Nanny State

DOJ Reversal Could Clear the Way for Online Gambling

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On Friday I noted that federal law does not appear to bar an online poker company licensed in Nevada from serving customers in other states where the game is legal. That same day, the Justice Department posted a memorandum from its Office of Legal Counsel that implicitly confirms this point. The September 20 memo, first reported by gambling law expert I. Nelson Rose, addresses the question of whether online lottery ticket sales by Illinois and New York would violate the Wire Act of 1961, the relevant section of which says:

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

The Justice Department has long maintained that the Wire Act encompasses not just sports betting but other forms of gambling as well, including poker and blackjack. The OLC memo (PDF), prepared by Assistant Attorney General Virginia Seitz at the request of Lanny Breuer, head of the Justice Department's Criminal Division, unequivocally says that position is wrong (emphasis added):

The Criminal Division's conclusion that the New York and Illinois lottery proposals may be unlawful rests on the premise that the Wire Act prohibits interstate wire transmissions of gambling-related communications that do not involve "any sporting event or contest."…We conclude that the Criminal Division's premise is incorrect and that the Wire Act prohibits only the transmission of communications related to bets or wagers on sporting events or contests….

In our view, it is more natural to treat the phrase "on any sporting event or contest" in subsection 1084(a)'s first clause as modifying both "the transmission in interstate or foreign commerce of bets or wagers" and "information assisting in the placing of bets or wagers," rather than as modifying the latter phrase alone….

We likewise conclude that the phrase "on any sporting event or contest" modifies subsection 1084(a)'s second clause, which prohibits "the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers."…

The legislative history of subsection 1084(a) supports our reading of the text…

In sum, the text of the Wire Act and the relevant legislative materials support our conclusion that the Act's prohibitions relate solely to sports-related gambling activities in interstate and foreign commerce….

Given that the Wire Act does not reach interstate transmissions of wire communications that do not relate to a "sporting event or contest," and that the state-run lotteries proposed by New York and Illinois do not involve sporting events or contests, we conclude that the Wire Act does not prohibit the lotteries described in these proposals.  

As Rose emphasizes, the implications of this legal interpretation extend beyond lotteries. If the Wire Act applies only to "sports-related gambling activities in interstate and foreign commerce," it does not cover poker, blackjack, or other casino games. That means onlike poker is legal unless it is prohibited by state law. Rose argues that the scenario I suggested, in which states agree among themselves to allow online poker, is a more likely route to legalization than legislative action at the federal level:

There may be nothing preventing states from making compacts with other states, and even foreign nations, once they have legalized an online game, like poker. If Nevada and the District of Columbia want to take Internet poker players from each other, what federal law would they be violating? And, if they agreed that their residents could bet with licensed poker operators in, say, Antigua and England, while residents of those nations could bet with poker operators in Nevada and Washington, we know they would not be violating the Wire Act, or the anti-lottery laws, or any of the federal prohibitions which require that the gambling be illegal under a state's laws….

My bet is that [Congress] will continue to do nothing, while Internet gambling explodes across the nation, made legal under state laws.

NEXT: Pain Patient Advocate Siobhan Reynolds Dies in Plane Crash

Nanny State Poker Bans Regulation Internet Online Gambling

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44 responses to “DOJ Reversal Could Clear the Way for Online Gambling

  1. Libertarian Stereotype Update:

    1. White
    2. Male
    3. Privileged
    4. Closet racist
    5. Middle-aged
    6. Ayn Rand-nut
    7. Hayek-nut
    8. Friedman-nut
    9. Ron Paul-nut
    10. Top hat
    11. Monocle
    12. Straight orientation (?)/gay mustache
    13. Online gambler

  2. Add online-gambling to the checklist of libertarian stereotypes?

    1. Gambling is the ultimate bourgeois waste of the society’s resources…and the fact that it’s online just makes it that much more icky.

      1. Yes, which is why the States prefer that icky state lottery with tickets selling from $1 to as much as $20.

        Isn’t it funny how liberals oppose gambling as a tax on the poor yet support tobacco taxes, beer taxes, and fat taxes? I guess in the liberal world, you can’t fuck the poor in a casino but you can fuck him in a gas station or 7/11.

        1. They view the state lottery as a harm reduction thing. It’s really hard to bankrupt yourself with a gambling addiction when the only option is Powerball tickets and scratchers. And the profits go to things like public schools (which liberals like) instead of more, bigger, better casinos (which they like less).

          The additional harm-reducing element is that bets in the government betting monopoly are all really shitty bets, reducing the desire to gamble in the first place. This is the same view taken towards increasing the prices of alcohol, tobacco, and shitty food that makes you fat via taxes.

          I think that everybody would be happier if the government gambling monopoly was ended, casinos were taxed, and those taxes went to better harm-reduction strategies like identification and counseling for gambling addicts.

          1. “They view the state lottery as a harm reduction thing. It’s really hard to bankrupt yourself with a gambling addiction when the only option is Powerball tickets and scratchers”

            This is, of course, nonsense. One can buy an entire net worth of scratchers if one likes.

            “The additional harm-reducing element is that bets in the government betting monopoly are all really shitty bets, reducing the desire to gamble in the first place.”

            This is, of course, nonsense, as study after study has shown, recreational gamblers have little to no idea of the EV of their particular bet.

            1. Gambling addicts =/= recreational gamblers.

              Gambling addicts = People who think they can recoup their losses with one big score.

              The low denominations and low returns of bets in the state gambling monopoly tend to deter them from making that choice. I agree that it doesn’t work well because illicit gambling and vegas offer bets that are both large in denomination and more reasonable in payout.

              I was attempting to explain the “liberal” mindset, not defend the system itself, which you can figure out because I said that the state gambling monopoly shouldn’t exist.

              1. “Gambling addicts =/= recreational gamblers.”

                Incorrect, there are “professional” and “recreational” players.

                Addicts all fall into one of those categories.

                “Gambling addicts = People who think they can recoup their losses with one big score.”

                Which in no way disqualifies them from being recreational players, and frankly, that mindset is common among recreational gamblers.

                “The low denominations and low returns of bets in the state gambling monopoly tend to deter them from making that choice. ”

                No, you’re flat wrong about that.

                Slowly, and again, because you seem to have trouble with this, as study after study has shown, recreational gamblers (which includes MOST addicts) have little to no idea of the EV of their particular bet.

                “I was attempting to explain the “liberal” mindset, not defend the system itself”

                I know that, which is clear from my post, when I address the nonsense of the arguments and not you personally.

                NOW, however, you are plainly wrong, recreational gambler DO in fact OFTEN = ADDICTS. There is NOTHING preventing them from occupying both classes.

                1. Yeah, I guess I’m misunderstanding your use of the word “recreational” gambler.

                  I see someone who is a “recreational” gambler as someone who gambles for fun, not as a money-making strategy. Do you agree? If so, it doesn’t matter if a recreational gambler doesn’t know the EV of a bet because they’re just there to have fun, and they won’t bet money they can’t afford to lose.

                  In that context, a “recreational” gambler can’t bankrupt himself because he won’t bet more than he can afford to lose.

                  A gambling addict, conversely, IS trying to make money in order to recoup the losses from bad bets he’s already made. It’s no longer recreational. He’s just a really shitty professional gambler at that point, right?

                  And given that people can transition between “professional” and “recreational” gamblers, I’m pretty sure the research you’re citing is not specific to the scenario we’re discussing. If you post it, I’ll read it.

                  I agree that there are plenty of “recreational” gamblers who have a potential gambling addiction that doesn’t affect their life too adversely (like a functional alcoholic), but once they view gambling as a way to fix their revenue problems, they become “professional” gamblers without the skills to make money at it (like a drunk). The state lottery attempts to stop “recreational” gambling addicts from becoming “professional” gambling addicts and therefore going bankrupt. Thoughts?

                  1. To be frank, you’re using words in a context that doesn’t make much sense.

                    The “addict” part has nothing to do with wins/losses. It’s entirely possible, although HIGHLY unlikely, to ride the positive side of variance one’s entire life, and be winning the whole time, while still being an addict.

                    I think the confusion comes from your fundamental misunderstanding of what an addict is.

                    I can tell you what it is not, and that is a guy chasing losses, which you seem to think is integral to being an addict.

                    I’ll tell you this, if I lost 10 straight bets where I was a 54/46 favorite, it wouldn’t make me an addict to bet big on the next bet if it were a 54/46.

                    1. I completely agree that you should keep making the 54/46 bet.

                      I’m talking about people who compulsively spend good money chasing bad.

                    2. “I’m talking about people who compulsively spend good money chasing bad.”

                      But see, that’s only one kind of addict.

                      It has nothing to do with the quality of bet, only the compulsion to engage in betting action.

                    3. And to clarify further, an addict would make those 54/46 bets all day, because he needed to BET. Give him a GOOD bet and he STILL CAN’T SAY NO.

                      No one would think that is “spending good money chasing bad”.

              2. Gambling addicts =/= recreational gamblers.

                That’s just fucking dumb, of course recreational gamblers can be addicts.

                1. I think that the “=/=” refers to the not equal sign (?).

                  It certainly is true that
                  gambling addicts ? recreational gamblers.

    2. Libertarians are just Republicans who want to smoke pot and shoot trespassers while giving poor people the “freedom” to lose their hard earned paychecks gambling it all away online!1!!!11!

      1. Yeah, yeah…and, uh, uh…the fact that it’s online…uh, uh…means that somebody lost a job…yeah, that’s the ticket!

        1. not if the online co is US based

  3. you’re missing an o.

    1. I ee what you did there

      1. Ok, even I finally got got it.

  4. I continue to wonder just where in the constitution of the US….

    “Interstate Commerce” – duh! Never mind.

    1. ANd that’s the problem, those in government will always expand a clause or law or regulation in favor of government rather than liberty and hell..just common sense. Seriously, how does betting on a sporting event honestly become all inclusive of any wagering, particularly a proven skill game? Not that I in any way even believe that the commerce clause, or anything in the US constitution gives the federal government authority over individuals.

  5. Isnt poker considered a “contest”.

    The phrasing is sporting event or contest. Is that

    a. “sporting event” or “contest”
    or
    b. sporting “event or contest”

    because it matters.

    1. Let’s go there…wouldn’t the intent of the law be sporting event or contest between others?

    2. “Isnt poker considered a “contest”.”

      Tournament poker, probalby, cash game poker, no way.

      “because it matters.”

      No, actually, it really doesn’t.

      1. To clarify, neither are a sport, so the wording is irrelevant, it applies to poker in neither case.

        1. I think that’s what he was asking, it is “sporting event” or “contest (not sports related) or “sporting event or contest”.

          Your answer didn’t help.

          1. I see, this is where a little background helps, and where his question becomes moot, the DOJ has already said the Wire Act doesn’t apply to “contests” that are not sports related, so, knowing that, there is only one possible reading.

            Sorry about the confusion.

  6. This whole episode is an example of how far we’ve sunk, and why I’m pessimistic on the future.

    Look at what effectively happened in regards to the Wire Act. For 50 years government maintained a particular stance, until one day, a government bureaucrat decides to alter that stance. Then boom, all of a sudden, what previously had been legal was made legal. Not on the act of representatives to government, but by a department of government bureaucrats.

    And look at the decision those bureaucrats came up with. The Wire act deals with Sports, and not lotteries, blackjack, poker, etc. And as an aside, it’s an absolute joke that the government maintains that sports wagering is something so awful that needs to be almost banned throughout the nation, while lotteries should be exempt. The lottery is a pure gamble with the worst odds.

    So the government decides to sanction the worst type of gambling, while arbitrarily preventing the widespread use of another, better (at least in terms of odds) form.

    And back to the decisions by bureaucrats…so we have no decisions based by elected representatives being made here, but law being made by bureaucrats, on nothing more than a whim. Who is to say that one day these people simply decide that poker is ok, but blackjack is not? Or that poker is not ok, but backgammon is?

    This entire thing is wretched when you think about it.

    Leave people the F alone already.

    1. …it’s an absolute joke that the government maintains that sports wagering is something so awful that needs to be almost banned throughout the nation.

      The major sports leagues (NFL, NBA, MLB) probably are responsible for the nationwide ban on sports gambling. MLB of course had a few gambling scandals early on. The other sports leagues want to project the image that the games are legit, and not tainted by wagering lines. It will be hard to get nationwide sports gambling, because the leagues will be the most vocal (and moneyed) opposition, and they already have a very cozy relationship with D.C.

    2. You assume that our elected reps care about constitutionally delegated powers and not just their money, perks, privileges and parking spots at the airport.

  7. I’ve played online slots. I’m not proud.
    They say those games have no memory, but are the payouts higher or lower than the physical slots?

  8. Would this be the same type of internal DOJ memorandum as the one about not enforcing the federal drug laws against medical marijuana users in the states that allow it?

  9. http://www.youtube.com/watch?v…..re=related

    Holy fuck

  10. owsers. Yuppie spawn scum.

    1. @ Res Publica Americana|12.26.11 @ 6:03PM|#

      http://www.youtube.com/watch?v…..re=related

      Holy fuck

      1. The shitty thing about that show is that for the American hosts, they always choose wholesale dictators — and I can think of several couples off the top of my head that are very liberal with their parenting, but whose children wouldn’t dare do stupid and awful shit like that.

  11. So, the government is saying that I may be free to gambol about the Internet after all?

  12. Professor Rose needs to bone up on his Constitution.

    From Article I, Section 10: “No State shall, without the Consent of Congress . . . enter into any Agreement or Compact with another State, or with a foreign Power[.]”

    If you’re going to have multi-state or state-and-foreign online poker, you still have to deal with Congress.

  13. Many USA players have been playing at sites listed on http://onlinecasinos-usa.com for years without any problem from the feds. The only difference is now players will have a wider choice of online casinos regulated from within the United States. The down side, im sure it will be taxed at a high rate.

  14. Many USA players have been playing at sites listed on ‘online casinos usa’ for years without any problem from the feds. The only difference is now players will have a wider choice of online casinos regulated from within the United States. The down side, im sure it will be taxed at a high rate.

  15. Did someone say clear the way for gamboling?

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