The US Department of Justice (DOJ) has changed its opinion on the Wire Act once again, thus threatening the future of online gaming in the US. Brewing in the back rooms of Robert F. Kennedy Building since November but conveniently coming to light during the government shutdown, the news has rocked the industry. In simple terms, the DOJ now believes that its 2011 interpretation of the Wire Act was wrong. For those not in the loop, the federal executive department previously ruled that the 1961 Act didn’t apply to interstate wire communications outside of sports.
“Interstate transmissions of wire communications that do not relate to a sporting event or contest fall outside the reach of the Wire Act,” reads the 2011 interpretation.
Put simply, online poker and gaming didn’t contravene the Wire Act, according to the DOJ. The upshot was the gradual regulation of the industry on a state-by-state basis. However, in a change of heart, the DOJ has now said that all forms of online betting fall under the legislation.
“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling. We further conclude that that the 2006 enactment of UIGEA did not alter the scope of the Wire Act,” reads the DOJ’s January 14 announcement.
Trying to Know the Unknown
Since the news broke, opinions have varied wildly. The overriding sentiment is that this is far from helpful. For many, the new opinion will, at best, bring a holt to interstate gaming (liquidity sharing pacts across state borders). At worst, it will end all forms of online gaming. The one thing we know for certain at this stage is that Deputy Attorney General Rod J. Rosenstein has directed prosecutors to wait 90 days before acting on the new opinion. In other words, no legal cases will be brought against gaming businesses for three months. However, what legal action will look like, remains unknown.
Sifting through the debris, those with long memories have pointed to the fact that the Wire Act hasn’t fundamentally changed. Yes, the DOJ now has a different view on things. However, the legal document remains the same. Therefore, it’s possible to say it’s business as usual. What’s more, only communications across state borders (i.e. interstate gaming) will likely be affected. In support of this, it’s worth noting that things will continue uninterrupted until a major operator is taken to court. Even if that does happen, the court battles are likely to be long and arduous.
In fact, perhaps the biggest strength we have is that major companies are now heavily invested in the industry. With money on the line, we can expect a plethora of lawsuits to be filed in the coming weeks. As you can see from New Jersey’s latest revenue report, companies are making a ton of money from internet betting and gaming. These brands are unlikely to roll over and former New Jersey Senator Raymond Lesniak is ready to fight their corner.
“It looks like I will have to go to court again to straighten out the Justice Department’s overreaching on states’ rights, as I did with sports betting,” Lesniak told Online Poker Report on January 18.
Let’s Fight in the Light and the Dark
In among the dark, there are clearly patches of light. However, we may have reached a point where too many people are standing by and debating rather than standing up and fighting. As former president of the Poker Alliance Rich Muny has pointed out, the Wire Act is out industry’s Achilles’ heel. In his opinion, gaming operators won’t feel the wrath of the DOJ because the shockwaves won’t get that far.
“Regulators won’t simply ignore the DOJ. And, banks won’t process transactions they feel are unlawful under the Wire Act, even if they meet the letter of UIGEA,” reads a January 19 Facebook post by Muny.
The biggest problem we may face is that organizations and businesses supporting the industry are risk averse. Online gaming CEOs are used to fighting legal battles on all fronts. Whether it’s US state departments, federal forces or government agencies around the world, we’re battle-hardened veterans. Banks, on the other hand, aren’t. With other people’s money to worry about, they can’t afford to get into a legal dogfight with the DOJ; especially because they have other interests outside of gaming.
But what’s important to remember is that, while we may be Achilles, we’re not Samson. Even if the Wire Act cuts our hair, it doesn’t mean we lose our strength. Just as Sheldon Adelson can fund an onslaught against the online gaming industry, we have the power to mount our own campaign. Working with the Poker Alliance and forming an organized effort to educate law makers is a great start. Therefore, instead of debating what may or may not happen, let’s take control and push back. The more support we can corral, the better chance we have of stopping the Wire Act wrapping itself around the industry and strangling online operators to death.
Find out more about the Poker Alliance and how you can help here.