Are Lobbyists To Blame For The Federal Stance On Online Gambling?

Are Lobbyists To Blame For The Federal Stance On Online Gambling?

March 20, 2019 3:00 AM
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Are Lobbyists To Blame For The Federal Stance On Online Gambling?

Earlier this year, the US Department of Justice (DOJ) issued an opinion regarding online gambling. Based on its rationale, the operations of online gambling may be threatened. However, several states have voiced their opposition to the DOJ, raising questions regarding the motivation behind the move to revisit the issue of internet betting. The general consensus is that this was done in order to appease the demands of a powerful casino tycoon who has a reputation of being the biggest Republican campaign donor to the President.

Lobbyist have too much power in the USA

The online gambling industry is currently legalized in just a few states. That being said, online casinos still offer casino games illegally in unregulated states. To address issues like this, a number of states are now pushing for the legalization of sports betting in light of the Supreme Court overturning PASPA 1992 in May 2018. Along with the push for sports betting legalization, a number of states are also looking to legalize online gambling in the process. This new push at iGaming legalisation has upset a few parties, most notably billionaire Sheldon Adelson.

Sands Chairman Wants Online Gambling Ban

Sheldon Adelson who is the chairman of the Las Vegas Sands Corp has vehemently opposed online gambling. He is the 12th richest man in the nation and recognized as one of the biggest donors to the Republican Party. He has vowed to spend “whatever it takes” to stop online gambling operations because he feels “compelled by his moral standard.” He points out that the beneficiaries of online gambling are rival casinos Caesars and MGM.

True to his word, Adelson has spent millions to campaign for a federal ban on Internet gambling. He was helped by a multitude of lobbyists including former members of Congress and some officials from the Department of Justice.

Despite his efforts, Congress has not made any action towards shutting down online gambling operations. In fact, the legal gambling industry has flourished as five states have now allowed casino-style games on the internet. Online lottery ticket sales are offered in many states as well as fantasy sports betting online. Almost every state has some form of online legal gambling and those that haven’t are considering the implementation in the future.

Congress Takes A Back Seat

Since Adelson was not successful in convincing Congress, he has shifted his attention towards the Executive branch. This time, he found new allies as Republican candidate Donald Trump won the presidency. Adelson’s camp enlisted the support of Attorney General Jeff Sessions and he stated his intention to revisit the DOJ memo in 2011 during his Senate confirmation hearings.

However, Sessions was forced to excuse himself from the proceedings due to possible conflict of interest. Sessions’ personal lawyer, Charles Cooper, was one of the lobbyists in Adelson’s campaign against online gambling.

The anti-online gambling campaign then focused on the DOJ as revealed by a Freedom of Information Act request. Adelson lobbyist Darryl Nirenberg sent a letter to the lead officials of the DOJ which also contained a rationale penned by Charles Cooper in April 2017. In the letter, Nirenberg exhorted the officials to revisit the 2011 DOJ Memo.

After a month from receipt of the letter, there was already a request for the Office of Legal Counsel (OLC) to revisit the 2011 opinion and dispute whether the conclusion that the Wire Act should be limited to sports gambling was correct. The OLC revised opinion was finished on November 2, 2018. Five days later, Jeff Sessions resigned as Attorney General.

Sessions was replaced by Matthew Whitaker in an acting capacity, but was eventually replaced by William Barr. Prior to Barr’s confirmation hearing, the DOJ released their revised opinion on January 14, 2019.

The similarities between the DOJ arguments were similar to those made by Cooper. Despite this, Whitaker denied that there was any outside influence that prompted the DOJ to release the new decision. However, Whitaker kept mum on the fact there were individuals in the DOJ who were directly or indirectly linked to Adelson and his lobbyists.

New DOJ Opinion And Its Impact On Online Gambling

The new opinion from the DOJ has been disputed as there is still a big question on why the DOJ needed to make a revision. There was no urgent issue or public protest that forced the DOJ to revisit it, as the DOJ had already clarified that the prohibitions in the Wire Act applied only to sports bets and wagers. The pressure was coming from Adelson and his company.

If online gambling is banned, there will be confusion over the legality of established online lottery ticket sales. Three states already have online lottery operations and although they operate within the states themselves, the new decision subjects them to a legal question.

It can also affect interstate lottery games like Power Ball and Mega Millions, national fantasy sports betting operations like Draft Kings and FanDuel and even online trading of stocks, securities and bonds.

The new decision has been opposed by a number of states. The opinion from the DOJ has already caused confusion as the scope of the prohibitions can be disputed and has resulted in legal questions being raised and lawsuits being filed. 

Opposition to new decision arise

The DOJ had initially given iGaming operators time till April to comply with the new opinion but recently pushed the deadline to June. The New Hampshire Lottery Commission has already filed a lawsuit and it is likely to be the first of many. Legal experts have stated that the decision has been “poorly constructed” and unlikely to withstand scrutiny in a legal proceeding.

It was also cited that in previous federal cases involving major credit card issuers, the courts upheld that the Wire Act prohibitions can only apply to sports betting. The DOJ would be in contradiction with these precedents.

Adelson Already Celebrating

The anti-online gambling camp has already declared victory in their cause in the aftermath of the DOJ memorandum. His Coalition to Stop Internet Gambling (CSIG) has released a statement calling the decision “a win for parents and children.”

How the DOJ will go about implementing this new opinion is currently uncertain. However, this new opinion will nonetheless derail the progress of online gambling in the coming months. States that are pushing forward with online gambling legalization will have to take into consideration this new opinion from the DOJ while iGaming operators will think twice about entering the market as their profits can be hit if the DOJ opinion gets implemented!

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