Department of Justice Nixes Online Lotteries

NACS answers questions about the U.S. Department of Justice’s new stance on internet gambling.

January 16, 2019

WASHINGTON - On January 14, 2019, the U.S. Department of Justice’s Office of Legal Counsel issued a new opinion on the legality of internet gambling under the Wire Act.  In an unusual move, the DOJ reversed the opinion it had issued on this subject in December 2011.

In its opinion, the DOJ reaffirmed a long-standing judicial understanding that all online gaming, including lotteries, are illegal under the Wire Act—a position NACS has been advocating for over the past seven years. The Wire Act was first signed into law in 1961 as part of an effort by the Justice Department led by then Attorney General Robert Kennedy to cut off the funding sources for organized crime in the United States. The law was enacted to prevent the interstate phone and wire system from being used to transmit wagers and information used by illicit gambling operations.  In more modern times the law has been equally applied to the internet.

The new opinion found that three of the four gambling prohibitions in the Wire Act make all forms of internet gambling illegal—not just sports gambling as the department said in 2011.  The full implications of this decision may take some time to become clear, but the following questions and answers may provide some of the basic facts.

What does this mean? This means that the DOJ takes the legal position that any lottery or casino gambling operation that is open to customers on the internet is violating the Wire Act—a criminal statute.

Have state lotteries and casinos operating online been breaking the law for years?  The DOJ wrote that these operations may have legitimately relied on the 2011 opinion and may be able to defend against charges that they have violated the law to date. But the opinion made clear that none of these operations can claim to rely on the 2011 opinion now that a new opinion has been issued.

Will online lotteries need to stop operations? They will need to stop operations unless they are willing to risk criminal prosecution by the DOJ. Such a prosecution could lead to a court challenge—and it’s possible that a state lottery could get a court to rule against DOJ. But operating in the face of potential criminal prosecution would carry a significant risk.

What if online lotteries keep operating? In addition to the risk of criminal penalties, the DOJ opinion means that banks will no longer be able to process payments for internet gambling operations under the Unlawful Internet Gaming Enforcement Act. 

What does this mean for sports betting? The U.S. Supreme Court decision on the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) allowed states the ability to make sports betting legal within their own borders. The DOJ opinion means that it is illegal for those sports betting operations to make such bets available to the public over the internet.

How soon will this take effect? DOJ has given gambling operations 90 days to assess the opinion and conform their activities to the limits of the law. After those 90 days, lotteries or casinos that continue to operate on the internet risk prosecution.