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DOJ Extends Wire Act Non-Prosecution Period

Posted on by John Lathram

Wire ActRather than clarify how it intends to enforce its revised opinion of the Wire Act, the U.S. Department of Justice has extended the non-prosecution period.

In September 2011, the U.S. Department of Justice (DOJ) issued an opinion that the 1961 Wire Act – a law that effectively prohibited interstate betting – only applied to sporting events, and that any other type of gambling activity was not covered by the Act. The opinion paved the way for interstate online lotteries, networked online casinos, and compacts between states that had regulated online poker.

Then, in January this year, the DOJ revised its opinion and declared the Wire Act applied to any gambling activity that crossed state lines – not only having implications for interstate lotteries, network casinos, and online poker compacts, but for any gambling activity conducted over the Internet (including Daily Fantasy Sports) because the transmission of Internet communications could be routed out of state.

A subsequent memo issued by U.S. Deputy Attorney General Rod Rosenstein gave operators ninety days to comply with the revised Wire Act opinion while guidelines for how the opinion would be enforced were prepared. The DOJ has now extended the non-prosecution period by a further sixty days, giving the gambling industry until June 14th to bring its operations in line with the Wire Act.

No Details Yet of Enforcement Action

A lack of clarification about how the new interpretation of the Wire Act will be enforced has left regulators and online operators no wiser about how to comply than they were back in January. Three lawsuits have been filed so far opposing the revised opinion and, with less than three months to go until the start of the World Series of Poker, organizers have admitted they don´t know whether players located outside of Nevada will be able to play in nine scheduled online bracelet events.

In Pennsylvania, the state´s Gaming Control Board has written to licensees telling them to comply in full with the revised opinion and stipulated that gaming servers must be located within the Keystone State – eliminating the prospect of an online poker compact with other regulated states. The Board has also delayed the launch of statewide interactive gaming – pushing it back until at least July – possibly as a consequence of the extended non-prosecution period, although that has not yet been confirmed.

The extended compliance window has also created problems for states who have introduced bills to regulate online gambling, but who do not yet know if, when, or how federal enforcement will be applied. Since the revised Wire Act opinion was published, Illinois, Connecticut, Kentucky, New York, Florida, and West Virginia have all filed bills to regulate online gambling; and, in some of these states, the regular legislative session for the year will have come to an end by June 14th.

All We Can Do is Wait and See

The current situation is unsatisfactory for everybody in the gambling industry. Without knowing how the DOJ intends to enforce its revised opinion – or whether the courts will say it is unenforceable – neither operators nor regulators can put measures in place to ensure they are in compliance. In the worst possible scenario, all online gambling could be prohibited; and although I personally can´t see that happening, I believe the revised opinion spells the end of interstate online poker compacts.

One further issue to be resolved is how willing online payment processors will be to process gambling transactions. Online deposits and withdrawals are subject to the Wire Act in the same way as placing an online bet, and it could be the case that some processors – especially those without a presence in a regulated state – shy away from online gambling to protect their reputations. I guess, just like us, the online operators and state regulators, the online payment processors will just have to wait and see.

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