U.S, Bars Online Gambling Across State Lines

state lines is illegal. This new opinion is putting a chill on the industry as businesses and state lotteries evaluate the implications of the change and the government's plans to enforce it. My guest is Keith Miller, professor at Drake University Law School. Keith, this reversed a d o J opinion from twenty eleven. Tell us about that opinion and why the Justice Department changed its position. Well, this was a surprise, but not completely a surprise, because there had

been rumors in the air that this was coming. The Wire Act was a nineteen sixty one law that Robert F. Kennedy, when he was Attorney General, got through Congress to combat organized crime, and the idea behind the Wire Act was

to look at wire transmission facilities. In nineteen sixty one that would have been a telephone, but now it includes the Internet, and it essentially said that any use of those UH wire transmission facilities to transmit information on bets or to take bets on sporting events, and that's the language is used, violated the Wire Act, and over time

it was used against organized crime. In the early two thousands, the Bush administration used it to some extent to harass Internet poker companies, and it ended up that a couple of lotteries in two thousand nine wanted to have online UH sales of their lottery tickets. And in two thousand eleven the Office of Legal Council said, don't worry about it. The Wire Act only applies to sports betting, and that really is what gave rise to the spread of Internet

poker UH and Internet lotteries. Well, we know what happened. Um Monday the Office of Legal Counsel looked at that same statute and said, that's not the way we read this law. We think that while it's unclear that on balance it applies to all forms of Internet gambling and not just sports, which the ebody who knows about the Wire Act would would describe it charitably as a poorly worded and unclear, and I think it lends itself to this sort of political back and forth. Is it also

outdated in the modern era? It is because in nineteen sixty one, there was very little legal gambling that went on anywhere in the United States. Uh, the illegal gambling market was predominant, was dominated by organized crime, and so there needed to be a very strong response to combat that. Now, our views about gaming have, for better or for worse, changed quite a bit. Um the view of the Wire Act. Taking that and applying it now does nothing to make

our country or our world safer. What it does is drive gambling that we know that's going on. It just drives it underground. And I think one of the things we've learned over the years is if there's going to be gambling occurring, we want to bring that into legal and regulated markets so that it can be regulated, taxed. It's safer. It drives the criminal element out. So yes, it isn't an outdated view of that law. Keith. Will it be difficult for the Justice Department to police this

where the Internet is involved? It may be because, um, some people have suggested that the interpretation the memo really doesn't change much of anything that There are sources that say, realistically, this was a matter of Donald Trump giving a gift to one of his benefactors, Sheldon Addlson, the fabulously wealthy head of Las Vegas Sands, who has been opposed internet gambling forever. They say, this is something that Trump got done for Addleson, and nothing's really going to change. But

a company can't rely on that certainly. UH. And if the Department of Justice were aggressive and viewed any UM intermediate routing of data for online gaming that would cross state lines to be a violation of the Wire Act, then that's going to jeopardize many types of of activity online gaming act of it that has been going on, even intro state poker, UH, could be jeopardized if there was a finding that some of the data that was used electronically crossed state lines at one time or another.

What about state lotteries that are so popular. I think that the opinion in two thousand eleven said lotteries, You're okay because this doesn't apply to you. And this UM memo on Monday said, oh, yes, it does apply to you. And if you do something that using these wire transmission facilities to transmit data that would cross state lines, then you would be in violation of the Wire Act. Now, the new legal opinion will likely be challenged in court.

What might the grounds be the Wire Act itself. I won't say that there have been books written about just the Wire Act, but it has been a notorious part of the gaming history of the United States, and I think it's fair to say that the balance of opinion about the Wire Act is that it was designed to apply only to sports, and there is a Federal Court decision from the year two thousand that said it only

applies to sports. So that would really be the basis for the challenge that in looking at the law and its language and legislative history, it doesn't have application to any form of gambling apart from sports. Now, of course, the irony to that is that the Supreme Court in May of last year opened up sports betting to the States by striking down a federal law, and the focus on in the minds of many people has been we need a federal law to get rid of the Wire

Act as it applies to sports betting. So this is definitely one step forward and two steps back as it relates to internet gambling. That was my next question, which is would the kind of reasoning that the Supreme Court applied in that case last may work here against the opinion of the d o J. I don't think that the Supreme Courts analysis in the sports betting case the Murphy case, would have much bearing on this. The essence of the Murphy case was that Congress was not willing

to prohibit sports betting itself. It just looked to the states and told them, you can't authorize sports betting. And the Court said to Congress, you don't have the constitutional power to tell states how to regulate, to tell them to pass laws or not pass laws. If you want to regulate sports betting, go ahead. But if you're not going to regulate it, you have to leave the states free to do so. And I really don't think that those federalism and separation of govern that powers issues would

have much bearing. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg