U.S. Justice Dept broadens restrictions on internet gambling

[January 16, 2019]  By Diane Bartz and Hilary Russ

WASHINGTON (Reuters) - The U.S. Justice Department will effectively prohibit online gambling and lottery businesses, experts said on Tuesday, after it decided to broaden its interpretation of rules governing interstate sports gambling to other forms of betting.

The department's Office of Legal Counsel said in a November 2018 opinion, not released until late Monday, that a 1961 law called the Wire Act does in fact apply to interstate online poker and casino games, not just sports bets.

The Department of Justice (DOJ) said on Tuesday it would delay implementation of the new restrictions for 90 days to allow businesses to adjust their operations. Legal experts said they expected the ruling to be challenged in court.

"DOJ will continue to prioritize the most egregious conduct, including gambling activity that is part of a larger criminal scheme," a department official said.

The broader restrictions were viewed as good news for billionaire Sheldon Adelson, CEO of Las Vegas Sands Corp and a major Republican donor.

Adelson's resort and gaming company had employed five lobbying firms in the third quarter of last year, and two lobbied on this issue. The Sands spent $280,000 to lobby in that quarter.

The November opinion would not affect the biggest online gaming operations, based offshore in places like Costa Rica and Antigua, said Chris Grove, a gambling industry strategist at Eilers & Krejcik.

But it could affect the small but growing online state lotteries and casino industries, which now have revenues of a little under $500 million annually, Grove said.

It will also likely pose problems for states like New Jersey, Nevada and Delaware, which have an interstate compact for online poker that was created a few years ago, in the wake of a 2011 Justice Department opinion.

The Nevada Gaming Control Board said it was studying the department's opinion "to determine its ramifications." New Jersey and Delaware did not immediately reply to requests for comment.

U.S. Justice Department building is seen in Washington, U.S., December 7, 2018. REUTERS/Yuri Gripas/File Photo

The U.S. Supreme Court in May allowed states to legalize, regulate and tax sports wagers. Under a previous opinion, the Wire Act was only applied to sports gambling, so that market has developed state by state, not across state lines like casino games.

In the 2011 opinion, the department found that Wire Act prohibitions against interstate transmission of wagering-related information applied only to sports betting, not casino games.

The new opinion "is sure to lead to legal challenges," said Daniel Wallach, co-founding director of the sports wagering program at the University of New Hampshire School of Law.

State lotteries that conduct online sales, gaming operators, states that have allowed interstate internet gambling, vendors and suppliers could all bring challenges. "The list of prospective plaintiffs could be rather long," Wallach said.

Aaron Swerdlow of the law firm Glaser Weil Fink Howard Avchen & Shapiro LLP also expected court challenges.

"There's too many power players on each side. This is far from over," he said. "The sports leagues are really leaning into this space. Athletes see this as a big revenue stream. There's just too much money at stake."

(Reporting by Diane Bartz; additional reporting by Hilary Russ in New York; editing by Jonathan Oatis and David Gregorio)

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