Gambling on a DOJ Reversal

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Finding “no good reason” for the recent opinion from the Department of Justice reversing course with regard to the application of the Wire Act to online gambling, a pair of state attorneys general (AGs) urged that the new opinion be withdrawn. The act states in pertinent part that no wire communication can be used to place “bets or wagers on any sporting event or contest.”

In January, the DOJ released “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling,” an opinion stating that the Wire Act applies to all forms of online gambling, not just sports gambling, a conclusion opposite to that reached in a 2011 Obama administration DOJ opinion that the prohibitions were limited solely to sports gambling.

New Jersey AG Gurbir R. Grewal and Pennsylvania AG Josh Shapiro informed then-Acting Attorney General Matthew Whitaker and Deputy Attorney General Rod Rosenstein by mail that their state-sponsored online gaming industries were developed in reliance upon the 2011 DOJ opinion.

New Jersey’s online gaming industry now generates $352.7 million in annual revenue and $60 million in gaming taxes, which are key to the state’s vitality and the fifth-largest source of revenue for the state. In Pennsylvania, the Internet lottery fund—completely dedicated to the benefit of older residents of the state—has generated tens of millions in funding to support programs such as living services and a transit program.

“We can see no good reason for [the] DOJ’s sudden reversal,” the AGs wrote. Not only does it run “contrary to the plain language of the Wire Act,” [but also] the new opinion departs from prior advice without providing “any intervening facts or information to justify such a major departure.”

Adding to the problem: the potential breadth of the new opinions, the AGs said.

“The opinion casts doubt not only on traditional online gaming, but also [on] multi-state lottery drawings (such as Power[b]all and Mega Millions) and online sales of in-state lottery tickets,” according to the letter. “[E]ach potential implication is of concern. This decision puts jobs and livelihoods at risk for the thousands of people who work in the online gaming industry and jeopardizes critical state funding for the public good that is generated by lottery sales and other Internet activity that is legal within our states.”

In addition to the letter, the AGs filed a Freedom of Information Act (FOIA) request for paperwork relating to the new opinion. The AGs expressed interest in press reports that “substantial lobbying by outside groups that have long been unhappy with the 2011 opinion” are the reason behind the DOJ’s about-face.

“That is not a good enough reason to trample over the law and states’ rights, and to upend the settled expectations on which we have been relying for nearly a decade,” the AGs wrote. “[The] DOJ’s latest reversal is wrong, and it undermines the values of federalism and reliance that our states count on.”

They requested the DOJ to withdraw its new opinion altogether or provide assurance that it will not bring any enforcement actions against companies and individuals engaged in online gaming acting lawfully under state law.

To read the letter, click here.

Why it matters: In addition to the letter and FOIA request from the New Jersey and Pennsylvania AGs, the DOJ now faces its first legal challenge relating to the new opinion. Together with the New Hampshire Lottery Commission, the state’s AG, Gordon McDonald, filed suit in New Hampshire federal court, characterizing the new opinion as “arbitrary, capricious, an abuse of discretion and not in accordance with law.” The plaintiffs are asking the court for a declaratory judgment that the new opinion doesn’t apply to state lotteries, as well as a permanent injunction halting the DOJ from enforcing the new legal interpretation.



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