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AG Urges Justice Department to Rescind “Reinterpretation” that Found Online Gaming can be Prosecuted

By rlsmetro on

Attorney General Gurbir S. Grewal is calling on the U.S. Department of Justice (DOJ) to rescind a formal legal opinion it issued during the Trump Administration that found state-sanctioned online gambling such as lotteries and casino games could be subject to criminal prosecution under federal law.   In a letter to U.S. Attorney General Merrick B. Garland, Attorney General Grewal on Friday joined 26 Attorneys General from around the country in urging that DOJ issue a formal memorandum rescinding its 2018 opinion “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling.”  

That 2018 DOJ opinion reversed an Obama-era DOJ position, put forth in 2011, which held that the Wire Act applied to only sports betting, thereby making online lottery sales and other non-sports-related online gaming safe from federal prosecution.   Friday’s letter urges the DOJ to abandon its 2018 position and adopt the reading of the Wire Act set forth by the First Circuit Court of Appeals in New Hampshire Lottery Commission, et. al. v. United States Department of Justice, et. al.—specifically that the Wire Act applies to only sports betting. 

(The First Circuit’s February 2021 decision rejected DOJ’s Trump-era opinion as overbroad and found that the 1961 Wire Act was intended solely to address sports bookmaking,  but its holding only applied to the litigants in the case and did not include New Jersey.)   In addition to requesting formal rescission of the 2018 DOJ Wire Act “reinterpretation,” Friday’s letter calls on DOJ to go on record as officially reverting to its Obama-era position that the Wire Act applies to only sports-betting-related activity and that lotteries and other online gambling options do not conflict with federal criminal law.   In a February 2019 letter of objection regarding the Trump-era DOJ opinion, Attorney General Grewal criticized DOJ’s reinterpretation of the agency’s Obama-era position as an unfounded “about-face” with potentially devastating economic consequences for families and businesses in New Jersey. 

The Attorney General’s 2019 letter noted that online gaming in New Jersey generates hundreds of millions of dollars in annual revenue and direct gaming taxes, which are “key both to New Jersey and to Atlantic City’s vitality.”   In 2020, as the COVID-19 pandemic forced New Jersey casino closures and, subsequently, operating restrictions that caused brick-and-mortar casino gaming revenue to decline compared to the prior year, internet gaming revenue increased substantially.

According to Division of Gaming Enforcement data, internet gaming win in New Jersey for 2020 was $970.3 million -- a 101 percent increase over the online gaming win in 2019.     “New Jersey’s legal gambling industry – and the many state services and programs supported by gaming revenue and tax dollars -- would have been devastated in 2020 without online gaming," Attorney General Grewal said. 

"Internet gaming has for years been, and remains, an essential industry here, one the Department of Justice viewed since 2011 as perfectly legal until its baseless backtracking in 2018.”   While the First Circuit ruling was a triumph for New Hampshire and other states, including New Jersey (Attorney General Grewal filed an amicus brief supporting New Hampshire’s position in the appeal), its reach was limited.   As Friday’s letter led by Michigan and Ohio points out, the ruling set a binding precedent only within the First Circuit and applied to only the specific parties in the suit brought by New Hampshire.   With the Trump-era DOJ opinion still in place, and the First Circuit ruling not applicable everywhere, “there remains substantial uncertainty” as to whether states and the industry can move forward with existing online gaming platforms and also invest in new online gaming products without fear of future criminal prosecution, the letter asserts.   That uncertainty is heightened, the letter contends, by the fact that a purported DOJ “review” of the applicability of the Wire Act launched 764 days ago remains unresolved.   Noting that President Biden has publicly disagreed with the Trump-era DOJ opinion and vowed in 2019 to reverse it if he became president, the letter asks DOJ to now provide “clarity and finality,” because “states and the industry need to understand what their rights are under the law without having to file suit in every federal circuit.”   “It’s time for DOJ to lift the fog of ambiguity surrounding this important national issue, do the right thing and rescind the opinion it issued in 2018,” Attorney General Grewal said. 

“We maintained from the start that the Trump-era Wire Act ‘reinterpretation’ was politically-motivated and wrong on the law, and we’re proud to now join with our fellow states in calling for its official elimination.”