DOJ

NJ, PA Attorneys General Argue Against Wire Act Opinion in Letter to DoJ

When the Justice Department’s Office of Legal Counsel (OLC) published a new opinion on the Federal Wire Act of 1961 in January, saying that it applied to all online gambling, the assumption around the gaming industry was that there would be legal challenges to the ruling. While not exactly a “legal” challenge, the Attorneys General of New Jersey and Philadelphia have begun their challenges, penning a letter to Acting United States Attorney General Matt Whitaker and Deputy Attorney General Rod Rosenstein, protesting the OLC’s new Wire Act opinion.

OLC Giveth, OLC Taketh Away

Welcome to pennsylvania signAs readers of this site likely recall, the Wire Act was written to curb organized crime, which used sports betting over the telephone as a revenue generator. The Wire Act, thus, explicitly banned interstate sports betting over communications lines. When internet gaming became a thing, this naturally extended to online sports betting (I have no beef with that), but the Justice Department also interpreted the Wire Act to apply to all online gambling.

In late 2011, in response to Illinois and New York asking about the possibility of online lottery sales, the OLC issued an opinion to say that the Wire Act only applied to sports betting, thus launching the online gambling industries of a few states.

But last month, the Justice Department now part of the Trump administration, the OLC published a new opinion on the Wire Act – an opinion nobody except Sheldon Adelson asked for – saying that the previous opinion was wrong and that the Wire Act did apply to all online gambling. This re-re-interpretation potentially threatens the industries in both New Jersey and Pennsylvania.

Letter Lays Into Justice Department

In the latter, the Attorneys General said that, “States and the gaming industry have been relying on DOJ’s advice for years to develop online gaming,” explaining how the states have benefitted financially from the growing industry. Even Pennsylvania, which has yet to launch any poker or casino sites, has seen a benefit from internet lottery.

“Pennsylvania is especially unique in that the Lottery Fund is completely dedicated to benefit older Pennsylvanians,” the letter states. “Since 1972, the Pennsylvania Lottery has generated nearly $28 billion in funding to support programs for older residents, including the Property Tax Rent Rebate Program, the free and reduced-fare transit program, and long-term living services.”

In less than a year, internet lottery sales have brought in almost $24 million in gross gaming revenue in the Keystone State.

“This decision puts jobs and livelihoods at risk for the thousands of people who work in the online gaming industry and jeopardizes critical state funding for the public good that is generated by lottery sales and other Internet activity that is legal within our states,” the Attorney Generals explained.

Then the letter just lays it all out:

We can see no good reason for DOJ’s sudden reversal. First, it runs contrary to plain language of the Wire Act. Second, DOJ has recognized that it should “employ considerable caution in departing from … prior opinions,” in light of the “strong interests in efficiency, institutional credibility, and the reasonable expectations of those who have relied on our prior advice.” Here, however, DOJ acknowledges that states were relying on its prior advice and did not provide any intervening facts or information to justify such a major departure. Press reports instead indicate that this new advice followed substantial lobbying by outside groups that have long been unhappy with the 2011 opinion—but who were unable to convince Congress of the merits of their view. That is not a good enough reason to trample over the law and states’ rights, and to upend the settled expectations on which we have been relying for nearly a decade.

The Attorneys General conclude by saying the OLC’s opinion “undermines the values of federalism.” They call on the Justice Department to withdraw the new opinion and if the DoJ refuses to do that, at the very least promise that it will not take legal action against companies that are acting legally, in accordance with state law.

Realistically, there is little hope that the Justice Department will be at all reasonable about the Wire Act under the current administration. Pennsylvania is already preparing for the worst. In January, the Pennsylvania Gaming Control Board told the Commonwealth’s casinos’ general managers and counsels that they need to work to get into compliance with the new Wire Act opinion. The target date for getting everything in order is April 15th, as Rod Rosenstein issued a memo saying that operators should be given a 90-day grace period for compliance as long as they were acting under the assumptions of the 2011 OLC opinion. That 90-day grace period is up on Tax Day.

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