U.S. Department of Justice Gives a Green Light

Good news! Internet gambling is now legal in the United States. Seriously. No kidding. It’s 100% true.

You may not have noticed the big change since most news organizations and politicians on both sides of the debate missed the legal decision. In fact, it even took some gambling advocates a few weeks to realize what happened, but the change occurred late last December. The U.S. Department of Justice issued a ruling that says the Wire Act, 18 U.S.C. §1084, does not apply to Internet gambling except for sports betting. Previously DOJ had said the Wire Act does apply. Big change.

Wha…? Wire Act? What the heck is that? It sounds obscure, but this is like an invisible undersea earthquake that will soon spawn a gambling tsunami.

In spite of all the sound and fury of the U.S. government’s anti-Internet-gambling efforts over the past ten years, there has been precious little actual Federal law that prohibited Internet gambling. Indeed, there was exactly one law, the Wire Act, enacted in 1961. Specifically, it says…

Notice the word "sporting" in that paragraph. The Wire Act was designed originally to be a legal tool against organized crime in an era when mob organizations used telephone and telegraph communications to transmit sports betting information. Congress had no idea that wires would eventually include the Internet, and gambling via wires would be online games such as blackjack.

When the Internet came along, brick-and-mortar casinos took a shortsighted view and wanted to protect their current business, so they entered into an unholy alliance with anti-gambling zealots (mostly congressional Republicans and the Bush administration) to support and encourage DOJ to rule that the Wire Act applies to Internet gambling. It was always a shaky argument. Well, that argument collapsed recently under the weight of legal reasoning and shifting politics. The Internet is now so popular that brick-and-mortar casino companies want to get in on the action. Moreover, even some Republicans want to legalize Internet gambling because of the tax revenues those games would generate. Meanwhile, Congress has been paralyzed on this issue due to partisan bickering, but DOJ is not paralyzed.

The new interpretation of the Wire Act by DOJ was in response to a question by Attorney Generals in several states, and it had to do with lotteries. The states wanted to know if proposals by Illinois and New York to sell lottery tickets instate via the Internet while using out-of-state transaction-processors would violate the Wire Act.

DOJ said those sales would be ok. And that decision opened the floodgates to almost any Internet gambling that states want to legalize, except for sports betting. Voila!

So what happened to the scary old Unlawful Internet Gambling Enforcement Act (UIGEA), the draconian piece of anti-Internet-gambling legislation passed in the dead of night in 2006? Twas a last gasp gotcha enacted just as the Republican Congress was losing power to the Democrats. What happened to UIGEA? Ahhh… Notice the word "unlawful" in its title. The law was intended to kill Internet gambling, but it was written so poorly that it only restricts "unlawful" Internet gambling. Therefore, if a state legalizes Internet gambling, and the Wire Act does not apply, then gambling is lawful and UIGEA is moot. HA! UIGEA is suddenly as harmless and benign as a glass of bottled water.

In fact, UIGEA contains a specific exemption that allows Internet gambling when the bettor and operator are in the same state, and it explicitly says that legal gambling does not violate UIGEA, even when Internet transmissions pass into other states.

DOJ’s ruling caught everyone off guard. As I said previously, it took weeks for some people to notice. Happily, the anti-gambling forces have almost no legal firepower to stop the coming tsunami. Major companies like Caesars Entertainment and MGM Resorts are jumping in with both feet.

Here’s how Internet gambling will operate in the coming years, probably by the end of 2013. It will be legalized and regulated state-by-state. Individual states will license Internet casino operators very much as they do today with brick-and-mortar properties. States are free to have compacts with other states sharing players and systems, and even with other countries where Internet gambling is legal.

The reason why you don’t see these services yet is that individual states are still working out the details and enacting local laws to legalize and regulate the games. Nevada is ahead of the pack, but states like California, Iowa, and New Jersey are close behind. When the licenses are awarded and the rules are set, be prepared to double down on that 11.

Yes, regulated and licensed Internet gambling is coming to the United States!

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(c) copyright 2012 Basil Nestor