DOJ’s Holiday Gift: Intra-State Internet Gambling for the States

Published On December 26, 2011 | By Jake Sommer | General, Internet Gambling & Fantasy Sports

In a long-awaited reversal of direction, the Department of Justice’s Office of Legal Counsel (OLC) released a Memorandum Opinion written earlier this year finding that the Wire Act no longer prohibited forms of gambling other than sports gambling.   The opinion, which was released on Friday as an attachment to a letter responding to Senator Harry Reid’s July 2011 request for more information regarding the DOJ’s enforcement of online gambling laws, disagreed with the DOJ’s Criminal Division’s view that the Wire Act prohibited all forms of gambling, not just “sporting events or contests.”  As the cover letter to Senator Reid states,“Although the OLC conclusion differs from the Department’s previous interpretation of the Wire Act, it reflects the Department’s position in congressional testimony at the time the Wire Act was passed in 1961.”

The OLC Opinion, which was issued in response to questions from the State of Illinois and State of New York regarding whether each could sell lottery tickets online, agrees with In re Mastercard Int’l, Inc., 313 F.3d 257, 262-63 (5th Cir. 2002), which limited the Wire Act to sports betting.  States, however, had not gone forward in reliance on that one opinion—in part because other lower federal courts had disagreed and any attempt by a state could have been met with expensive litigation.  See, e.g., United States v. Lombardo, 639 F. Supp. 2d 1271, 1281 (D. Utah. 2007);  Report and Recommendation of United States Magistrate Judge Regarding Gary Kaplan’s Motion to Dismiss Counts 3-12, at 4-6, United States v. Kaplan, No. 06-CR-337CEJ (E.D. Mo. Mar. 20, 2008) (same).

The cover letter  also notes that the OLC opinion does not weaken the tools available to the DOJ, stating that “The significant majority of our current and past prosecutions concerning Internet gambling involve cases where the gambling activity is part of a larger criminal scheme.  OLC’s conclusion will not undermine our ability to use other powerful tools, such as the federal statutes prohibiting organized crime, racketeering and money laundering, to prosecute that type of criminal conduct.  Furthermore, in states that ban various forms of gambling—including Internet poker—the Department will be able to investigate and prosecute those gambling businesses under the Unlawful Internet Gambling Enforcement Act and other sections of the criminal code.”

The opinion opens the door for states to begin using the Internet to sell lottery tickets to residents of their state, as well as for states to begin to enter into compacts with each other to sell lottery tickets in more jurisdictions.  It also provides an opportunity for states to legalize other types of online gambling other than sports betting, so long as that gambling is only offered intra-state.

About The Author

Jacob Sommer's practice focuses on legal issues related to Internet-based services and social networking, with a focus on protecting client's rights in litigation or government investigations involving the Copyright Act, Lanham Act, Digital Millennium Copyright Act ("DMCA"), Electronic Communications Privacy Act (“ECPA”), the Wiretap and Communication Acts, CAN-SPAM, FISA and federal and state laws governing Internet gambling. He also helps social networks, search engines, e-mail providers, ISPs and other clients fulfill their compliance obligations pertaining to the discovery and disclosure of customer and subscriber information.

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