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U.S. gambling operators have 90 days to comply with new rules

A game of internet slots is under way on a free-play site in Atlantic City, N.J., is shown on Aug. 2, 2017. A legal opinion from the U.S. Department of Justice made public Monday, Jan. 14, 2019, could threaten the viability of online gambling that crosses state lines, such as poker. (Associated Press)
Washington Post

The Justice Department late Monday issued a legal opinion that could further restrict online gambling even as some states have been moving to embrace it – a restriction long sought by GOP megadonor Sheldon Adelson, who controls one of the world’s largest casino empires.

The opinion from the Justice Department’s Office of Legal Counsel, which will probably be tested in the courts, reversed an Obama-era opinion that declared that the Wire Act applied only to sports gambling.

A medley of state and federal laws, including the 2006 Unlawful Internet Gambling Enforcement Act, already make most online gambling illegal. But Justice Department prosecutors will soon be able to use the Wire Act, in addition to those other laws, to bring cases against online gambling operations.

“The change here will have some impact, but it doesn’t mean that large swaths of gambling that were once legal are now illegal and vice versa,” said a Justice Department official familiar with the matter, speaking on the condition of anonymity to discuss internal deliberations.

“Not to say that there couldn’t be some situation where this extends the reach; this is just one more tool,” the official added.

The new legal opinion was greeted with dismay by many in the gambling industry, who fear that the interpretation will limit the growth of the online betting industry across states.

Curtailing such online gambling ventures has been a major goal of Adelson, who with his allies has argued that web-based gambling would hurt children, invite criminal activity and produce little revenue for states.

Adelson and his wife, Miriam, gave $113 million to support Republicans in the 2016 cycle, including $20 million to back Donald Trump’s campaign.

Former Sen. Blanche Lincoln, D-Ark., speaking on behalf of the Adelson-backed Coalition to Stop Internet Gambling, praised the new Justice Department opinion, saying in a statement Monday night that the department’s previous interpretation of the law was “as problematic legally as it was morally.”

“Today’s decision seamlessly aligns with the department’s long-standing position that federal law prohibits all forms of internet gambling, as well as with Congress’ intent when it gave law enforcement additional tools to shut down the activity through the overwhelmingly passed Unlawful Internet Gambling Enforcement Act in 2006,” she said.

“Today’s landmark action to rightfully restore the Wire Act is a win for parents, children and other vulnerable populations,” Lincoln added.

Adelson’s company, Las Vegas Sands, has paid Lincoln’s lobbying firm, the Lincoln Policy Group, $210,000 since 2017, according to federal lobbying records.

The Justice Department official said the Office of Legal Counsel did not have discussions about the opinion with Adelson or “any outside parties.”

“The OLC opinion reflects the materials that went into the opinion, the request from the criminal division to reconsider it,” the official said. “OLC opinions are not generally characterized by nongovernmental communications, and there were none in this case.”

One lobbyist for online gambling interests who spoke on the condition of anonymity to describe internal discussions said Monday night that the Justice Department’s decision was “disappointing and worrisome.”

Its exact impact remains unclear, he said, but he noted that it could affect interstate compacts, such as a recent agreement by New Jersey, Delaware and Nevada to allow online poker games.

Another lobbyist said the opinion could also have an impact on interstate lotteries, which have grown in popularity.

Online gambling has been vigorously opposed by Adelson, the CEO of Las Vegas Sands, who has lobbied against such betting at the state and federal levels.

For years, lawyers and lobbyists for Las Vegas Sands circulated position papers in Washington, arguing for a change in the 2011 Justice Department interpretation, according to people familiar with their efforts.

A Sands spokesman, Ron Reese, said the new opinion would “have little or no impact” on the company, but he declined to comment further.

The opinion centers on an interpretation of the Wire Act, a 1961 statute that makes it a criminal offense to transmit information to promote interstate or foreign wagering.

Before 2011, the department applied the Wire Act to nonsports gambling.

But in September 2011, President Barack Obama’s Justice Department issued an opinion that only sports betting fell within the purview of the act.

At the time, Adelson and his top congressional allies lambasted the decision. Controversy about the applicability of the Wire Act has been rampant in the internet age.

Lawmakers for years pressed the department on its interpretation of the act, and former Attorney General Jeff Sessions agreed at his 2017 confirmation hearing to look into it.

Later that year, the acting head of the Justice Department’s criminal division asked the acting head of the Office of Legal Counsel to reconsider its 2011 opinion.

Deputy Attorney General Rod Rosenstein will issue a memo Tuesday, directing prosecutors to delay implementing the new opinion for 90 days, so that those who might be afoul of the law can review their operations and adjust. The official said the department will continue to prioritize cases against the most “egregious” offenders.

The opinion is significant, though the impact might not be as severe and widespread as some have predicted, experts said.

“It is too early to speculate what, if anything, will come from the Department of Justice’s latest interpretation of the Wire Act,” said David Briggs, CEO of GeoComply, a company that ensures that licensed internet betting operators and their customers are located within states where internet gambling has been legalized.

He said the new federal opinion would not affect gambling in states that have authorized it within their own borders.