The Department of Justice (DOJ) reversal of the 2011 Obama-era Wire Act memo understandably produced a fair share of anxiety in the online gaming realm.
Moreover, the timing of the release which confirms the current DOJ’s position that Wire Act restrictions on interstate transactions apply to all online gambling – in contrast to the prior opinion that they only encompassed sports betting — was at least somewhat interesting.
It dovetailed perfectly with the first day of Senate confirmation hearings for the authoring department’s new boss – William Barr. Barr was confirmed for the position this week. He was also the named defendant in a lawsuit regarding the opinion that came out today.
How might Barr enforce the present-day DOJ’s Wire Act opinion?
Barr previously served as an attorney general (AG) for just under 14 months during the elder George Bush’s lone presidential term. He was the deputy AG for the 18 months immediately prior as well.
His brand of conservatism would seemingly harken back to an era when the term commonly equated to a staunch belief in limited government, robust deregulation and states’ rights.
That should theoretically be of comfort to industries that conflict with at least some aspect of federal law, yet nevertheless now exist thanks to state-level legalization.
But let’s be real. We’re in a political climate where “alternative facts” and “truth isn’t truth” have become credos. Nothing can be taken for granted.
One of those aforementioned industries is most certainly the online gambling sector. To a degree, online sports betting observer is an intrigued Barr observer for the time being, too.
Is everything at risk?
It seems that online poker, online lotteries and online casino are prime potential endangered species in the wake of January’s DOJ announcement, though. That is, in instances where related transactions cross state lines in a fashion that violates the spirit of the Wire Act.
Presently, both online casino and online sports betting essentially operate under the intrastate framework that is required for Wire Act compliance. But there are exceptions.
For example, interstate wagering is the seminal component of the Nevada-New Jersey-Delaware compact that governs their current shared online poker player pool.
Then, there is also often a digital traversing of state lines when it comes to specific legs of payment processing for online gaming transactions. Whether they would be exempt from the Wire Act could be the subject of legal debate.
Confirmation hearing indirectly offers some clues into Barr’s thinking
Barr’s confirmation hearing held the potential to offer some insight on his Wire Act views.
After all, Sen. Lindsey Graham (R-SC) — longtime agitator of online gambling, past supporter of the failed Restoration of America’s Wire Act legislation, and cheerleader of the freshly minted DOJ opinion — went on record in December saying he planned to elicit Barr’s perspective on online gambling either verbally or in writing.
Alas, those questions never made it into the six-plus-hour grilling Barr faced from the Senate on Jan. 15. Yet, there was some relevance to the manner in which the prospective AG answered a question about the possible federal disruption of the legalized marijuana industry.
“My approach to this would be not to upset settled expectations and the reliance interests that have arisen as a result of the Cole memoranda,” Barr told the Senate Judiciary Committee when he was asked about a memo written during President Barack Obama’s administration that has since been rescinded. “Investments have been made, so I don’t think it’s appropriate to upset those interests.”
Legalized recreational marijuana and online gaming share more than polarization
Interestingly, the legalized recreational marijuana and online gaming sectors claim virtually the same timeline. Each now has more than five years’ worth of investment in it by multiple entities. And states that have legalized either activity are increasingly benefiting from the resulting tax revenue.
Additionally, both industries have experienced a notable legal jolt from the current administration.
As mentioned earlier, some segments of online gambling are experiencing a Wire Act “moment.” It was precisely a year ago when the legalized cannabis space was temporarily shaken by a DOJ communication as well.
Last January, former AG Jeff Sessions rescinded the 2013 memo referenced by Barr — one written by Deputy AG James Cole in which he confirmed that federal prosecution of most marijuana offenses wouldn’t be pursued in states where the activity was legalized, and there were “strong and effective regulatory and enforcement systems” in place.
Sessions replaced it with a 2018 directive to US Attorneys that they “enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities.” To the relief of stakeholders, there hasn’t been any subsequent tangible interference from the feds in states where the activity is already regulated.
Barr’s response highly applicable to online gambling as well
Given the multiple similarities in the circumstances, especially as it pertains to the “settled expectations and the reliance interests” that Barr referenced, the wording of his response would arguably render it a near-perfect cut/paste answer to a similar, hypothetical question about online gambling, including sports betting.
Granted, in addressing a follow-up question from Sen. Cory Booker (D-NJ), Barr conceded to favoring an updated federal law that prohibits marijuana “everywhere.” However, he offered a same-breath endorsement of states’ rights as a counterbalance, remarking that “if we want states to have their own laws, let’s get there and let’s get there the right way.”
Despite Barr’s somewhat mixed messaging, there’s optimism to be gleaned from his purported position. Perhaps the most important takeaway is he seems to favor leaving well enough alone concerning state-legalized, regulated activity that clashes with existing federal law — provided, of course, there are no red flags.