Thanks to a recent ruling by the U.S. Department of Justice, many forms of Internet gambling could potentially make a return. The ruling, which was decided in September but just made public- last Friday, pertained to proposed online lotteries in Illinois and New York as they related to the Federal Wire Act of 1961. The Department of Justice stated that the federal statutes do not apply to these lotteries, but their reasoning may have opened the gates for other forms of online gambling to re-enter the market.
The Federal Wire Act of 1961 imposed a two-year prison sentence on anyone taking bets across state lines using electronic communications, and it specifically pertained to “sporting event[s] or contest[s].” It is because of this clause that the DOJ ruled in September that intra-state lotteries “fall outside of the reach of the Wire Act,” even if the states would need to route payments to another state for processing — potentially making Internet lotteries an interstate transaction and, therefore, illegal.
The DOJ’s decision is a lengthy document, and focuses mainly on grammatical fuzziness in the Wire Act, but the decision that the law ought only be applied to sporting events could be excellent news for the online gambling industry, much of which has nothing to do with sports betting.
The online poker industry suffered a brutal setback earlier this year, in what came to be known as Black Friday among enthusiasts, when the DOJ charged the three top poker sites with operating illegal gambling businesses, and also with conspiracy to commit wire fraud and money laundering. The domains were seized by the government, and online poker (for real money) was essentially shut down. This was a serious regulatory blow to the nascent industry while also ruining many a poker player’s work-from-home lifestyles. Back to waiting tables, or playing poker in real life for them!
The websites were charged with violations of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which among other things makes it illegal for an online business to circumvent state and federal gambling law by operating online. The money laundering and wire fraud charges were unrelated to UIGEA.
The recent DOJ decision, according to some, means existing federal gambling laws does not apply to poker, unless it is considered a sport (it is on ESPN, after all). As we understand it, that means UIGEA doesn’t apply, either, unless there are existing state regulations.
According to a recent post by Professor I. Nelson Rose, on his Gambling and the Law blog, the DOJ decision means that online poker can operate in any state that allows online poker. It may no longer be subject to federal law. This will likely take some time to shake out as the trials for those indicted on Black Friday are only just beginning.
Another interesting side note in all this comes from our home state of New York. On the second page of the DOJ’s September decision, there is a mention of New York State delivering lottery tickets to mobile phones should they implement their online lottery plan. There’s something unsettling about that, the physicality of a lotto ticket is what gives it its mystifying power — it is likely worth nothing but it could be worth millions, and you’re free to leave it as a tip or lose it if you like.
While mobile lotto would take away from this mystique, it is also reflective of the way things are going in all things money-related. You bank with your phone, why not gamble with it, too?
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