DOJ Opinion Revives Online Gambling in US

A Justice Department opinion letter has opened the door to online gambling in the United States for the first time since Congress passed the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).   The opinion abandons prior expansive interpretation of the Wire Act and limits its application to only sports wagering, thereby giving the green light for New York and Illinois to engage in the intra-state sale of lottery tickets online (and possibly other online gambling offerings).   California, along with a number of other states are exploring the option.

It remains to be seen whether UIGEA supporters in Congress will seek to block the move.  The move would not impact the nearly decade old trade dispute between the US and Antigua  under which the World Trade Organization awarded Antigua $21 million per year in sanctions and permitted it to disregard US intellectual property laws to recoup its damages, but the island nation has not taken any such action.

The executive summary of the opinion is below.  The full text is available here.

WHETHER PROPOSALS BY ILLINOIS AND NEW YORK TO USE THE INTERNET AND OUT-OF-STATE TRANSACTION PROCESSORS TO SELL LOTTERY TICKETS TO IN-STATE ADULTS VIOLATE THE WIRE ACT

Interstate transmissions of wire communications that do not relate to a “sporting event or  contest” fall outside the reach of the Wire Act.

Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not prohibit them. 

            September 20, 2011

MEMORANDUM OPINION FOR THE ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION

You have asked for our opinion regarding the lawfulness of proposals by Illinois and  New York to use the Internet and out-of-state transaction processors to sell lottery tickets to instate adults. See Memorandum for David Barron, Acting Assistant Attorney General, Office of  Legal Counsel, from Lanny A. Breuer, Assistant Attorney General, Criminal Division (July 12,  2010) (“Crim. Mem.”); Memorandum for Jonathan Goldman Cedarbaum, Acting Assistant Attorney General, Office of Legal Counsel, from Lanny A. Breuer, Assistant Attorney General,  Criminal Division (Oct. 8, 2010) (“Crim. Supp. Mem.”). You have explained that, in the Criminal Division’s view, the Wire Act, 18 U.S.C. § 1084 (2006), may prohibit States from conducting in-state lottery transactions via the Internet if the transmissions over the Internet during the transaction cross State lines, and may also limit States’ abilities to transmit lottery  data to out-of-state transaction processors. You further observe, however, that so interpreted, the Wire Act may conflict with the Unlawful Internet Gambling Enforcement Act (“UIGEA”), 31 U.S.C. §§ 5361-5367 (2006), because UIGEA appears to permit intermediate out-of-state routing of electronic data associated with lawful lottery transactions that otherwise occur in-state.   In light of this apparent conflict, you have asked whether the Wire Act and UIGEA prohibit a state-run lottery from using the Internet to sell tickets to in-state adults where the transmission using the Internet crosses state lines, and whether these statutes prohibit a state lottery from transmitting lottery data associated with in-state ticket sales to an out-of-state transaction processor either during or after the purchasing process.

Having considered the Criminal Division’s views, as well as letters from New York and Illinois to the Criminal Division that were attached to your opinion request, we conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.  Because the proposed  New York and Illinois lottery proposals do not involve wagering on sporting events or contest, the Wire Act does not, in our view, prohibit them.  Given this conclusion, we have not found it necessary to address the Wire Act’s interaction with UIGEA, or to analyze UIGEA in any other respect.