We first heard whispers that a new Department of Justice opinion on the Wire Act was coming last month. It arrived on Monday.
The new opinion walked back most of the 2011 DOJ opinion on the same subject. In 2011, the previous opinion concluded that the scope of 1961’s Wire Act only applied to sports betting.
In the wake of the opinion, numerous states began looking into online gambling. A handful, including Pennsylvania, legalized it. The legislature did so thinking they had the cover of the opinion to affirm the legality of their intrastate gaming operations.
All of that could be at risk now.
New opinion takes a much broader interpretation
This new opinion openly acknowledges that it is rare for the DOJ to issue a new opinion on a matter. Nonetheless, the organization released the opinion in the middle of a government shutdown.
The opinion, dated Nov. 2, says the Wire Act does apply to gaming beyond the scope of sports betting. Moreover, the opinion specified that the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2007 did not change the scope of the Wire Act either.
UIGEA carved out an exception for fantasy sports in its online gaming restrictions. This new opinion makes it clear that, at least in terms of the Wire Act, no such exemption exists. This means the daily fantasy sports industry should be on high alert.
The DFS industry and online state lotteries that sell tickets to multistate draw games, like Powerball and Mega Millions, are the most obvious examples of legal US gambling activities that would be in violation of the Wire Act according to this new document.
Of course, the real question is not what the opinion says. The pressing issue is how the DOJ will act in the wake of this change.
It is possible they take no action, much like they are not going after states with legalized marijuana using federal drug laws. However, it is possible the DOJ challenges state online gambling, too.
How does this DOJ opinion affect PA?
The good news is that this new opinion will likely not affect PA sports betting. Because the Wire Act applied to sports betting, states crafted laws that would be in line with the law.
There may be an argument that mobile betting is in violation, but it depends on how far the DOJ takes the interpretation. For just about any internet transaction, there is a point where an out-of-state server or IP address gets involved. UNLV’s Jennifer Roberts explained this to Play Pennsylvania when news of the opinion broke in December.
Pennsylvania online casinos and poker have not launched yet, but like mobile betting, it depends on what happens in vs. out of state. Many gaming companies already have servers set up in New Jersey. If the plans for PA included leveraging those servers, casinos might be rethinking that plan as of yesterday.
One group that is less likely to be targeted is the Pennsylvania Lottery. The state launched online lottery games in May. However, unlike some states, PA does not allow the sale of draw game tickets online. However, it does still have to contend with the pending lawsuit from several Pennsylvania casinos.
Banking might be hit hardest
Every gaming industry in and out of PA does need to worry about payment processing. UIGEA targeted payment processing with its laws, which is why there are still plenty of financial institutions still declining your credit and debit cards on presumably legal gaming transactions.
This new DOJ opinion means if money crosses state lines while changing hands for gambling, the banks are at risk of prosecution. When it comes to federal law, banks tend to be extremely risk-averse. Going back to the legal marijuana example, plenty of banks and casinos for that matter refuse to take marijuana money, even if it was earned in a regulated market.
We cannot overstate that no one knows for certain what happens after this new opinion. It could be a gesture to appease Trump backer Sheldon Adelson, who hates online gambling. It could be an all-out assault on iGaming. In reality, the answer is likely somewhere in the middle.
In the meantime, keep a close eye on the Pennsylvania Gaming Control Board (PGCB). We reached out to PGCB for comment but had no response at time of publishing. Since online casino and poker are not launched yet, the PGCB is taking extra time to make sure the industry is as unexposed to the new interpretation as possible.
It seemed like online casino was launching this spring. With this news, do not be surprised if that launch date is pushed. We will keep you posted with any news as this story develops.