Monday, December 26, 2011

Talkin’ the DOJ Letter and Nevada (The State of Online Poker)

Welcome to NevadaHope everyone enjoyed the weekend festivities. I know I enjoyed seeing family and eating more than I should. Turkey sandwiches on the menu today.

Was enough to make us forget about that burst of poker news that happened last Friday. You remember, how in the afternoon a memorandum emanating from the U.S. Department of Justice momentarily grabbed the attention of the poker world thanks to its apparent connection to the legality of online poker in the U.S. Early reactions over Twitter and on certain sites made it sound at first as though after an especially rough year for online poker players we’d all been delivered some sort of nifty early Christmas gift by our otherwise Grinchy government.

Alas, the news turned out to be not as immediately significant as those early indications suggested. Sort of like reaching in your stocking, pulling out an intriguingly-shaped package, tearing it open and discovering you’d been given a box of dental floss.

That said, it might come in handy at some point. You know, like after you finally finish with the barely-used box of floss you got last year.

The memo -- an opinion regarding proposals made in New York and Illinois having to do with state lotteries -- is dated a little over three months ago (September 20), although it only became public on Friday. In fact, the timing of the memo becoming public is quite interesting and most certainly noteworthy (more on that below). It is signed by Virginia A. Seitz, Assistant Attorney General for the Criminal Division of the DoJ’s Office of Legal Counsel, and you can read it in full here.

The opinion shows Seitz -- and, by extension, the DoJ as a whole -- weighing in on a question regarding those two states selling lottery tickets online to residents who might not physically be within the state at the time of purchase. The opinion essentially says such sales are okay, thanks mainly to the fact that they do not violate the Interstate Wire Act of 1961.

In asking for the opinion, the states had argued that selling state lottery tickets in this manner (over the web, across state lines but to their own residents) shouldn’t violate the Wire Act since that federal law applies only to sports betting. The states also argued that the Unlawful Internet Gambling Enforcement Act of 2006 also allows for this sort of online gambling (i.e., lotteries).

The memo describes how in the past the DoJ’s Criminal Division had interpreted the Wire Act to cover other types of online gambling than just sports betting. Previously, the Criminal Division had taken the position that what the Wire Act prohibits “is not limited to sports wagering and can be applied to other forms of interstate gambling.” But Seitz also spells out how this particular way of reading the Wire Act “creates tension with [the] UIGEA, which appears to permit out-of-state routing of data associated with in-state lottery transactions.”

The Wire ActSo there are a couple of different issues being discussed here. One is the DoJ’s prior view that the Wire Act applies not just to interstate online sports betting, but other kinds of interstate online gambling, too. The other is the UIGEA clarifying that it is permissible for states to sell lottery tickets online to its own residents, even if those sales involve transactions that could be said to cross state lines (i.e., could perhaps be called “interstate” transactions in a technical sense).

On the first issue, this new opinion says that the DoJ’s Criminal Division’s previous interpretation of the Wire Act was “incorrect” and that the law “prohibits only the transmission of communications related to bets or wagers on sporting events or contests.” The explanation of this differing view takes up the majority of the memo (Sections II and III, starting on page 3 and continuing to the end of the letter on page 13).

As far as the second issue is concerned -- i.e., the UIGEA’s allowance for states to sell lottery tickets online to its own residents (even if those transactions happen to cross state lines) and whether that presents some sort of conflict or “tension” with the Wire Act -- that is set aside by Seitz as not really relevant because of the way this new opinion interprets the Wire Act as not covering lotteries.

“In light of that conclusion,” writes Seitz, “we need not consider how to reconcile the Wire Act with UIGEA, because the Wire Act does not apply in this situation. Accordingly, we express no view about the proper interpretation or scope of UIGEA.”

And that is that. So what we have is a fairly notable revision of the DoJ’s earlier stance regarding the Wire Act. And while the letter ends with that note saying that no view is being expressed regarding the UIGEA, it does along the way quote a passage from the UIGEA emphasizing that individual states can pass their own laws to allow intrastate online gambling: “The UIGEA specifies that ‘unlawful Internet gambling’ does not include bets ‘initiated and received or otherwise made exclusively within a single State’... and expressly provides that ‘[t]he intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made.’”

So what are we looking at here? Well, as Grange95 helpfully explains in his post “Why the DOJ’s Wire Act Opinion is No Big Deal for Online Poker,” the opinion regarding the Wire Act is significant insofar as “it removes one federal criminal statute from the weapons prosecutors can wield over online poker companies.”

Just my opinionThis is the reason why the Poker Players Alliance quickly issued a press release last Friday in which it “applauded the ruling” represented by the DoJ’s memo. (Of course, the letter isn’t really a “ruling” but rather an “opinion,” though it is still significant for the DoJ to weigh in like this.) The PPA is excited because getting the Wire Act out of the way would certainly be helpful when it came to passing federal legislation to license and regulate online poker (à la Joe Barton’s H.R. 2366).

Also important here is the way the opinion quietly defers to states when it comes to legislating intrastate online gambling. This is what the UIGEA says, too, although any state that might have been interested in pursuing such legislation was understandably hesitant in the same way the New York and Illinois lottery folks were -- not wanting to get carried away with allowing online gambling in their state without having some sort of okay from the feds first.

In his post, Grange95 further describes what he sees the memo representing as far as individual states offering online gambling is concerned. As he points out, no state allows it just yet. But that could change. Which brings us back to the interesting timing of the memo being made public last Friday.

Recall how it was just one day before -- on Thursday -- that the Nevada Gaming Control Board approved regulations for intrastate poker. In fact, six companies have already filed applications for licenses to operate online poker sites (Bally’s Technology, Caesars Entertainment, Cantor Gaming, International Game Technology, Shuffle Master, and South Point). Check out this CardPlayer interview with a member of the NGCB for more particulars of the vote and its implications.

This approval comes about six months after the passage in May Assembly Bill No. 258 in Nevada, approved by Governor Brian Sandoval and made effective on June 10. That’s the law enacting provisions governing the licensing and operation of online poker in Nevada.

In allowing for the licensing and regulation of online poker in Nevada, A.B. 258 includes a couple of provisions designed to keep the state from appearing to step on the feds’ toes. Before any licenses can be issued, says the bill, one of two things must first occur: “(1) A federal law authorizing the specific type of interactive gaming for which the license was granted is enacted; or (2) The United States Department of Justice notifies the Board or Commission in writing that it is permissible under federal law to operate the specific type of interactive gaming for which the license was granted.”

It appears that the memo that we all learned about on Friday would be an example of that second provision. Thus is the timing of last week’s events all the more interesting. (Thanks to Scarlet Robinson for her help sorting through some of these connections.)

The United States of AmericaI’m not completely clear on the extent to which we’re looking at the possibility of not just intrastate online poker (e.g., in Nevada), but interstate online poker as well, e.g., via agreements between states that have individually legalized intrastate online poker to form agreements and start sharing player pools, but that’s certainly part of the discussion here. Grange95 talks about the possibility of multi-state consortiums a bit in his “Wire Act” post as well as in a second post “Online Poker Legalization Will Ultimately Be a State by State Fight

My Dad just called me about an hour ago to say he saw something crawling across the bottom of the screen on CNN about online poker. Something about it being legal again, he said. I said, yeah, something is happening.

But it’s complicated. And it will take a while. A lot of behind the scenes politicking going on, and probably some state-vs.-state battles having already developed over the issue of online poker. And as far as our getting to play again goes, that is going to take some time, too. Indeed, for anything to get done, it’ll probably seem like pulling teeth.

Which reminds me, now that I’ve finished another turkey sandwich... I think I’ll go floss.

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