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Cutting Gaming Cord
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Here’s why Nevada should worry about the Justice Department’s recent opinion about internet gambling

Internet gambling is a scourge and a plague, a magnet for crime and corruption. Or it’s a blessing and an economic boon — and a digital-era inevitability that we should tax and regulate. Or maybe online gambling is mere fiscal snake oil, a sham panacea that causes more social and economic woes than it solves.

In this ongoing debate, some voices are louder than others. And a recent legal opinion from the U.S. Department of Justice has everyone listening. Its reinterpretation of the 1961 Wire Act says the law forbids interstate, or cross-border, transmissions of all forms of gambling online. “Having been asked to reconsider, we now conclude that the statutory prohibitions are not uniformly limited to gambling on sports events or contests,” a DOJ attorney wrote. Translation: Any kind of internet gambling violates the Wire Act. This legal opinion threatens to derail a modest but burgeoning online wagering industry — and is already causing a lot of head-scratching in Nevada, as gaming experts, lobbyists, and regulators try to figure out what the legal opinion means for the state.

“The Wire Act was intended to stop Mob-related sports betting, and quite simply, the best way to cut that off in the 1960s was by severing the ability to place wagers by phone. That made sense at the time,” says A.G. Burnett, a former chairman of the Nevada Gaming Control Board and now a gaming lawyer with McDonald Carano in Reno. But the new interpretation that says the Wire Act prohibits all forms of online gambling? “It is an overreach, because it is swatting a fly with an H-bomb.”

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But perhaps a surprise bombshell was the point. The opinion is dated Nov, 2, 2018, but was released on Jan. 14, while the federal government was in a shutdown, and came from the DOJ press office, most of whose staff were furloughed. Also interesting is the fact that this Justice Department advisory opinion had long been lobbied for by Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp., GOP megadonor, and vigorous opponent of online gambling.

What does this mean for Nevada, not to mention the three other states where online gambling and poker are currently legal and available?

“This new opinion would impact the ability to compact between legal jurisdictions on any form or gambling, Therefore, shared liquidity pools are at risk with this ruling,” says Jennifer Roberts, associate director of the International Center for Gambling Regulation at UNLV.

And — surprise — for online poker, Nevada, Delaware, and New Jersey share player liquidity across state lines. For example, a Nevada gambler can legally play on New Jersey’s online poker platform.

For Roberts, the biggest concern with the opinion is the uncertainty it creates with intrastate activity. In the digital era, information doesn’t care about state or country borders. Even if you’re in Las Vegas and playing on a Nevada gambling website, some of your online transactions will cross the state line at some point.

“It is unclear whether they will take the position that any transmission of betting information or transactions that are both made and accepted in a state where it is legal that may be briefly routed outside will be treated as a violation of the Wire Act,” Roberts says. “This would mean that any intrastate activity — sports betting, poker, lottery, or casino gambling — could constitute a federal criminal violation.” Although the opinion is advisory rather than law or regulation, Roberts cautions that it remains in the Justice Department’s power to enforce their interpretation. And with even the faint prospect of federal intervention or sanction by state gaming regulators, Nevada casinos aren’t likely to take any chances.

Advocacy group Coalition to Stop Internet Gambling supports the opinion, characterizing the previous version as “problematic legally as it was morally.” The group has also been supported by Adelson. This, too, raises the question of whether this DOJ opinion isn’t so much a piece of cogent jurisprudence as the product of successful lobbying.

“Identifying the motivation for the opinion is difficult and should be the subject of congressional inquiry,” says Anthony Cabot, distinguished fellow in gaming law at the UNLV William S. Boyd School of Law. “No apparent legitimate reason for the reversal exists, but other factors need to be explored.”

Factors such as, whether justified or not, some brick-and-mortar casinos see internet gaming as a threat to their multibillion-dollar investments.

“If, as The Wall Street Journal has speculated, the forces behind this effort are private competitive concerns close to the Trump administration, it would be an affront to the Constitutional principles upon which our government was founded,” Cabot says.

The Justice Department established a 90-day cooling-off period before the new opinion is enforced by federal prosecutors. It’s unclear how this new decision will be implemented when the cooling-off period expires in early April. But for now, the bold new world of internet gambling is stuck on a spinning pinwheel.

 

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