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September 1, 2015

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DOJ opinion ‘important day’ in efforts to legalize online gaming

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WASHINGTON -- A Department of Justice opinion released today declares that Internet gaming transactions are legal between states where gambling is legal.

The opinion appears to open the door for multiple states with legalized gaming to band together and create online gambling zones across state lines -- provided they don’t involve sports betting.

Advocates for legalizing online gambling have focused on getting Congress to overturn the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), which made it illegal for banks to process Internet bets for prohibited forms of gaming. The 13-page opinion by DOJ Criminal Division Assistant Attorney General Virginia Seitz does not discuss how the Wire Act intersects with UIGEA.

But Richard Bronson, chairman and co-founder of California-based U.S. Digital Gaming, called the opinion a sea-change in the federal government’s approach to online gaming.

“This is a very important day,” said Bronson, whose company develops online gaming technology. “It has always been considered to be illegal under the Wire Act.”

Seitz reviewed the 1961 Wire Act to address whether state lottery operators in New York and Illinois could sell tickets online if the routers and networks processing those transactions were out of state, in places like Texas, Maryland and Nevada.

Seitz wrote: “Given that the Wire Act does not reach interstate transmissions of wire communications that do not relate to a ‘sporting event or contest,’ and that the state-run lotteries proposed by New York and Illinois do not involve sporting events or contests, we conclude that the Wire Act does not prohibit the lotteries described in these proposals.”

“Our conclusion that [the Wire Act] is limited to sports betting finds additional support in the fact that on the same day Congress enacted the Wire Act, it also passed another statute in which it expressly addressed types of gambling other than sports gambling,” Seitz wrote.

Despite opening the door to intrastate online gaming, the opinion is not a nationwide legalization of online poker and other casino games. Rather it could lead to a patchwork approach by states.

“It does not legalize anything, but what it in essence says is they will not step in and not stop online gambling,” Bronson said.

Several bills in state legislatures, from California to Iowa to New Jersey, call for legalization of online betting within state borders. Most have languished or failed. Only Nevada and Washington, D.C., have approved Internet gambling within their borders.

The new laws don’t cover a big enough swath of the online gaming population to be a game-changer. Washington, D.C., has only about 600,000 residents, and Nevada fewer than 3 million; the presumed market of American online poker players is 15 million.

Theoretically, the DOJ opinion could change that. It suggests that if more states legalize online betting, those states could process non-sports transactions across their borders, or, perhaps, link up with other online gaming operators off-shore.

The gaming industry’s main lobby in Washington, D.C. took the opinion as further incentive to change federal laws banning an industry that appears will inevitably become legal.

The DOJ opinion “validates the urgent need for federal legislation to curb what will now be a proliferation of domestic and foreign, unlicensed and unregulated gaming websites without consistent regulatory standards and safeguards against fraud, underage gambling and money laundering,” the American Gaming Association said in a statement tonight. “These federally mandated protections are vital no matter the interpretation of the Wire Act, and they must be enacted in order to avoid a patchwork quilt of state and tribal rules and regulations that would prove confusing for customers and difficult for law enforcement to manage.”

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