Earlier this week the U.S. Department of Justice (DOJ) made waves in the online gambling industry with an Opinion released this week interpreting the Wire Act (18 U.S.C. § 1084). In the Opinion, the DOJ's Office of Legal Counsel concluded that most sections of the Wire Act are not limited to sports-related wagers and instead prohibit the use of interstate wires for any bets or wagers. This Opinion represents a significant change from DOJ's prior position on the issue and also puts online gambling providers and advertisers in legal limbo.
Generally speaking, the Wire Act prohibits the use of wire communications (e.g. telephone, fax, internet) for the purpose of conducting gambling-related business. This includes placing and receiving bets as well as transmitting the proceeds of any bet or wager. Since 2011 the DOJ has taken the position that the Wire Act's prohibitions only apply to sports-related gambling. In the new Opinion, however, DOJ reversed course and now is of the view that only one clause of the Wire Act is limited to sports betting and the remainder of the law applies to all forms of gambling.
This development is significant for a few reasons. First, it has the potential to place anyone engaged in online gambling in legal jeopardy even if the gambling occurs in a state where gambling is otherwise legal. Second, DOJ’s new position threatens the validity of interstate gambling compacts that allow players in multiple states to compete in the same game. For instance, the DOJ's current interpretation of the Wire Act would prohibit the compact between Nevada, New Jersey and Delaware which allows individuals in those states to compete against one another in online poker games offered at qualifying locations. Third, in light of DOJ's new position, advertisers and agencies should exercise caution that the games or products they are advertising will not now be considered illegal under federal law.
That being said, it is important to remember that the Opinion is not binding law. The Opinion reflects the current position of the Department of Justice and the stance it will take in enforcing the Wire Act. But it is ultimately up to the courts to decide whether DOJ's interpretation of the Wire Act is correct and the DOJ expects that its new position will be challenged. The DOJ also gave companies 90 days to comply with the new policy before it begins enforcement.
Only time will tell where the chips will fall on this issue.