30-second summary

• DOJ rocks gambling industry by changing its interpretation of 1961 Wire Act
• This could see the end of online gambling in the US
• Operators have a 90-day deadline to become compliant
• Major gambling stocks took a hit after the news broke
• Operators seek further clarification from DOJ
• Legal action possible in the future

DoJ commits online gambling U-turn

The United States Department of Justice (DOJ) has changed its opinion on their interpretation of the 1961 Wire Act. The gambling sector is concerned that it could mean the end of online gambling.

The DOJ gave an opinion on the Act in 2011. The legislation was originally was brought in to combat illicit gambling activities, particularly concerning criminal enterprises. The DOJ came to the conclusion that the Act calls only for the curtailment of online sports betting. Therefore, interstate online poker, lottery and casinos were given the green light to operate.

However, the DOJ now says the Wire Act applies to all forms of online gambling. The department formed this opinion in November 2018, but only went public on January 14.

Currently, Delaware, Nevada and New Jersey have online gambling operations up and running. A number of states are also very near to offering their own. Six states have online lottery offerings. There is concern that the DOJ’s revised opinion could jeopardise these operations.

Financial institutions may want to avoid processing payments to these platforms in the future. With many in Congress being anti-gambling, as seen with the proposed federal sports betting bill, that would bring in a strict regulatory framework for the sector.

After the announcement of the news, major gambling stocks took a hit.

Deadline for compliance

Deputy Attorney General Rod Rosenstein has issued a statement on the change of opinion by the DOJ. He said businesses in the online gambling sector will have 90 days in order to become compliant.

The DOJ has given no guidance as to what might happen if operators do not comply after the 90-day grace period has come to an end. Operators and key industry stakeholders want further clarification from the DOJ so they can act accordingly.

Legal experts are unsure how this move is going to affect the industry, but believe that the key stakeholders in the online gambling space will contest the U-turn in the court system.

Operators seek clarity

The biggest casino lobbying group in the US, the American Gaming Association (AGA), does not think there will be any knock-on effects for the sports betting sector. This is because the DOJ had already considered sports betting in its 2011 opinion.

Nothing has changed in this regard. However, there could be a change in the enforcement of the new opinion. Operators feel like they are in the dark on this issue and that the U-turn is open for interpretation.

The University of Nevada’s International Center for Gaming Regulation’s spokesperson, Jennifer Roberts, said: “Some could go really far and say even if you send a text message to a casino customer in another state and you are saying ‘Come play blackjack this weekend, here’s a deal,’ arguably you can say 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.”

The worst case scenario is that those states that have interstate online poker, online casinos and online lottery sales will have to cease their operations. However, the probability of this occurring is still up in the air.