30-second summary:
- The 1961 Wire Act made provisions against criminal enterprises in the gambling space
- The DOJ gave its opinion on the Act in 2011 in relation to online gambling
- The 2011 opinion gave the green light for all types of online gambling
- However, the DOJ changed its opinion in November 2018
- It is aiming to end online gambling, but New Jersey is fighting back
Panic hit the gambling sector in January when the US Department of Justice’s decision to change its stance on the 1961 Wire Act was made public. This could spell the end of online gambling in the country.
The initial opinion on the Act was given in 2011. Its origins date back to a time when criminal enterprises were promoting illicit gambling activities and raking in the profits.
In 2011, the only online gambling that was subject to curtailment was online sports betting. Therefore, the likes of online casinos, lotteries and poker were federally permissible once a state had made the activity legal.
DOJ changes its mind
Now the DOJ has made a U-turn and is now saying that the Act is applicable to all forms of online gambling. The DOJ changed its opinion in November 2018, but it only became public knowledge in January.
While there is no clear motive behind the DOJ’s changing of its opinion, many believe that it seeks to undermine the online gambling sector in the US.
At the moment, only a handful of states have online gambling in operation. However, many other states are looking to follow suit in the near future. Many believe that the current operations will be put in jeopardy and that those planned will be shelved.
This will, of course, have a significant effect on operators, players and governments. Online gambling has never been more popular. New Jersey saw its January sports betting intake hit record highs of almost $480m. Of this sum, 80% was wagered through online sportsbooks.
A knock-on effect of the DOJ changing its opinion could be that financial institutions may no longer want to deal with gambling-related transactions for online platforms.
Congress too is full of politicians opposed to gambling who have been looking at a way to crack down on the sector with a stricter framework.
Gambling companies react
Unsurprisingly, gambling companies with major US online gambling operations saw their stock prices take a hit after the announcement. There was also a clamor for more information and clarity on the new opinion.
The DOJ’s deputy attorney general Rod Rosenstein issued a statement that gave the online gambling operators 90 days in order to become compliant. The statement gave no indication as to what would happen to companies who were still operating after the 90-day deadline. Many key stakeholders in the space looked at their options for legal action.
One sector that seems like it will be okay is that of sports betting. The American Gaming Association (AGA) believes that because sports betting was already under specific consideration as part of the 2011 DOJ opinion, this new opinion would bear no effect.
New Jersey fights back
New Jersey has long been a state that supports gambling. It has had a number of racetracks and casinos in operation for many years.
The state was the main driver to the ending of the federal ban on sports betting. It was constantly pressing legal action to get the Supreme Court to support its stance. And in May 2018 it was successful in this regard. Now New Jersey is looking to overtake Nevada as the leader in sports betting in the US.
New Jersey is now taking on the DOJ over its new opinion on the Wire Act, and is planning to file a lawsuit. The New Jersey State Senate majority leader Steve Sweeney wrote to the DOJ on February 13. In his letter, he called for the rescinding of this opinion with immediate effect. He wants the previous opinion from 2011 to be re-enacted.
If these demands are not met, then the state of New Jersey will be filing a lawsuit against the DOJ through former state Senator Frank Lezniak.
Once the 90-day grace period has elapsed without a response or backing down from the DOJ, it is likely that the lawsuit will then go ahead. If this is the case, an extra buffer to the grace period may be given until the case is completed.
