Two of the more prominent sweats in the gaming community these past few months haven’t come on a casino floor or sportsbook. Instead, they’ve unfolded in a much more subdued environment: the legal arena.
The outcome of the landmark Murphy vs. NCAA case gave the long-awaited green light for states to begin considering the legalization of sports betting, both in brick-and-mortar locations and online.
Then most recent — which came to fruition Monday — was far less welcome. The Department of Justice followed through on what was a rumor for weeks.
New interpretation redefines assumptions
The news sent shock waves through a segment of the online gaming realm.
A quick refresher on what the Wire Act intends to prohibit is in order.
The law criminalizes the utilization of a wire communication facility:
- To transmit “bets or wagers;” or,
- “Information assisting in the placing of bets or wagers on any sporting event or contest.”
Additionally, it’s considered illegal to use the transmission of wire communications to provide an individual with any form of remuneration for either:
- “Winning bets or wagers;” or,
- “For information assisting in the placing of bets or wagers.”
One of the key distinctions of either provision: They apply only to interstate transmissions of any degree.
The decision on PASPA helped usher in legal, single-game sports betting in a state other than Nevada for the first time. However, given the Wire Act’s limitations, wagering remains fenced in within each jurisdiction.
Geo-fencing technology helps ensure as much on both the customer and operator side of sportsbooks.
Meanwhile, between the DOJ’s 2011 opinion and Monday’s memo, other forms of online, money-based gaming, e.g., casino games including poker, were tacitly deemed to be out of the Wire Act’s reach based on the previously cited wording.
The same held for online lottery sales.
Multiple states, activities potentially affected
The new reading of the Wire Act shoots down that assumption.
It notes that only one provision of the law singles out sporting events as the subject of the prohibition. The rest, it emphasizes, can be assumed to apply to all forms of money-based gaming.
Eventually, it also resulted in New Jersey, Nevada and Delaware establishing ongoing, shared liquidity with their online poker player pools.
Given that state lines are crossed in a manner of ways during business transactions under the latter arrangement, it’s precisely the type of activity this reinterpretation now places into legal jeopardy.
Such activity is now also believed to be outside the law; that is if this latest interpretation is actively enforced as such.
Uncertainty on enforceability abounds
And that is indeed the tipping point.
In the wake of Monday’s announcement, the optimistic view has been to point out the Trump Administration’s DOJ’s similar “walk-back” of an Obama-era memo offering guidance on more lenient enforcement when it came to marijuana-related transgressions.
The current DOJ’s communication on the matter last November directed US Attorneys “to use previously established prosecutorial principles” when enforcing marijuana-related federal law. As with online gaming, the release of that communication prompted initial concerns in a newly legalized and regulated market that remains only a handful of states in size.
However, there has been no subsequent tangible effect on that industry. States that had taken the step of legalizing the activity in some form remain unencumbered by the ruling.
A similar scenario could play out with this Wire Act “redux.”
One vastly important legal component at play — that even the DOJ memo acknowledges — is it represents an opinion and therefore does not carry the force of the law. It further concedes that the opinion could certainly be nullified via a court challenge.
Indeed, there’s already a precedent for such. Both the 1st and 5th Circuit Court of Appeals have previously ruled the Wire Act to strictly encompass sports betting.
So, is there any potential liability for intrastate sports betting?
Sports betting’s limitations under the Wire Act were already clarified under the prior interpretation of the law.
Thus, for the moment, the industry appears far less impacted by the potential fallout of this decision.
Yet, given the avalanche of uncertainty regarding the exact ramifications of the DOJ’s memo — particularly pertaining to what degree it will be deemed legally enforceable — there is still some apprehension.
For example, one significant open question: Whether any leg of an intrastate sports betting transaction digitally crossing state lines constitutes a Wire Act violation.
A strictly literal application of the law may conclude as much. In such a scenario, full intrastate solutions, especially with payment processing, may have to be found.
Intersection with proposed federal sports betting legislation?
Then, there’s one other intriguing angle to the entire discussion that involves another branch of the federal government – the Legislative.
The bipartisan Sports Wagering Market Integrity Act of 2018, introduced this past December by Sens. Chuck Schumer (D-NY) and Orrin Hatch (R-UT), interjects the federal government into the sports betting legislative arena as well.
However, it does so while acknowledging “each State may decide whether to permit sports wagering and how to regulate sports wagering.”
Rather than to impose any prohibitions, one of the stated intentions of the bill is to allow Congress to “provide law enforcement with additional authority to target the illegal sports wagering market.”
The latter wording is especially relevant in the wake of the latest developments. Any potential restrictions on regulated sports betting stemming from the latest interpretation would work at cross-purposes with the bill by once again driving the US sports bettor to offshore, unregulated sportsbooks.