Thought Leadership
US Department of Justice’s New Position on Internet
On Friday, December 23, 2011, the Office of Legal Counsel within the U.S. Department of Justice issued a surprise Memorandum Opinion. It addressed the application of the Wire Act (18 U.S.C. § 1084) to wagering that does not relate to a "sporting event or contest."
The Office of Legal
Counsel is primarily responsible for providing senior legal advice to the
Attorney General and to the President and his administration. It issued a memorandum opinion
wherein it concluded that the Wire Act’s prohibition on the use of Interstate
transmissions of wire communications involved in betting or wagering applied only to betting or wagering related
to a "sporting event or contest."
For nearly two decades,
the Criminal Division of the Department of Justice has taken a consistent
position. It states that the Wire Act’s prohibitions apply to all betting or wagering over the
Internet, not just to wagering on sporting events or contests. Hence, the
Memorandum Opinion came as a surprise. This Opinion is significant in many
respects, however, the landscape for legal Internet wagering in the United
States is still uncertain. Furthermore, there will be much more to be decided,
including modification to the laws of individual States, before wide spread
legal Internet wagering can become a reality in the United States.
The Memorandum Opinion
sought to address whether the online sales of lottery tickets by New York and
Illinois, to residents within their own individual borders was a violation of the
Wire Act’s prohibitions. The
implications of the analysis adopted by the Office of Legal Counsel, however,
are broader than the potential sale by individual States of lottery tickets
over the Internet to their own residents.
The Memorandum Opinion’s
conclusion is that the Wire Act’s prohibitions are limited to wire transmissions associated with bets or wagers
relating to "sporting events or contests." Therefore, all manner of online
gaming activities unrelated to sporting events or contests (e.g. lotteries,
poker, bingo, etc.) could potentially
become legal in the United States.
But, before concluding
that a new age of legal Internet gaming in the United States is imminent, it is
important to look at what has changed and what has not changed in light of the
Memorandum Opinion:
It appears that the
Department of Justice will no longer take the position that all forms of gambling
over the Internet are illegal solely on the basis that they involve the use of
telephones or the Internet. The Wire Act
is the only clear federal prohibition on specifically Internet gambling which
is not dependent on an underlying State law prohibition of such gambling. Thus,
it appears that henceforth the Department of Justice will take the position
that the Wire Act only prohibits Internet wagering relating to sporting events
or contests. In addition, the Department
of Justice will not attempt to dissuade individual States from selling lottery
tickets online any longer. In fact, if appropriate bi-lateral or multi-lateral
compacts are put in place, it is conceivable that multi-state sales of lottery
tickets over the Internet could now be permissible.
Likewise, it appears
that the Department of Justice will no longer attempt to dissuade individual
States from pursuing legalizing within their own state borders other online
wagering businesses unrelated to sporting events or contests.
What Has Not Changed?
The Department of
Justice will apparently no longer take the position that the Wire Act applies
to all forms of wagering over telephones or the Internet (i.e. to non-sports
wagering). Yet, there is no
indication that this new policy will affect any other federal prosecutions of
Internet-based wagering arising under other federal laws. Therefore, for
example, the Department of Justice could still initiate prosecutions under the
Illegal Gambling Business Act ("IGBA"), 18 U.S.C. § 1955. Moreover,
if its conditions are met, it makes it a federal crime to operate a gambling
business which violates the law of the State or political subdivision in which
it is conducted.
Under the laws of most
States, the legality of most types of online gambling is at least uncertain,
and in many instances clearly prohibited under current State law.
Until individual States
act to legalize one or more forms of Internet gambling, there can be no
certainty that any individual form of online wagering business will not draw
further scrutiny or potentially even prosecutorial activity from the Department
of Justice. But, experienced legal
counsel can help to navigate the myriad of State laws which currently exist, or
are being or will be considered in the coming months and years.
Policies and procedures
implemented by the credit card associations and other payment systems in light
of the enactment of the Unlawful Internet Gambling Enforcement Act ("UIGEA"),
31 U.S.C. §§ 5361-5367.
Therefore, it will still
be necessary to overcome the practical difficulties of completing online
financial transactions associated with legal Internet gambling before any
widespread Internet gambling operations, even those conducted entirely in an
intra-state basis, can be successful.
Given the new position
in the Memorandum Opinion it is possible that Congress will feel compelled to step
in and proscribe at least some consistent standards for legal Internet
gambling across the several States. One option might, of course, be for
Congress to define a uniform system of laws legalizing and regulating online
gambling in all 50 States.
Various bills relating to Internet gambling have been introduced in Congress in recent years. However, history of State-level gambling laws suggest that regardless of what move congress makes, states would have a few unsolved queries concerning issues such as- the extent of online gambling to permit within their individual State borders.
The new Memorandum
Opinion by the Office of Legal Counsel within the Department of Justice could
portend a new era of development illegal
online betting and wagering in the United States.
But, Congress has
stepped into the fray to define a uniform system of laws for Internet gambling
in every State. Congress’ initiative will be largely shaped by, developments in
the States regarding the legality of individual forms of Internet gambling
within each State’s borders.
