U.S. Justice Department Bans Online Casinos and Poker Sites

2019 US DOJ Ban on Online Poker, Casinos

MSNBC reported Brian Benczkowski’s appointment to the Criminal Division raised red flags, because of his “lack of prosecutorial experience” and his “ties to a Russian bank.”

All online gambling in the United States is now illegal — at least that is what the Justice Department now says. The U.S. Department of Justice unsealed an opinion on Monday which reversed its position on the 1961 Wire Act and the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).

DOJ opinion now states that all interstate online casinos, poker sites, and sportsbooks are illegal.

In 2011, the attorney generals of Illinois and New York asked the Department of Justice its opinion on the 1961 Wire Act. Later that year, Assistant Attorney General for the Office of Legal Counsel Virginia A. Seitz issued an opinion that the Wire Act banned online sports betting, but not online casinos and card rooms.

Seitz’s opinion was based on two ideas. First, the Wire Act specifically banned interestate sports betting over phone lines. Two, the Wire Act did not ban interstate poker or casino betting over phone lines, because it was impossible to conduct games of poker, blackjack, roulette, or slots over the telephone.

The opinion mattered because the UIGEA banned all online and mobile forms of gambling which were banned under the Wire Act. Thus, UIGEA applied only to interstate online sports betting.

Effects of Online Gambling Ban

Aaron Swerdlow of the Glaser Weil Fink Howard Avchen & Shapiro LLP in Los Angeles said of the 2019 DOJ opinion, “This will have a chilling effect on investment and expansion in the industry. You are going to see legal challenges.”

States which have legalized online and mobile poker sites and casinos — such as Nevada, New Jersey, Delaware, and Pennsylvania — are likely to file lawsuits against the Department of Justice. Three of those states (Delaware, New Jersey, Nevada) signed the Multi-State Internet Gambling Association (MSIGA), which allowed shared poker liquidity between the three states.

Interstate Online Gambling Banned

The MSIGA now appears to be illegal under federal law, because it is interstate online gambling. Intrastate or single-state online gambling remains legal, because it does not cross state lines and is therefore under state jurisdiction. All online gambling sites in iGaming states will need to assure the interactivity between the gaming portal and the player stays within their states’, though.

Dennis Gutwald, a lawyer with McDonald Carano LLP in Las Vegas, said that each licensed gaming company must assure they comply with the new law. Gutwald said, “Every company has got to take a close look at what they’re doing.”

Edvard Pettersson of Bloomberg News speculated that states which allowed online lottery sales would be affected. Those states might be the first to launch challenges to the opinion. Several southern states, such as Georgia, have had brisk online lottery ticket sales and would be harmed by Monday’s opinion.

The Bloomberg News article stated, Online poker and blackjack operations are much less developed than the lotteries, but they will have to examine how they can continue to be run in light of the Justice Department’s opinion.”

Online Gambling Shares Fall

When news of the DOJ opinion was announced on Monday, shares of online gambling companies like MGM Resorts, Caesars Entertainment, and International Game Technology (IGT: Gtech) dropped. MGM Resorts stock fell as much as 1.3%, while IGT shares declined by as much as 3.7%.

The decision is a big win for unregulated offshore online gambling sites. Wherever Internet gambling is banned, unlicensed gaming operators flourish. Betting is an activity that Americans enjoy. Any illegal activity which is popular creates a shadow economy, much like liquid sales during the Prohibition Era.

2019 DOJ Opinion on Online Gambling

Monday’s 23-page legal opinion was written by the Department of Justice’s Criminal Division on November 2, 2018 — then sealed until Monday. It fulfills the longstanding ambition of Las Vegas Sands Corp. CEO Sheldon Adelson to ban all forms of online gambling in the United States.

After New Jersey, Nevada, and Delaware launched online gambling in 2013, Sheldon Adelson stated in early 2014 he would spend “whatever it takes” to see a federal ban on Internet gambling. He formed the Coalition to Stop Internet Gambling (CSIG), which lobbied state governments to avoid passing online gambling bills.

RAWA Died in US Congress

Also, US Sen. Lindsey Graham (R-South Carolina) and former US Rep. Jason Chaffetz (R-Utah) backed Restore America’s Wire Act (RAWA), Adelson’s pet bill to ban online gambling at the federal level. Sen. Marco Rubio (R-Florida) and several other federal politicians backed the same bill, but it never got out of committee.

In hearings, RAWA supporters’ contention that legalization of online betting in New Jersey imposed online gambling on other states was challenged. Proponents of online gambling showed that geolocation software — similar to the GPS systems in cars — assured gambling intended for New Jersey stayed in New Jersey. RAWA died in committee in late 2015, and only occasionally was discussed afterwards.

About Brian Benczkowski

The DOJ’s Criminal Division is headed by Brian Benczkowski, who assumed office on July 16, 2018. Assistant Attorney General Benczkowski received a Bachelor of Arts from the University of Virginia in 1991 and his Juris Doctor from the Washington University School of Law in 1994.

Benczkowki worked former US Senateor Pete Dominici (R-New Mexico) and US Rep. Jim Sensenbrenner (R-Wisconsin). He also served as the Principal Deputy Assistant Attorney General for Legislative Affairs, which manages the DOJ’s relationship with Congress.

Prior to assuming his post in the Justice Department, Brian Benczkowski worked at Chicago’s Kirkland & Ellis, the world’s highest-grossing law firm. Kirkland & Ellis is best known for private equity, business outlook, and restructuring cases. One of Benczkowski’s clients at Kirkland & Ellis was Alfa-Bank, Russia’s largest private commercial bank, which is controlled by Russian oligarchs like Mikhail Fridman, Pyotr Aven, and German Khan. CNN reported that Alfa Bank had “suspicious activity” with a server in Trump Tower in the summer of 2016 — and which sued BuzzFeed over their release of the Steele dossier in the Trump-Russia case.