DoJ Announcement on Online Gambling

Published: December 30, 2011

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Last week the US Department of Justice (DoJ) issued a statement that the Wire Act applied only to online sports betting. Therefore the states could legalize and regulate all other forms of online gambling if they so desired.

There have already been responses from a number of US states to this announcement. Illinois plans to sell lottery tickets online by March 2012. Nevada is also ready to give final shape to its online poker plans. California will defer its online poker plans and start with online lottery. Massachusetts has indicated that an online gambling task force will be constituted to evaluate various options available. Connecticut plans to bring in bills allowing online lottery and online in the next legislative season.

Now that the initial euphoria is over, industry experts have begun to point out the hurdles that could come in the way of states legalizing and regulating online gambling. Legal experts have pointed out that it is for the courts to decide on the applicability of the Wire Act and not for the DoJ. Courts in different states have given conflicting decisions in this regard. Further, the statement by the DoJ is just an expression of intent of the Obama administration and could be overturned by the next president. The justice department spokesperson pointed out that though the Wire Act did not apply to other forms of online gambling, the other state and federal laws would still apply.

Other experts discussed the laws that could create a problem for legalization and regulation of online gambling. Clarification would be required on whether the federal law and the constitution give the states the right to legislate on such a controversial and sensitive issue. One expert said that if states now assumed that online gambling legislation passed by them would not violate federal law they would be talking a big risk.

The more direct issue is that of tribal compacts with First Nation tribal authorities. Any legislation made by the states would have to be within the framework of these contracts and breaching them could cost the states heavily. The tribal authorities are seized of the matter and are in discussion with several state and federal authorities. One of the reasons for California to defer online poker is the inability to reach an agreement with the tribal casinos. Chuck Bunnell, a spokesman for the Mohegan Tribe in Connecticut, said that two tribes have exclusive rights to offer casino games in the state. Therefore the right to run online gambling should be given to one or both tribes.

The best advise came from an expert who said, “Internet gambling is likely inevitable at some point. But legislators should ensure that the state’s approach carefully considers all the consequences, and is not merely a rush to help wealthy special interests reap larger profits.”


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