were interpreted to cover all forms of gambling, whether wagering on sports, horse races, or on the “numbers racket” (that era’s lotteries). This made sense because as was known to and discussed by the law’s authors, all three forms of gambling relied on the wires—to relay bets; to transmit winning numbers, horses, or teams; and to “lay off” wagers (a form of syndication mobsters used to hedge their risk).

The Wire Act Opinion used tortured logic and neglected fundamental canons of statutory construction in concluding that somehow Congress meant to exempt lotteries from the Wire Act, despite the fact the “numbers racket” was the most lucrative form of gambling for the mob.

For example, the opinion cites DOJ testimony from 1961 stating the legislation covers sporting events only. But the opinion failed to disclose the bill language about which DOJ was testifying never became law.

The Opinion claims Congress, to exclude nonsports wagers, removed “two commas” in re-drafting the Wire Act. In fact, the actual legislative texts indicate the Senate Judiciary Committee did not “remove” commas, but rather struck and rewrote the entire provision.

It is also important to keep in mind that opinions issued by agency attorneys do not carry the force of law. Such opinions are simply guidance given to federal agencies as to how to enforce the law. They can be withdrawn or revisited at any time (as others have been in the past). And, they do not shield those companies that rely on them from liability or protect them from private claims.

Interviewed by Newsweek in 2014, the opinion’s author, Virginia Seitz, conceded the document upon which online casinos are relying is “just that—an opinion.” When asked about the Opinion during her nomination proceedings, former Attorney General Loretta Lynch explained she was not aware of “any statute or regulation that gives OLC opinions the force of law.”

That America’s most prominent financial service companies refuse to process online wagers speaks as loud as Ms. Seitz’s candid words. As states rush to cash in on the Supreme Court’s recent ruling permitting sports betting, it is instructive that, when it comes to online casino gambling, the country’s biggest banks continue to favor the law over a unilateral decree rendered by a lawyer; the full force of law over a flimsy opinion.

DarrylNirenberg is a partner at Steptoe & Johnson. Nirenberg is an international gambling law expert who serves as chief counsel to the Coalition to Stop Internet Gambling.

https://www.law.com/nationallawjournal/2018/11/30/26318/?slreturn=20181102120704

A Nov. 2, 2018, Department of Justice opinion (released earlier this month) reversing a 2011 DOJ opinion on the 1961 Wire Act has left the gaming industry with far more questions than answers.

Deputy Attorney General Rod Rosenstein was supposed to provide some clarity on the new opinion, but his enforcement memo did nothing of the sort.

How the new opinion will affect states with legal online gambling, and how the DOJ will enforce its new interpretation of the Wire Act, are just as unclear after Rosenstein’s memo as they were before it.

Rosenstein’s memo simply provides “a 90-day window will give businesses that relied on the 2011 OLC opinion time to bring their operations into compliance with federal law.”

The memo doesn’t indicate if the states currently offering intrastate online gambling are in compliance with federal law, nor does it properly explain what the federal law actually is.

That leaves the states with legal online gambling such as New Jersey, and any state considering it, in a veritable limbo.

What we know about the Wire Act opinion

Barring legal challenges, the opinion likely means the interstate online gaming agreement between Nevada, Delaware and New Jersey will come to an end.

It’s also going to lead to some structural changes, such as Pennsylvania’s decision to adjust certain aspects of its in-process online gaming industry.

“As a result of the Opinion and at this time, we no longer believe it is consistent with law as articulated in the Opinion to locate the interactive gaming devices and associated equipment in any jurisdiction other than Pennsylvania,” wrote Kevin O’Toole, director of the Pennsylvania Gaming Control Board, in a memo to the state’s casinos.

And what we don’t know

The big unknown in the new DOJ opinion is intermediary routing of data and transmissions through the internet.

Even when a bet originates and ends in the same state, it’s often routed through other states. This incidental routing through other states is near unavoidable, and a byproduct of the internet.

Not surprisingly, the 2006 UIGEA addresses and allows for intermediary routing. But the 1961 Wire Act doesn’t, which leaves it open to interpretation.

The DOJ, therefore, could take one of two approaches:

• Strictly enforce the new opinion and prosecute states that offer online gambling products, even intrastate products if the communications cross state lines at any point.
• Take a more measured approach and continue to allow states to offer intrastate online gambling even if some of the communications cross state lines.

What happens for NJ online casinos and NJ online sports betting depends on what path the DOJ takes.

Doj Online Gambling Opinion Form

Based on Pennsylvania’s reaction, it believes the DOJ will take the more measured approach. That would be good news for New Jersey.

A smart DOJ would expressly exempt intrastate online gambling

The DOJ would be wise to leave well enough alone.

Not only is the new opinion on shaky legal footing, but with numerous online gaming states (casino, poker, sports betting, and lottery), the pressure on congressional delegations would likely be overwhelming.

That provides states with a contingency plan of congressional action, in the unlikely event they lose in the courts.

As such, the DOJ’s best course of action is to enforce blatant interstate online gambling and ignore any incidental routing of data and transmissions that take place in legal intrastate jurisdictions.

If the DOJ isn’t smart, expect NJ to fight

Even if the DOJ takes a lax enforcement approach to the new opinion, this issue is likely headed to the courts.

And if the DOJ really wants to fight, New Jersey is ready to fight.

Former New Jersey State Sen. Raymond Lesniaksaid as much in an interview with Online Poker Report:

“It looks like I will have to go to court again to straighten out the Justice Department’s overreaching on states’ rights, as I did with sports betting. This opinion is outrageous. It puts state lotteries at risk and state revenues. If Congress won’t fix it, I will through the judicial process.”

How messy the legal fight will be will likely depend on how stringently the DOJ tries to enforce its new, somewhat ambiguous policy.

And then there’s the worst case scenario

If the DOJ takes a hardline approach and somehow manages to shut down online gambling in the US, it would be catastrophic for New Jersey.

“The new Justice Department opinion threatens the significant boost enjoyed by New Jersey casinos, and the jobs and state revenues from online gaming and it could also have a negative impact on sports betting at our casinos and racetracks,” New Jersey Senate President Steve Sweeney said in a statement.

“We don’t want to lose the hard-fought gains that are helping to revive Atlantic City and the state’s gaming industry.”

NJ online casinos generated nearly $300 million in revenue in 2018. Losing that revenue would be a blow to the state (the state taxes gaming revenue at 17.5 percent) but even more so to the Atlantic City casino industry.

One AC casino, Golden Nugget, heavily relies on NJ online gambling. With more than 40 percent of Golden Nugget’s revenues generated through its online gambling websites, the loss of online gambling could very well lead to the property closing its doors.

And Golden Nugget probably wouldn’t be the only causality. As PlayNJ laid out in a previous column, it’s unlikely the new Ocean Resort Casino and Hard Rock Atlantic City casino would have opened without online gambling.

If the new DOJ opinion is followed to the letter, Atlantic City would lose thousands of jobs and hundreds of millions of dollars of revenue.

Doj Online Gambling Opinion Report

It’s unfathomable to think the DOJ would sit by and watch that happen simply to appease the whims of a political mega-donor.