How America's U-Turn on Online Gambling Is Likely to Pan Out

Just as things were starting to look brighter for the US gambling industry with the repeal of the Professional and Amateur Sports Protection Act last year, the US government has cracked down hard once again. A recent U-turn on a previous reinterpretation of the 1961 Wire Act has returned the whole industry to a familiar doubt.

Many gamblers in the US were hoping that the repeal of the 1992 PASPA legislation would usher in a new era for online gambling in the US. Seven states have already moved to legalise sports betting and a further 19 have introduced legislation to pursue their own regulations on the matter.

However, the picture has darkened at the federal level once again, and it seems that only single-state-serving options will continue to be offered.

Naturally, there is still a large unexplored market for both domestic and overseas operators. However, such a fragmented approach makes serving multiple jurisdictions tough for casinos and bookmakers, as well as dramatically limiting the choice of the customers themselves. In such an uncompetitive market, aspects of the player experience will suffer. For example, the types of bonuses are sure to be limited and no deposit offers will be rare.

A look elsewhere can show just what the federal government is missing out on. In the UK, online gambling accounts for £4.5 billion each year and provides the government with the largest slice of gambling income. A research firm has even estimated that federally legal online gambling could generate $9 billion annually.

What is the Wire Act?

The 1961 Interstate Wire Act was originally an effort to police interstate payments being used to play sports bets. The idea behind it was to combat the rise in organised crime surrounding professional sports leagues.

During the 1990s it was used to prosecute those gambling away from the sports fields on other games or non-sporting events. This caused the scope of the law to be debated and ultimately led to change in 2011.

What Happened in 2011?

In 2011, the US Department of Justice amended the 1961 Act through formal legal opinion. The reinterpretation stated that the act only applied to bets made on sporting events, since there was no internet in 1961 online casinos were not considered during the drafting on the legislation and the DOJ felt that it should not extend to games of chance offered virtually.

And the Latest Developments?

Recently, the Department of Justice has come after online gambling once again. It reversed the 2011 legal opinion and stated that the Wire Act should indeed apply to all forms of gambling. Naturally, this has dashed the hopes of many gamblers in the US who thought that the government might be softening up on the pastime given the recent repeal of the PASPA legislation.

The assistant attorney general Steven Engel wrote at the end 2018:

“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling. We further conclude that the 2006 enactment of the (Unlawful Internet Gambling Enforcement Act) did not alter the scope of the Wire Act.”

A Lack of Unity in the States?

Such reversals of legislative opinion will not kill online gambling in the US. However, it will do little help nurture the industry into one that contributes heavily to federal coffers.

Perhaps hardest hit by the reversal will be the poker players of Nevada, New Jersey, and Delaware. Under a compact, the players in the three states have been able to access a single player pool, giving them a much fuller experience – if you’ve ever played at different poker websites from around the world, you’ll probably agree that the more players on the site, the better the games.

Also, likely to be impacted negatively are the various fantasy sports leagues in the US. These typically exist across state lines and the future of such competitions is now in question.

A gambling industry analyst for Online Poker Report, Chris Grove, stated the following of the reversal:

“There’s a real question here of how much actually changes. And I think that’s a question that frankly no one has the perfect answer to at this stage. It could be months until we do know the full impact because it seems like this opinion almost certainly is going to throw at least parts of this issue into the courts.”

He added that there seems a real threat to those products that clearly cross state lines – chiefly poker under the tri-state compact and fantasy sports leagues. There is a further fear that the new interpretation of the Wire Act could used to further attack online gambling with reference to the 2006 Unlawful Internet Gambling Enforcement Act:

Grove states:

“More troubling is that it goes out of its way to assert that the language of UIGEA, which clarifies that a bet or wager is intrastate if it is initiated and received in the same state, does not apply to the Wire Act. Presumably, they will allege that any use of the Internet is now illegal even if the sender and receiver are in the same state. This would apply to online poker in Nevada and could potentially be extended to mobile wagering on sports.”

Going Forward?

So how does all this impact the movement to federally legalise online betting in the USA? Well, the short answer to that is that no one really knows. However, it’s certainly not a positive development.

At best it seems likely to be used to enforce the current state-level approach to online gambling whereby operators can be licenced by legal states and must keep transactions associated with their business within state borders. Naturally, this would be detrimental to those forms of gambling previously mentioned as already offering services across state lines – the Nevada-New Jersey-Delaware poker compact and fantasy sports. If this is the approach of lawmakers, progress towards a fully unified market like that of the United Kingdom or other nations around the world has likely been set back by a few years.

However, just like with the nascent marijuana industry, those operating in legal states would continue to do so in fear of the federal government coming down hard on them at any point. Such constant fear does little to nurture a rapidly growing industry that could be contributing billions to the nation’s tax revenue.

Alternatively, the harsher regulatory approach hinted at by Grove could be followed to the effect of setting back the industry by decades by effectively outright banning the online pastime – something the owners of the nation’s super casinos would no doubt be pleased to see.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.