All You Need to Know About The New Wire Act

The Federal Wire Act, which prohibits certain forms of betting businesses in the United States, has recently been altered by the US Department of Justice (DOJ), presenting it, once again, as a law pertaining to all forms of online gambling.

Back in 2011, the DOJ had released a legal declaration modifying the specifications of bans under the Wire Act. The new stipulations stated that "interstate transmissions of wire communications that do not relate to a 'sporting event or contest' fall outside the reach of the Wire Act."

A new opinion by the DOJ created on November 2, 2018, reversed this judgment. The law now states once again that bans are “not uniformly limited to gambling on sporting events or contests.” This alteration was published on January 15, 2019.

What does the Wire Act do exactly?

Although states are allowed to authorize regulated sports betting within their state borders, states are not allowed to authorize interstate sports betting via methods of communication such as through internet and phones. Sports betting by means of wire communication is prohibited under the Federal Wire Act. The Wire Act specifically states:

(a) "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."

(b) "Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal."

Therefore sports betting business are not allowed to send or receive interstate sports wagers via wire communication and it is prohibited for sports betting companies to send winnings from wagers through either wire or electronic payment methods across state borders.

The transfer of information such as odds and line information is permitted between interstate legalized and regulated sports betting businesses. Furthermore, communication for sports betting in regards to news and reporting is permitted.  

Although sports betting may not be impacted by these changes, it appears that online gambling companies and products which pool liquidity between state borders will feel a bigger impact. This decision is one that could harshly restrict online gambling.

It is believed that GOP mega-donor, Sheldon Adelson, is after the further restriction of online gambling as he dominates a large amount of the casino industry. Adelson's argument claims that online gambling targets youth and is dangerous for children. He claims to believe that online gambling attracts criminal activity and is not beneficial for the states. Adelson has been in support of the Republican party, donating $113 million with his wife back in 2016. During Trump's campaign, Adelson backed him up with a $20 million donation.

How will the country be impacted by these changes in the Wire Act?

An online gambling lobbyist expressed his worry and disappointment for the DOJ's recent decision, stating that there have previously been interstate compacts of which this decision could have a heavy impact on. For example, New Jersey, Delaware, and Nevada have already reached an agreement to allow online poker games. Interstate lotteries could also be impacted by the changes made to the Wire Act.

Some fear court battles in the near future due to the recent alteration of the Wire Act from the Justice Department's Office of Legal Counsel. The decision made in 2011, that stated the Wire Act applied only to sports betting, was concretely backed up by rulings in the Fifth Circuit and the First Circuit Courts of Appeals. Soon, Justice Department prosecutors could use the Wire Act against online gambling enterprises. Many fear these changes will halt the growth of online betting in America.

A memo was issued on Tuesday, the 22nd of January, by Deputy Attorney General Rod J. Rosenstein, delaying the implementation of this opinion for another 90 days. Prosecutors will not be allowed to address the issue during this time while those in conflict with this law can review their current plans and adapt. Experts stated that the impact of this change in the Wire Act might not be as severe as some predict.

David Briggs, CEO of GeoComply, stated, “It is too early to speculate what, if anything, will come from the Department of Justice’s latest interpretation of the Wire Act." GeoComply is a geolocation company who ensures that online gambling operators and customers are located within the legalized state borders. According to Briggs, states which have already legalized and regulated online gambling within their state lines would not be affected by the alteration of the Wire Act.

The decision has made enough of an impact to begin affecting stocks, however. 888 shares were down 8% and Stars Group's shares were down nearly 5% by the 15th of January.


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