US Justice Department Opens a Way For Online Gambling

The Obama administration cleared the way for states to legalize Internet poker and certain other online betting in a switch that may help them reap billions in tax revenue and spur web-based gambling.

A new opinion from the Justice Department opens the door for states to allow various forms of online gambling operated by lotteries and other gambling interests, legal experts say. Photo: Limconcon/Flickr

The Justice Department has reversed its long-held opposition to many forms of Internet gambling, removing a big legal obstacle for states that want to sanction online gambling to help fix their budget deficits, CNBC reports.

Until now, the department held that online gambling in all forms was illegal under the Wire Act of 1961, which bars wagers via telecommunications that cross state lines or international borders.

The new interpretation, by the department’s Office of Legal Counsel, said the Wire Act applies only to bets on a “sporting event or contest,” not to a state’s use of the Internet to sell lottery tickets to adults within its borders or abroad.

According to The Wall Street Journal, proponents of legalized online gambling say the business could provide new sources of revenue for state coffers.

Others, including large casino interests that prefer a national system limited to online poker, say that the free-flowing nature of the Internet is ill-suited for state gambling plans, which would attempt to limit online gambling to within a given state’s borders.

“The United States Department of Justice has given the online gaming community a big, big present,” said I. Nelson Rose, a gaming law expert at Whittier Law School who consults for governments and the industry.

As a result of the new policy, New York Lottery officials said they planned to add two additional jackpot games, Powerball and Sweet Million, to its current online lottery subscription service, and would allow New York residents to buy single-draw tickets online for the first time.

The department’s conclusion would eliminate “almost every federal anti-gambling law that could apply to gaming that is legal under state laws,” Rose wrote on his blog at www.gamblingandthelaw.com.

If a state legalized intra-state games such as poker, as Nevada and the District of Columbia have done, “there is simply no federal law that could apply” against their operators, he said.

The director of the New York Lottery, Gordon Medenica, said Saturday that the lottery had built a broader online gaming system for New York, but that the contractor that put the system together was wary about moving forward because it feared it could get into legal trouble.

“We’ve been waiting for a couple years,” Mr. Medenica said in a telephone interview. “We’re thrilled that this ruling has now come down and confirmed that our legal analysis was correct all along.”

The change essentially gives states the green light to allow gambling within their borders, online gambling experts said. That is a victory for advocates of state-regulated online gambling, which include companies hoping to provide technology for online gambling and in some cases lotteries and others that operate gambling in states, such as Indian tribes or casinos.

Many of the 50 U.S. states may be interested in creating online lotteries to boost tax revenues and help offset the ripple effect of a federal deficit-reduction push, Huffington Post informs.

The global online gambling industry grew 12 percent last year to as much as $30 billion, according to a survey in March by Global Betting and Gaming Consultancy, based on the Isle of Man, where online gambling is legal.

In a separate request in July, Senators Harry Reid, Democrat of Nevada, and Jon Kyl, Republican of Arizona, asked the Justice Department to clarify its position on Internet gambling, seeking either to affirm that federal law prohibits gambling over the Internet or to make sure that Congress has a role in drafting any expansion of online betting.

In a reply letter that was also issued Friday, the Justice Department said that while the new policy “differs from the department’s previous interpretation of the Wire Act, it reflects the department’s position in Congressional testimony at the time the Wire Act was passed in 1961.”

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