Supporters of traditional state lotteries, as well as advocates for expansion of interstate online poker compacts, cheered as the U.S. Department of Justice on Monday let a deadline expire without appealing a federal Wire Act ruling in favor of the New Hampshire Lottery.
The iDevelopment and Economic Association group — known as iDEA, with a goal of expanding legal, regulated online gambling — was among those hailing the inaction.
Jeff Ifrah, iDEA’s general counsel, called the decision “a victory for states’ rights, for clarity in the reading of federal statutes, and for the gaming industry and its consumers.”
The news seems to revert conditions back to where they were from 2011 to 2018. A decade ago, in response to queries from lottery directors in New York and Illinois about the breadth of the federal Wire Act of 1961, DOJ’s Office of Legislative Counsel produced a legal opinion declaring that the act applied only to online sports betting.
That freed up any state to offer online lottery games (although New York Gov. Andrew Cuomo ultimately declined to participate).
And after Nevada, Delaware, and New Jersey began offering online poker in 2012-13, the states were able to engage in an interstate compact allowing players to compete against those in the other states. That’s a key element for a “peer-to-peer” game such as online poker, as none of the three states had populations large enough to lead to a full slate of games available at all times at all price levels.
Status quo was upended in 2018
But in 2018, the Trump administration’s DOJ unexpectedly offered a contradictory opinion that the law’s prohibition on interstate commerce extended to all forms of online gambling.
That clearly jeopardized the online poker compact, but also potentially Mega Millions and Powerball lotteries — and perhaps even state lotteries, since the technological infrastructure involved in producing tickets conceivably could be deemed as having an interstate component.
As a result, the New Hampshire Lottery went to federal court, and it won in June 2019. Early this year, the First Circuit U.S. Court of Appeals upheld the decision. That gave DOJ until last weekend to appeal the ruling, or to let it stand unchallenged, as it chose.
“Now states considering legalizing online gaming can enter into compacts with other states that offer legal internet gaming, and state legislatures will have the ability to create rational gaming regulations that protect consumers, grow jobs, and generate tax revenues without risk of federal intervention,” Ifrah said in a statement.
Pennsylvania and Michigan are the two most prominent states that have legalized online poker but are not yet part of the interstate compact. The combined populations of the two states would figure to be sufficient to produce the desired “liquidity” for players in each of the states.
A more direct stance sought from Biden administration
Still, 27 state attorneys general sent a letter Friday to U.S. Attorney General Merrick Garland seeking more clarity than simply letting the deadline pass.
The letter, penned by the AG’s offices in Michigan and Ohio and backed by more than two dozen counterparts, points out that the ruling set a binding precedent only within the First Circuit, and it applies to only the specific parties in the suit brought by New Hampshire.
“There remains substantial uncertainty as to whether states and the industry can move forward with existing online gaming platforms and also invest in new online gaming products without fear of future criminal prosecution,” according to the letter. “States and the industry need to understand what their rights are under the law without having to file suit in every federal circuit.”
“It’s time for DOJ to lift the fog of ambiguity surrounding this important national issue, do the right thing and rescind the opinion it issued in 2018,” said New Jersey Attorney General Gurbir Grewal. “We maintained from the start that the Trump-era Wire Act ‘reinterpretation’ was politically-motivated and wrong on the law, and we’re proud to now join with our fellow states in calling for its official elimination.”
Online gambling expansion advocates had asserted that Sheldon Adelson, the Republican Party’s top campaign donor and an avowed foe of online casino gaming, sought and received a DOJ opinion on the Wire Act that favored his stance. Adelson died in January.
With or without a more active stance by the Biden Administration, it appears that Paul Barbadoro, the judge who made the 2019 ruling in favor of the lottery, will turn out to be wrong on one prediction he made two months before his ruling: “I have a strong feeling that however I resolve the case, or however the First Circuit resolves the case, it is likely going to be resolved by the U.S. Supreme Court either way.”
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