A legal opinion from the U.S. Department of Justice made public Monday could threaten the viability of online gambling that crosses state lines such as poker.
The 23-page opinion interprets the federal Wire Act, which prohibits interstate wagering, to apply to any form of gambling that crosses state lines, not just sports betting. The opinion marks a reversal for the department, which under the Obama administration in 2011 said online gambling within states that does not involve sporting events would not violate the federal law.
The 2011 opinion opened the door for cash-strapped states and their lotteries to bring online gambling to their residents, as long as it did not involve interstate sports betting.
Nevada, New Jersey and Delaware legalized online gambling after that opinion was issued, and the three states have agreements allowing poker players to compete online across the states. Pennsylvania became the fourth state to legalize online casino gambling in 2017. Indiana does not allow online gambling.
Since it began in Nov. 2013, internet gambling has been the brightest spot for casinos in Atlantic City, New Jersey, often making the difference between an up month and a down one for the nine casinos. Figures released earlier Monday show internet gambling revenue increased by 21.6 percent in 2018 in New Jersey, to nearly $300 million.
Now, the Justice Department says the previous opinion misinterpreted the statute.
"Based upon the plain language of the statute, however, we reach a different result," attorneys for the department wrote in the opinion dated Nov. 2. "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."
The Wire Act was enacted in 1961 to target the mob and its gambling activities.
Casino operator Caesars Entertainment, which offers online gambling in Nevada and New Jersey, declined to comment Monday.
The American Gaming Association, the largest lobbying group of the U.S. casino industry, said it is reviewing the opinion and its implications on the industry, consumers and "the eight states that currently offer legal, regulated sports gaming."
Experts on Monday said the sports betting industry will remain unaffected because the Wire Act already applied to that form of gambling under the previous interpretation.
Jennifer Roberts, associate director of the International Center for Gaming Regulation at the University of Nevada, Las Vegas, said the impact of the opinion rests on how strictly the Justice Department is going to enforce the new interpretation of the statute.
"Some could go really far and say even if you send a text message to a casino customer in another state and you are saying 'Come play blackjack this weekend here's a deal,' arguably you can say that is information that assists in the placement of a wager," she said. "I doubt it will go that far, but we will once again be subject to the interpretation."
The new legal opinion will likely be challenged in court, an issue acknowledged by the department attorneys in their document.
Daniel Wallach, co-founding director of the University of New Hampshire School of Law Sports Wagering and Integrity Program, said the opinion could have "an immediate chilling effect" on the ability of states to conduct lotteries online.
"I think the most obviously impacted stakeholders are the lotteries that do internet sales, and that group is the most likely stakeholder to challenge this opinion in court."
Advocacy group Coalition to Stop Internet Gambling and former U.S. Sen. Blanche Lincoln of Arkansas in a statement cheered the new opinion, characterizing the previous one as "problematic legally as it was morally" and calling the new one a "win for parents, children and other vulnerable populations."
The group has been backed by Sheldon Adelson, chairman of casino operator Las Vegas Sands Corp., a GOP megadonor supporter of President Donald Trump and a staunch opponent of internet gambling.
"This has been years in the making," Wallach said. "A number of influential Republican lawmakers, backed by Sheldon Adelson through political campaign contributions, have wanted to see the Wire Act restored to its original intent. The problem is the original intent of the Wire Act only applies to sports betting, and I think this muddies the water."