S. 3376: Congress takes on the DOJ regarding Internet Gaming

A new bill, S. 3376, introduced last month in Congress is taking direct aim at the legally divisive world of online casino and poker gambling websites. It was submitted by Sen. Tom Cotton (R-Arkansas) and co-sponsored by Sen. Lindsey Graham (R-South Carolina) and Sen. Mike Lee (R-Utah).
The bill aims to undo the actions of the Department of Justice, which in 2011, issued an opinion on the application of the 1961 Wire Act to online gambling (also known as “iGaming”). That opinion stated that the Wire Act prohibits online sports betting, but does not prohibit other forms of online gambling including casino games, poker, lotteries, and the like. The 2011 opinion represented a reversal of the DOJ’s prior long-standing position that all forms of iGaming were prohibited under the Wire Act.

  1. 3376 does not attempt to rewrite the Wire Act to prohibit online gambling. That effort stalled last year with Senators Graham and Rubio’s failed attempt to pass the Restoration of America’s Wire Act (RAWA). Instead, this bill seeks to render the DOJ’s 2011 opinion irrelevant and ineffective for the purpose of interpreting the Wire Act.  As a practical matter, it is unclear exactly what effect this would have; however, the sponsors’ intent is to advance the position of those who hold the opinion that all iGaming is or should be prohibited under the Wire Act.

I am often asked how it could be the case that the Wire Act, a statute enacted in 1961, is being debated today in the context of online gambling? How does a federal law that pre-dates the Internet by at least 20 years have any relevance? The 1961 Wire Act was enacted as a result of then Attorney General Robert Kennedy’s efforts against the mob and their use of the telephone and telegraph communications systems of the era to facilitate sports betting. It lay dormant for many years until the early 1990s, when the fledgling Internet offered a tempting and lucrative option for gambling. Because Internet traffic traveled over telephone lines, courts began to consistently find that laws that had previously only applied to traditional forms of communication were applicable in the Internet age. More recently, threats from federal authorities to bring criminal charges against iGaming operators for violations of the Wire Act and the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) nearly killed the online gambling market in the US. The most notable event in this regard occurred on April 15, 2011 (also known in the iGaming industry as “Black Friday”), when federal prosecutors unsealed their indictment against the three largest online gambling companies operating in the US – PokerStars, Full Tilt and Cereus (which ran Absolute Poker and Ultimatebet).
Despite multiple attempts by individuals in Congress to overtly kill online gaming both through revising the Wire Act and through separate legislation, there are currently no federal laws that prevent or inhibit states from authorizing intrastate online gambling. Today, New Jersey, Nevada, and Delaware permit individuals to participate in certain forms of real money online gambling within their respective borders.
Supporters of S. 3376 consist primarily of those who are opposed to iGaming in general.  The most frequent reasons given by opponents of online gambling revolve around (a) the idea that the easier it is for individuals to gamble, the more likely they will become addicted to it; and (b) concerns over the improper use of online gambling sites by children, criminals, money launderers, etc. There is considerable disagreement even within the land-based gaming industry over whether iGaming is good or bad for business. Critics of S. 3376 have noted that (a) criminalizing online gambling is hypocritical since various legal forms of gambling exist to varying degrees in every US state; and (b) criminalizing online gambling in the US drives online gamblers to gray market offshore unregulated gambling websites, which is not only risky for US players but also involves a significant loss of tax revenue for the US federal and various state governments.
Whether this new legislation makes it through Congress is anyone’s bet. With existing legal gambling currently underway in Nevada, New Jersey, and Delaware; and legalization proposals being considered in many other states including Pennsylvania and California, the stakes are becoming higher.
This brief discussion of S. 3376 highlights the complexity of this area of the law. It is imperative for iGaming operators to understand these complexities and seek guidance to help navigate the maze of gaming laws. This is truer than ever in light of ongoing attempts to further regulate the industry.

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