Department of Justice “Reverses” Stance on Online Gambling

The Department of Justice recently released its response letter regarding its current stance on online gambling in the form of in-state lotteries.  Various state groups had requested a response as to whether the sales of instate lottery tickets, which used the internet in order to conduct sales, violated the relevant federal laws. (The two relevant laws are the Wire Act and the Unlawful Internet Gambling Enforcement Act (UIGEA). While the Wire Act outlines different sorts of forbidden gambling, the UIGEA made it illegal for financial institutions to process payments for online wagers.)

Gambling interest groups have become increasingly uncertain of the federal government’s enforcement agenda since the shutdown of three major online gambling sites last spring. The companies at issue were located offshore, in countries where online gambling was legal, but used U.S. financial institutions to process payment, thus violating the (UIGEA), and other relevant federal laws.

In-State Online Lottery Ticket Sales  Legal

The DOJ’s opinion states, “interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.” It also goes on to state that the DOJ will enforce the laws according to Congress’s intent at the time the law was passed.

The new policy seems to reverse the notion that the Justice Department’s stance regarding online gambling as being illegal in the United States. The opinion states that so long as the gambling operator and the customer are within the same state, and the betting activity does not include sporting events, a state’s own laws apply. The perhaps nonobvious reason for the confusion, dealt with the fact that the internet relies on out of state processors to transmit data, and financial transactions use the financial institutions the UIGEA was thought to forbid.

The DOJ’s opinion takes the position that the UIGEA payment restrictions do not apply to transactions within a single state. Thus, states can now take advantage of capturing additional lottery ticket purchasers by using the internet as both a means of transmitting the information and taking credit card purchases.

Future of Online Gambling

By the ruling stating that the Wire Act applies only to sports betting, it also seems to clear the way for in-state online poker and other games. By particularly adhering to the sports betting ban, the DOJ may be indicating that its prevention is the main priority.