A sudden reversal in the stance of US Department of Justice for interstate online gambling has sent chills through the gambling industry. The DoJ is now upholding the statutes of the Wire Act, which will put a hold on the expanding internet gambling sector.
The DoJ is taking a 180-degree turn from its previous interpretation of the Wire Act. In 2011, during the Obama administration, the department noted that only interstate sports betting was prohibited in the law, opening the way for state lotteries and other online operators. Now, they are suggesting that their Wire Act prohibits all kind of gambling operations interstate. The state lotteries and other businesses in the industry are evaluating the impact of this statement now.
The shares of casino operators and other suppliers fell on Tuesday after the news went public. MGM Resorts International shares fell by 1.3 percent while International Game Technology Plc shares dropped by 3.7 percent. States are also feeling the burn of the new interpretation since many of them started selling lottery tickets online after the 2011 opinion.
Casino operators also started providing online gambling options which could now be severely limited. Interestingly, it was a coalition supported by billionaire casino executive Sheldon Adelson that has been lobbying the Justice Department since 2017 to reconsider its 2011 opinion on the Wire Act. Interstate lotteries are going to be the hardest hit after this decision, according to McDonald Carano LLP attorney Dennis Gutwald.
Problems Ahead for US Gambling?
The new interpretation is a huge problem for the industry as it is practically impossible to ensure that no payments coming to internet gambling sites are coming from other states. According to Aaron Swerdlow, an attorney with Glaser Weil Fink Howard Avchen & Shapiro LLP in Los Angeles this decision will have a chilling effect on expansion and investment in the gambling industry. The DoJ also noted that it could see legal challenges to the interpretation.
The decision comes at a time when the US Supreme Court did away with the PASPA after a legal challenge from the state of New Jersey. This opened the opportunity for states other than Nevada to jump into the sports gambling sector as well. The new opinion could be a hurdle for the states of New Jersey, Nevada, and Delaware that allows users to play poker against each other online. This could also dampen these states’ revenues.
Gutwald also noted that blackjack and poker are not as developed operations as lotteries, but they will be affected by the interpretation nonetheless.