Very little of what Donald Trump does or says makes sense. But his administration’s repeated attempts to limit or shut down various forms of gambling in the United States is one of the more head-scratching developments of the former casino owner’s presidency.
It was only a little more than two years ago that his name still illuminated part of the Atlantic City boardwalk. Since taking office, however, Trump’s administration has put a bullseye on all forms of gambling.
First it was sports betting. In May of 2017 when SCOTUS was debating whether or not to grant cert to New Jersey’s bid to strike down the federal prohibition of sports betting, Trump’s Acting Solicitor General, Jeffrey B. Wall, filed an amicus brief recommending that the Court deny cert. SCOTUS disagreed and took the case. And even though the federal government was not a party to the “sports betting case” (Murphy v. NCAA), Wall participated in oral arguments in an effort to uphold the now defunct Professional and Amateur Sports Protection Act (“PASPA”). Wall famously advocated that since New Jersey could theoretically repeal all sports betting laws and allow 12-year-olds to place wagers in casinos that PASPA was constitutional. SCOTUS, in a 6-3 decision, disagreed.
Despite taking a loss on sports betting, the Trump administration is now throwing a potential haymaker at all online gambling, including poker, lotteries, and potentially even daily fantasy sports.
On Monday, the Department of Justice reversed its prior 2011 opinion that the Wire Act only applied to sports betting and now argues that the Wire Act encompasses all forms of wagering.
Why this matters requires a brief history lesson.
At its core, the Wire Act of 1961 (18 U.S.C. § 1084) was Congress’s attempt to rein in organized crime and target the proliferation of underground bookmaking, i.e., illegal sports betting. (Professor John Holden’s deep dive on the origins of the Wire Act is a must read.)
The key text of the Wire Act, § 1084(a), seemingly makes clear that its intended targets are “sporting events or contests”:
Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
This was the general understanding of the Wire Act for more than five decades. Indeed, the Fifth Circuit held in 2002 in In Re Mastercard that the Wire Act only applied to sports betting and the First Circuit reiterated that finding in dicta in U.S. v. Lyons.
Of course, with new technologies comes new questions. In 2009, officials from the New York and Illinois state lotteries sought guidance from the DOJ as to whether their plans to sell lottery tickets on the internet would violate the Wire Act. In a now famous 2011 memo, the Office of Legal Counsel explained that the Wire Act only applied to sporting events or contests, so internet lottery sales were kosher under federal law.
The DOJ’s opinion paved the way for six states to launch online lottery sales, the formation of a multi-state poker liquidity sharing pact between Delaware, Nevada, and New Jersey, the rebirth of legal internet poker, and the rise of intrastate online casinos.
Then Trump’s DOJ dropped the hammer.
In the DOJ’s new Wire Act memo (full text on the next page), which surfaced on Monday, but is dated November 2, 2018 — a few days before Jeff Sessions’s last day as AG — Assistant Attorney General Steven Engel argues that Obama’s DOJ was wrong, because the Wire Act applies to all wagers, not just sports bets.
The memo is somewhat of an ode to Scalia and Bryan Garner in finding that, legislative history be damned, a missing comma in § 1084(a) precludes limiting the Wire Act to sports wagers. So there are really four prohibitions in this section, with only one clause solely applying to sports betting. Confused yet?
Here is how Assistant AG Engel explains it:
Section 1084(a) consists of two general clauses, each of which prohibits two kinds of wire transmissions, creating four prohibitions in total. The first clause bars anyone in the gambling business from knowingly using a wire communication facility to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.” The second clause bars any such person from transmitting wire communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.”
Thus, any form of interstate gambling whether a lottery, poker, or traditional casino game is prohibited. Clear enough. But what about purely intrastate activities that rely on out-of-state internet servers or what about interstate payment processer routing that allows users in a given state to fund accounts via credit cards or online banking?
Simply put, there will be lawyers. The DOJ openly acknowledges that it is inviting litigation with this sudden reversal:
Reaching a contrary conclusion from our prior opinion will also make it more likely that the Executive Branch’s view of the law will be tested in the courts. . . Under our 2011 Opinion, the Department of Justice may not pursue non-sports-gambling-related prosecutions under the Wire Act. But under the conclusion we adopt today, such prosecutions may proceed where appropriate, and courts may entertain challenges to the government’s view of the statute’s scope in such proceedings. While the possibility of judicial review cannot substitute for the Department’s independent obligation to interpret and faith-fully execute the law, that possibility does provide a one-way check on the correctness of today’s opinion, which weighs in favor of our change in position.
After the widespread uproar of this new DOJ memo upending online gambling, the DOJ announced on Tuesday that it would wait 90 days before implementation. But it is unclear what states, gaming operators, or payment processors are supposed to do to comply with this new interpretation of the Wire Act.
Will the federal government really try to shut down online lotteries and poker in 90 days? Would SCOTUS permit such a brazen intrusion on states’ rights given its recent holding in Murphy?
Frankly, the DOJ’s reversal creates many more questions than answers.
But the overarching question is why even do this at all?
Well, according to former Congressman Ron Paul in a New York Daily News op-ed, the DOJ’s memo was a favor to the nation’s most outspoken online gambling critic, Sheldon Adelson. Congressman Paul wrote that the memo is “one of the most brazen examples of crony capitalism since President Trump was elected” as a “seeming thank you gift to Las Vegas casino owner Sheldon Adelson, who with his wife just sent over $100 million to Republicans for the midterm elections.”
Whether that is true does not really matter as the damage is now done. At best, the DOJ’s actions create a climate much like marijuana where the industry operates pursuant to state law with the knowledge that at any time the feds can shut the whole thing down.
But at worst, many states are going to lose significant revenue with a lot of gaming industry employees receiving pink slips. And it is all because a former casino owner’s administration has put gambling in the cross hairs for no apparent reason.
Trump Administration Takes Aim At Online Gambling In Sudden Wire Act Reversal curated from Above the Law
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