The first salvo launched by two states at the U.S Department of Justice’s Federal Wire Act reinterpretation all but blames Las Vegas Sands Corp. and its lobbyists for forcing through the changes that could end legal Internet gambling in the U.S.
In a letter signed Tuesday by New Jersey Attorney General Gurbir Grewal and Pennsylvania Attorney General Josh Shapiro, the states asked the Justice Department to withdraw last month’s Wire Act decision, saying the opinion was “wrong” and an “unfounded about face” that “undermines the values of federalism.”
New Jersey Gov. Phil Murphy (l) and Attorney General Gurbir Grewal
In its opinion, the department’s Office of Legal Counsel reverted to the original interpretation of the Wire Act, the 1961 law that prohibits certain types of betting businesses in the United States. A December 2011 opinion said the Act pertained only to sports betting. The new decision, dated Nov. 2, threw out the seven-year-old ruling and added back in other forms of online gaming, including Internet wagering and the sale of lottery tickets over the Internet.
Grewal noted in the letter that online gaming in New Jersey, “generates $352.7 million in annual revenue and $60 million in direct gaming taxes—key both to New Jersey and to Atlantic City’s vitality. The Justice Department’s latest action is wrong on the law and wrong for New Jersey,” he added.
Three states have Internet casino markets – Nevada, New Jersey and Delaware – and Pennsylvania legalized the activity in 2018 with sites expected to launch this year. That move has been thrown into question by the ruling. Six states have online lottery operations – New Hampshire, Pennsylvania, Georgia, Kentucky, Illinois, and Michigan.
“Our growing online gaming industry is a key component in revitalizing Atlantic City and strengthening New Jersey’s economy,” New Jersey Governor Phil Murphy said in a statement.
Grewal on Tuesday also filed a Freedom of Information Request (FOIA) on behalf of the state seeking records pertaining to the Justice Department’s opinion and communications between the agency that involved Las Vegas Sands and the casino company’s lobbyists.
The casino operator, through Chairman and CEO Sheldon Adelson, has long sought to ban online wagering, funding the Coalition to Stop Internet Gambling. Adelson, 85, No. 15 on the Forbes 400 with a net worth of $34.2 billion – and a Republican Party megadonor – has long vowed to spend millions to kill Internet gambling. Adelson believes the activity will diminish results at traditional casinos and could lead to increased problem gambling issues and underage gambling.
The Wall Street Journal reported the legal reasoning behind the Wire Act reversal came from an April 2017 memo drafted by the Sands’ lobbyists. The memo, according to the report, was sent to top Justice Department officials in April 2017 and made a case that the 2011 opinion on the Wire Act by the DOJ was in error.
“Nothing changed in the years since the Justice Department allowed online gaming to move forward, and there was no good reason for the Justice Department to rethink its prior decision,” Grewal said in a statement. “Instead, media reports make clear that pressure to reconsider the opinion came from out-of-state casinos and their lobbyists. That is not a good enough reason to reverse course and undermine the online gaming industry. We want to know who Justice Department officials spoke with and why they decided to change their minds.”
New Jersey’s FOIA request is seeking “information on any communications involving Adelson, his lobbyists, the White House, and DOJ regarding the relevant federal law and online gaming.”
In a statement, Grewal suggested, “after Adelson’s Coalition to Stop Internet Gambling was unable to persuade Congress to address the issue, then-U.S. Attorney General Jeff Sessions agreed to look into it.”
A spokeswoman for Las Vegas Sands said the casino company declined comment on the New Jersey action.
Last week, Eilers and Krejcik Gaming put out an extensive research report on Office of Legal Counsel decision, saying the industry didn’t have a clear consensus on how the read the opinion. In addition to New Jersey, the North American Association of State and Provincial Lotteries said the Wire Act guidance was bad for the industry,
“Both letters are pretty critical, and both appear to support a broad reading of the DOJ’s new opinion, i.e., the opinion impacts many, if not all, products at the intersection of gambling and the Internet (versus) clearly interstate products,” Eilers and Krejcik analyst Chris Grove said in an email.
Nevada’s online poker market is small, with just two operators, Caesars Entertainment and the South Point Casino. Nevada, Delaware and New Jersey have interstate online gaming agreements that allows Internet poker players to compete across the three states.
Pennsylvania has been taking applications from its casino operators for online gaming operations. Coincidentally, Las Vegas Sands filed a petition last July to conduct casino-style online gambling in the state at Sands Bethlehem resort. However, the move was done for the Alabama Indian tribe that is acquiring the casino for $1.3 billion.
Deputy Attorney General Rod Rosenstein issued a memorandum in January to delay implementation of the opinion for 90 days.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
