The US gambling sector, specifically online gaming, has been cast into deep uncertainty following a reversal by the Department of Justice via its Office of Legal Counsel (OLC) on a 2011 opinion of the Wire Act. That opinion concluded that the Act applies solely to betting on sporting events or contests. Assistant Attorney General for the OLC Stephen Engel now says that the act covers all forms of gaming.
Summarizing the volte face, Engel noted: “We do not lightly depart from our precedent. But having reconsidered our conclusion, we now reach a different result. The 2011 Opinion, in our view, incorrectly interpreted the limitation ‘on any sporting event or contest’ (the “sports-gambling modifier”) to apply beyond the second prohibition that it directly follows: the prohibition on transmitting “information assisting in the placing of bets or wagers.
“We conclude that the prohibitions of 18 U.S.C. § 1084(a) are not uniformly limited to gambling on sporting events or contests. Only the second prohibition of the first clause of section 1084(a), which criminalizes transmitting “information assisting in the placing of bets or wagers on any sporting event or contest,” is so limited. The other prohibitions apply to non-sports-related betting or wagering that satisfy the other elements of section 1084(a). We also conclude that section 1084(a) is not modified by UIGEA (Unlawful Internet Gaming Enforcement Act). This opinion supersedes and replaces our 2011 Opinion on the subject.”
The latest opinion simply comes down to interpretation of the grammar used in the text of the act, namely a missing comma. Engel confirmed: “Our 2011 Opinion concluded that this clause was ambiguous on whether the sports-gambling modifier applies to both prohibitions in the first clause. We reasoned that the text itself can be read either way because section 1084(a) lacks a comma after the first reference to ‘bets or wagers’; we thought that such a comma would have made it plausible that the first prohibition in the first clause was not limited to sports-based gambling.”
The scale of uncertainty now facing the gambling sector is in direct contrast to the size of the missing punctuation mark that underlines the DoJ’s fresh opinion on the Wire Act. The effect on share prices of British firms involved in the US market was immediate, with William Hill, Paddy Power Betfair and 888 Holdings taking a hit of between 1.5 per cent and seven per cent on Tuesday.
As for the true implications of the DoJ’s revised thinking, it is perhaps too early to say for sure. Some industry observers harbored deep concerns about the threat of future litigation, others expressed the view that for the short term at least, this new opinion would have little impact on a business that is largely ‘intrastate’ by nature.
But for states such as New Jersey, Delaware and Pennsylvania which are well immersed in online gaming, it looks like uncertain times ahead. It costs $4m for an online gaming license in Pennsylvania – these are high stakes in what could prove to be a very litigious game that the DoJ has set in play.
Ultimately the implications of this new opinion, and it remains just an opinion until tested in the courts, may not become apparent until the US government returns from its current shutdown. In the meantime, we wouldn’t expect too much in the way of a break in radio silence from stakeholders who will understandably be very guarded on the topic.
