Stakeholders play down impact of new DOJ Wire Act opinion

The US Department of Justice (DOJ) has reversed its legal opinion on the application of the Wire Act, saying it now applied to all forms of online gambling rather than just sports betting.

The new DOJ opinion was written in November but published Monday and has implications about the continued roll-out of online gaming in the US.

The Wire Act prohibits the transmission of betting information across state lines.

Sports betting is expected to be unaffected by the opinion since the Wire Act already applied to the activity, but the bigger impact could be felt by online gambling, and poker in particular where liquidity is currently pooled between three states.

“The opinion seems to create more headaches for products that clearly share liquidity across state lines,” said Eilers and Krejcik analyst Chris Grove. “We also expect it to further delay Pennsylvania’s rollout of online casino gambling.”

New opinion seeks to create a more conservative environment for legal online gambling, but the immediate impacts are unclear.

Rapid read from legal types is that the decision is a negative for regulated online gambling and that we’re likely headed to the courts. https://t.co/1SGPOIU2vN

— Chris Grove (@OPReport) January 14, 2019

The opinion could also lead to court battles, as the 2011 opinion had previously been backed up by two separate rulings in the Fifth Circuit and the First Circuit Courts of Appeals holding that the Wire Act applies only to sports betting.

Washington gaming attorney Jeff Ifrah was quick to downplay the impact of the decision on the industry.

“The revised opinion does not reflect the thoughtful and more careful analysis issued by the two highest federal courts of appeal that have reviewed this precise question,” Ifrah told CDC Gaming.

“This opinion standing alone, of course, changes nothing and is of no significance or value. It is unfortunate that the [DOJ’s] Office of Legal Counsel appears to have been manipulated to issue an opinion for purely political purposes.”

DOJ reinterpretation of Wire Act to include online poker and casino games will run into a formidable judicial obstacle: federal case-law (see, e.g., In re Mastercard) that makes clear that the Wire Act only applies to sports betting.

— Daniel Wallach (@WALLACHLEGAL) January 14, 2019

Swedish investment bank SEB said in a note the opinion would be “unlikely to have any real implications or consequences in practice”.

“However, as it makes a good headline the news could put gambling stocks in the red today,” the analyst added.

888 shares were down 8% this morning while Stars Group’s were down almost 5%.

The Washington Post linked the new opinion with long-time online gambling antagonist Sheldon Adelson. The paper also quoted a DOJ official who said: “The change here will have some impact, but it doesn’t mean that large swaths of gambling that were once legal are now illegal and vice versa.”

Jennifer Roberts, associate director of the International Center for Gaming Regulation at the University of Nevada, Las Vegas, said it was unclear whether the DOJ was willing or able to enforce its new interpretation of the Wire Act.

She told the Atlanta Journal Constitution: “Some could go really far and say even if you send a marketing text message to a casino customer in another state, that is information that assists in the placement of a wager. I doubt it will go that far, but we will once again be subject to the interpretation.”

Thanks! To be clear, I’m not saying that the DOJ will now just shut all gambling down. I’m saying the opinion has broad implications if enforced and interpreted strictly. It’s now a matter of enforcement, which may just go the way of the marijuana industry … little to none.

— Jennifer Roberts (@JRoVegas) January 15, 2019