In a busy week of national gambling news, one story stuck out from the rest, and not in a good way.
Online Poker Report first broke the news that the Department of Justice might revise its opinion on the Wire Act.
Why is this such a big deal? Well, even though a DOJ opinion is not binding or law, it can give people a certain sense of security.
For example, in 2011 the DOJ authored an opinion that the Wire Act only applied to sports betting. While not a change in the law, the opinion provided cover. So much cover in fact, that Nevada, New Jersey, and Delaware legalized intrastate gambling shortly after it was written.
So far, the opinion is not out yet. In fact, it may never come. However, if it does, it potentially poses a serious risk to state online gambling industries, including Pennsylvania.
PA should at least be a little nervous
Jennifer Roberts is the associate director of the International Center for Gaming Regulation at University of Nevada Las Vegas. She has 15 years of gaming experience and provided some insight to PlayPennsylvania about the potential ramifications of a change.
Let’s preface that it is difficult to know exactly what a new opinion could do to PA’s new online gambling industry. In addition to not knowing exactly what the opinion might argue, we also don’t know how the government might yield the opinion.
Intrastate betting isn’t as intrastate as you think
For Roberts, the big concern is if the opinion is a complete reversal of the 2011 version. The Wire Act pertains to interstate bets and gambling. However, virtually every online bet falls under that description, even if it is intrastate gaming like Pennsylvania will soon have.
“If your interpretation of the Wire Act is from what it was before, then that means you cannot transact across state lines,” Robers explained. ” And you cannot transact even intra-state. Because they look at the routing issue.”
In other words, just because the bettor and the gambling institution are in the same state, the way the bet is routed through the Internet matters. Most of these transactions will cross the state line at some point in the process.
In that vein, Nevada could be in big trouble for the location of its servers. Caesars Interactive Entertainment relocated all of its servers to New Jersey as part of the combining of player pools on WSOP.com. Needless to say, online poker compacting across states would be in serious jeopardy with a Wire Act opinion change as well.
Roberts summed up what amounts to the worst-case scenario:
If they simply invalidate the 2011 opinion, and go back to the previous interpretation, we’re at significant risk. That gets rid of online lottery. There’s possibly sports betting…I think there’s concern that will spread beyond what they think it’s going to effect. Which is online casino gambling.
Enforcement of an opinion change is key
It can’t be stated enough that a DOJ opinion is not law. Even if the opinion changes, the Wire Act is still the same old Wire Act. What a DOJ opinion does do is give people a certain amount of cover for their actions.
The 2011 opinion gave states the peace of mind to pass state gambling expansion. A reversal could give lawmakers and the DOJ the confidence to prosecute groups for violating the Wire Act.
Roberts has ideas about who the DOJ would go after too. States that passed these laws are not the likely culprits. Rather, like in Black Friday and the shutdown of online poker sites, the DOJ will go after operators.
Watch out for deposit and withdrawal problems
With the potential pressure coming on operators, banking becomes a major concern. Even if the states continue operating online gambling in the wake of a new Wire Act opinion, companies are not going to be thrilled to take a risk.
One group that is already pretty risk-averse when it comes to online gambling are banks. When PA online gambling gets up and running, be prepared for certain credit and debit cards getting declined when you try to deposit.
Even though the state legalized gambling, financial institutions still liberally flag and decline gambling-related transactions. If the DOJ opinion changes, more banks could tighten the rules on gaming. After all, the Unlawful Internet Gambling Enforcement Act (UIGEA) criminalizes the interstate gaming bank transaction, not the act of gambling itself.
So what is next?
There are those out there who say there is no cause for concern in Pennsylvania. When state lawmakers were considering the gambling expansion legislation, Thomas Decker of Cozen O’Connor law firm authored a letter on behalf of the Coalition for a Safe and Regulated Internet. In it, Decker made a case for why the state should not worry about a change of opinion from the DOJ.
In Decker’s view, a change in opinion doesn’t matter too much because the PA gaming industry is intrastate.
As Roberts noted though, that depends on how you want to define intrastate and interstate.
Therein lies the problem. The debate around the Wire Act rages on nearly 60 years after the law first came into existence. All that gray area translates to a total lack of certainty for gaming states and gaming operators.
For now, it is a matter of waiting and seeing if a new opinion comes and what it says. Pennsylvania should heed Roberts’ warning and keep its guard up though.
Meanwhile, other states should take a look at Michigan, who passed an online gambling bill early this morning. Act now, while there is momentum across the nation to push sports betting into all.
Roberts sums up why the best defense against a new opinion is a good offense:
“Go forward with it. Because the stronger number of states you have, the easier it’s going to be to challenge.”