Legislative efforts to bring legal online gambling to states in the US are sprouting like flowers after a spring rain. “Spring” in this case was actually December 2011, when the US Justice Department made public an opinion produced a few months earlier.
The legal opinion came in a letter with a real yawner of a title: “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”. For the online gambling industry, the contents of the opinion letter were anything but boring.
What is the Wire Act?
The Wire Act of 1961 (18 USC CHAPTER 50 Section 1084) made it a Federal crime for bookies to take sports bets over “a wire communication facility” that crossed state lines. Since sports betting was primarily accomplished via telephone, this was an effective tool for prosecution. In recent years, the original intent of the Wire Act has become a point of interest as gambling has expanded beyond sports bets and the telephone. In one notable decision, the US Fifth Circuit Court of Appeals in New Orleans ruled that the Wire Act did not apply to any forms of gambling outside sports bets. Despite that ruling, the US Justice Department seemed to still be of the opinion that all gambling was covered by the Wire Act. That is, until now.
What does the opinion letter change?
In the letter, the Justice Department finally publicly clarified the only interpretation of the law that makes sense given the explicit wording of the Wire Act. The Wire Act does not apply to any wagers that do not relate to a “sporting event or contest.” Thus casino gambling and poker are not covered by the Wire Act. This creates an interesting situation with regards to the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which created criminal penalties for transferring money for the purpose of illegal internet gambling. However, the definition of illegal internet gambling is very vague. It would seem that now that the Wire Act is officially not an issue, any state in the US can explicitly legalize online gambling within their borders and not run afoul of the UIGEA.
With so many states in budget crisis mode, expect the dominoes to fall.
State after state is scrambling to find new sources of revenue to support their crumbling budgets. The recent economic crisis has created shortfalls of unprecedented proportions in many statehouses. Raising revenues by regulating and taxing online gambling has never been as appealing. And once the flood begins, expect many states to follow, just like a line of dominoes.
The citizens want it; The states need it.
Pre-UIGEA, there were millions of US players enthusiastically playing at online casinos and poker rooms, all domiciled outside the US where no regulations or taxation applied. However, there were numerous examples of shady operators cheating their players, and the US citizens victimized by these operators had virtually no recourse. In a properly regulated and taxed industry, the players are better off, and the states are better off. As the rest of the world has already been marching steadily toward this approach, it appears that finally, the DOJ letter opens the door for the US to join the race.