In January this year the US Department of Justice overturned its 2011 ruling on the Wire Act that said the Act applied only to sports betting and not other forms of online gambling. The new ruling came about as a result of lobbying by US casino mogul Sheldon Adelson and reveals the influence of bug money on US politics and lawmaking, writes Dominic Gates.
Why is the DOJ ruling significant? The reason is that the DOJ’s 2011 decision paved the way for online poker and casino to be regulated in the US and US state lotteries were also allowed to sell their products online.
Simply put, if enacted, the DOJ’s new opinion could jeopardise much of the online gaming, betting and lottery sector in the US.
In May 2018 PASPA, the law that made sports betting illegal in all states but Nevada, was repealed and enabled individual states to regulate sports betting. The fact that so far seven states have regulated sports betting and many others are in the process of passing the required legislation to legalise their own sectors is positive for the industry and means it will soon operate openly and legally across much of the country.
So the DOJ’s new ruling could upend the new setup and regulatory wave. It has caused much disquiet among operators, whether they are casino, betting or state lotteries. It also means many investors have cause to worry about existing and potential investments in the sector.
The new ruling’s wording said the Wire Act barred any gambling business from using wire communication (i.e. the web or phones) to transmit bets or “information assisting in the placing of bets or wagers on any sporting event or contest”.
A further clause barred companies from using wire communications that would enable them to “receive money or credit” as a result of any betting activity.
PASPA repeal focusing minds
The DOJ’s January ruling came about after its Office of Legal Counsel (OLC) was asked to review the Wire Act’s remit in December following a request by an associate of Las Vegas Sands owner and multi-billionaire Sheldon Adelson for the OLC to re-open the examination.
It also follows on from Adelson’s long-term financing of the Restoration of America’s Wire Act (RAWA) initiative, which, as the name implies, came about after the DOJ’s 2011 ruling on the Wire Act.
The recent regulation of sports betting in so many states since the PASPA repeal of May 2018 has focused minds, especially of those who oppose online gambling in any shape or form.
Adelson has been an arch-opponent of online gambling for years and vowed to spend “whatever it takes” to have it banned. Even though he runs one of the biggest land-based casino operations in the world. The irony eh.
He believes gambling on the web is some kind of evil, nothing to do with him not wanting to see a potential rival format of gambling establish itself of course – and is happy to lobby lawmakers to ban it or make it as difficult as possible to have it regulated and legalised. His latest ‘result’ being the DOJ’s Wire Act-related opinion in January.
The key takeaway though is that where it once might have only affected the comparatively smaller and less powerful online betting and casino sector, state lotteries are now in the firing line and could see their online sites closed down as a result.
However those lotteries are not fly-by-night companies. They have the backing of their home states and generate more than US$23bn in annual revenues that go towards public services, schools and good causes.
The North American Association of State and Provincial Lotteries said the DOJ’s latest opinion would have a “substantially detrimental impact” on their industry, which “currently provide[s] more than $23 billion in annual revenue to … good causes [governments] support within their jurisdictions, from education to the environment to economic development to senior citizen and veteran programs, and much more”.
In response the New Jersey and Michigan Attorneys General Gurbir Grewal and Dana Nessel both filed an amicus brief this week challenging the opinion and joined the New Hampshire Lottery Commission in two consolidated federal lawsuits: New Hampshire Lottery Commission v. Dep’t. of Justice and NeoPollard Interactive LLC and Pollard Banknote Limited v. Dep’t. of Justice.
Big money and US politics
The other states involved are Delaware, Idaho, Vermont, Mississippi, Alaska and the District of Columbia and the Kentucky Lottery Corporation, the Tennessee Education Lottery Corporation, the Virginia Lottery, the Rhode Island Lottery, the Colorado State Lottery Division, and the North Carolina Education Lottery.
It will be fascinating to see how this develops, because the lotteries are powerful and have state government backing. Accusations that they exploit and ruin gamblers or cause addiction problems can not be throw at them.
When it comes to Adelson and his obsession with stopping internet gambling, it also reveals the corrupting role money has on US politics and lawmaking.
There is no debate or room for compromise in such an environment and well-argued positions simply hold no water for those working in his sphere of influence.
A simple example is the fact that after years of being completely offshore (illegal), online betting and casino in the US is slowly and very gradually being brought into the open; in a fully regulated and legal way.
The regulations surrounding the sector are very strong and pervasive and are focused on ensuring operators work in complete respect of the rules.
It is already generating millions of dollars in tax revenues, which is surely a better state of affairs than having a completely illegal sector that pays nothing in taxes and where players have no recourse to any consumer protection or social responsibility guidelines.
But since Adelson has limitless funds and can finance just about anything that takes his fancy, he is able to impact major laws and legal statutes such as the Wire Act.
The fact that he also spreads complete lies and disinformation about online gambling, causes economic uncertainty for many companies and puts thousands of jobs at risk is of no concern to him as long as the online gambling sector, which just happens to be a competitor format to that operated by his company, is put under pressure.
The one saving grace of this latest episode is that he is going up against state lotteries, which are well established, respected and powerful. Hopefully they will overturn the ruling and in the process bust some of the myths Adelson and his henchmen have been propagating.