Senators Refuse to Accept the Logical DoJ Opinion on Online Gambling

The Restoration of America's Wire Act Bill introduced recently would repeal the 2011 decision by the DoJ that opened the door for licensed and regulated Internet gambling in the U.S., but this latest effort to curb iGaming is once again misguided.

It was reported late last week that three senators, Lindsey Graham (R-S.C.), Kelly Ayotte (R-N.H.) and Dianne Feinstein (D-Cal) sent a letter to Attorney General Eric Holder asking for his department to support a bill introduced earlier this year that would ban online gambling at the federal level and consequently force states to close online casinos that are already in operation. The bill, (the Restoration of America's Wire Act Bill), was introduced in the Senate by Graham and in the House by Congressman Jason Chaffetz (Utah) and under its terms would repeal the 2011 decision by the DoJ where they stated that the 1961 Wire Act only applied to sports betting. That bill was apparently spearheaded by Sheldon Adelson who felt it was the best way to stop online gambling in its tracks. The wording of the letter was quite bold if not accusatory. The following is a direct transcript from the letter:

"Left on its own, the DOJ opinion could usher in the most fundamental change in gambling in our lifetimes by turning every smart phone, tablet, and personal computer in our country into a casino available 24 hours a day, 7 days a week. The FBI has warned it will open the door to money laundering and other criminal activity. And, it is bound to prey on children and society's most vulnerable. We note that a number of states are now considering authorizing Internet gambling, which poses a significant threat to states that have banned or limited gambling.

We have introduced legislation to restore the Act to the way it had been interpreted for the five decades preceding the DOJ opinion. Since you have changed DOJ's interpretation of the Wire Act, opining that it only applies to sports-related betting, will you support the legislation we have introduced to respond to your re-interpretation of the statute? The clock is ticking. We must act before we find virtual casinos making gambling pervasive in our society, invading living rooms, bedrooms, and dorm rooms across the country; a result we know the DOJ does not want to see."

The sponsorship of the bill by Graham and Ayotte shouldn't be too surprising since they are about as neoconservative as they come, having voted against anything that the churches oppose including gambling, abortion and same sex marriage, but Feinstein's support is a bit mystifying. On all basic rights issues Dianne Feinstein has been hands off, but for some reason she decided to make a stance on online gambling. Feinstein was the only Democrat to co-sponsor the bill and it has really upset the casinos and the California Tribal Business Alliance (CTBA), who said she made the decision without contacting any other interests in California.

"We're concerned that there appears to have been no consultation before she decided to support this bill, which would have direct impacts on California tribes," a spokesman for the CTBA told the media. "We look forward to having government to government consultation with Sen. Feinstein, and ultimately doing what's best for California and Indian Country."

Another Democrat I spoke to personally, however, was less upset with Feinstein's personal viewpoints than he was with the fact that her decision seemed to go against state rights, a diehard issue that Democrats always support:

"We know she opposes gambling for personal reasons and that's her right, but unlike the Republicans, Democrats stand for state rights and gambling has always been an issue left to the states. If she can't support our decisions then she should abstain but to actually defy the other Democrats for personal reasons, particularly in a state (California) that relies on gambling for its survival, is unacceptable and reprehensible."

Keith Sharp, an attorney for the various poker clubs in California indicated that in his view Feinstein's opinions won't matter anyway and that the legislature will do what is best for the state when push comes to shove.

But what's more mesmerizing than Feinstein's support of the bill is the fact that legislators are asking for the decision to be overturned at all. To understand the Wire Act, one must go back to its inception. In 1961 illegal bookmaking and trafficking by organized crime was a problem in the United States so Robert F. Kennedy, the Attorney General at the time, asked Congress to pass some bills to curtail their operations. As a result Congress introduced three bills into law, the Travel Act, The Paraphernalia and the Wire Act. The Wire Act was the one law that dealt specifically with gambling through wire transmissions and read as follows:

"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission...of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest...shall be fined under this title or imprisoned not more than two years, or both."

Upon the passage of the law Robert Kennedy addressed the nation with the following message:
"It is quite evident that modern, organized, commercial gambling operations are so completely intertwined with the Nation's communications systems that denial of their use to the gambling fraternity would be a mortal blow to their operations."

In better words if legislators can make it clear that gambling run by organized crime is illegal they would have a means to arrest them, if the criminals used the telephone to run their bookmaking business.

But the Wire Act's wording is very specific that it relates to "a sporting bet or contest." Under no circumstances was the Wire Act ever meant to apply to legal gambling or to any type of gambling that wasn't sports or contest related.

Of course until the 1990s this was never a concern. Offshore gambling was virtually unheard of and the internet didn't exist. In the mid 1990 some companies in other jurisdictions did take bets from the U.S. by telephone including SBG Global, WWTS and WSEX and consequently their U.S. owners were issued arrest warrants by then Attorney General Janet Reno. But the internet changed things and a U.S. court had to make it clear that in their opinion a "wire" included all forms of communication including the Internet. This allowed the DoJ to arrest David Carruthers and others for taking bets over the internet by Americans. But while the courts were vigilant on sports betting they were also clear that they didn't believe the Wire Act was intended for anything else. This was apparent when the Fifth Court of Appeals affirmed a lower court ruling in 2002 when two individuals tried to get out of debts they incurred when they funded an online casino account with MasterCard. The courts effectively ruled that the Wire Act couldn't be used to avoid debts because the Wire Act was only intended for sports or contests and the casino chips they purchased didn't fall into that category.

So what logically happened in 2011 is that the DoJ was getting pressure from various states like Nevada to allow intrastate non-sports online gambling and the only thing in their way was the Wire Act. The UIGEA specifically made it legal for the activity and the other acts didn't apply. As a result the DoJ looked at the whole scenario, agreed with the Fifth Court of Appeals and made a statement that when they reviewed the exact wording of the Wire Act it clearly wasn't intended to include poker or casino games and hence they would only enforce action against sports betting operators. No doubt they were also coming under a lot of pressure as a result of their actions on Black Friday. The decision was the right one and the suggestion by the three senators that the DoJ blew it with their opinion and should change their minds for the sake of the children required a lot of chutzpah. The DoJ, including Holder, clearly went through all the scenarios and ramifications before making that decision and they aren't going to reverse that decision now because some hypocritical billionaire has a bee up his bonnet because he's afraid that online gambling will cut into his land based empire. Moreover recent polls indicated that the majority of the population doesn't want online gambling criminalized, so the Senators are not only challenging the DoJ, but also the voting public.

Of course public opinion hasn't stopped some neocon Senators and Congressmen from trying to enact a bill to overturn Roe v Wade or bills to change laws that have legalized gay marriage but one would hope they would at least take the public's opinion into consideration before making a personal decision. But more than anything else one would hope that these Senators use some common sense at some point. The Wire Act is clear in its wording "the placing of bets or wagers on any sporting event or contest". How in any shape or form can that be interpreted to include casinos or poker? It's debatable whether the Senators' suggestion in the letter to Holder is true that the Wire Act has been interpreted to include all forms of betting for the five decades prior to the recent DOJ opinion but even if that is true the wording of the statute makes it clear that it was interpreted wrong for five decades. And in today's age with the abundance of gambling everywhere in land based form and offshore and with the huge debts states currently have (thanks partly to federal decisions) it's hard to justify why states shouldn't be allowed to offer online gambling if they so desire.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!

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