States Challenge Federal Internet Gambling Ban


This January, the Department of Justice (DOJ) issued an opinion that threatens legal online gambling in the U.S. The tenuous rationale on which the opinion is based has raised some eyebrows, but the most concerning aspect is that the DOJ revisited the Internet betting issue at the behest and in service of a single casino owner, one who just so happens to be a major donor to the president.

After decades of rampant illegal online gambling, the DOJ issued an opinion that opened the door for states to regulate the activity within their borders. Since then, the legal online gambling industry in the U.S. has flourished. This newly legal market now supports millions of jobs, contributes billions of dollars to our nation’s economy, and has knee-capped the illegal market. But not everyone was happy with this development.

Republican Donor Asks Congress to Ban Online Gambling

Sheldon Adelson, the owner of the Las Vegas Sands Corp. and a Republican mega-donor, vowed in 2013 to spend “whatever it takes” to stop online gambling. He has since spent millions campaigning for a federal ban on Internet gambling with the aid of an army of lobbyists, many of whom are former members of Congress or DOJ officials.

These legislative efforts repeatedly failed and, as they failed, the states rapidly expanded legal gambling opportunities. Today, five states allow casino-style games online, many allow online lottery ticket sales, and most have legalized daily fantasy sports betting online. More importantly, just about every state that hasn’t already legalized some form of gambling online is currently considering legalization to do so in the future.

Bypassing Congress

Undeterred by their failure in Congress, Adelson and his lobbysists found a new opportunity with the election of Donald Trump. First, they sought the sought the support of Attorney General Jeff Sessions who, in his Senate confirmation hearings, vowed to revisit the DOJ’s 2011 memo. But Sessions was ultimately forced to recuse himself from the Internet gambling issue due to the fact that his personal lawyer, Charles Cooper, also worked as a lobbyist for Sheldon Adelson’s anti-online gambling efforts.

Sessions’s recusal did not deter Cooper and others from lobbying the Department of Justice, as records obtained from a Freedom of Information Act request reveal. In April 2017, Las Vegas Sands lobbyist Darryl Nirenberg send a letter to high-ranking DOJ officials about revisiting their 2011 opinion and included with it a legal rationale, written by Charles Cooper, to do so.

A little over a month after the letter was sent, these DOJ officials requested that the Office of Legal Counsel (OLC) reconsider the 2011 opinion’s conclusion that the Wire Act was limited to sports gambling. OLC finished its revised opinion on November 2, 2018—five days before Jeff Sessions “resigned” his post as Attorney General.  

Though Matthew Whitaker took over as acting Attorney General almost immediately after Session’s departure, the Department did not release the new opinion until January 14th—the night before the confirmation hearing for his nomined replacement, William Barr.

Did Adelson Get DOJ to Ban Online Gambling?

The arguments used by DOJ in its latest memo track those made by Cooper in the memo sent to the Department, even citing the same case law as examples. Though Whitaker denies that outside parties had any influence over DOJ’s opinion, he did not address the many individuals within the administration that have links to Adelson and his lobbyists, and may have influenced DOJ decisions.

A Cloud of Confusion

A major question about the new DOJ opinion is why the Department felt the need to revisit the issue. The first DOJ Wire Act memo was a response to questions from state authorities: a clarification of the how federal law applied to their proposed online lotteries. The new memo seems to have been prompted only by the demands of Adelson’s lobbyists and, instead of providing clarity, has created even more confusion about the law. Not only does the law, under the new interpretation, ban online gambling, but it is now also unclear whether or not it bans in-person lottery ticketing systems (if the devices are Internet enabled), interstate lottery games like Power Ball and Mega Millions, or even online trading of options, securities, stocks, and bonds.

Confusion may have been the purpose of the new opinion since it was uncertainty that had, for so long, dissuaded state authorities from regulating online gambling prior to 2011. But, unlike the pre-2011 era, state lawmakers cannot now sit back and wait for the federal government to decide the fate of online betting. States and residents have come to depend on the industry for jobs, economic stability, and tax revenue.

Indeed, a lawsuit has already been filed against DOJ in federal court by the New Hampshire Lottery Commission. And pressure from the judge overseeing the case has, reportedly, already forced the DOJ to push compliance with the new opinion from April to June.

Fortunately, this period of limbo will likely not last very long, as most legal scholars agree the new opinion is so poorly constructed it will not withstand challenges in court. Thus, it may only be a matter of months before the clarity achieved by the DOJ’s 2011 opinion is reestablished and the power to regulate intrastate gambling is rightfully restored to the states. Still, the opinion will no doubt have the chilling effect Adelson hoped for with states stalling proposals to legalize or expand online gambling and notoriously skittish payment processors refusing to service licensed operators in states where online betting is already legal. And, no matter how short-lived the logjam created by the DOJ’s opinion is, it should be gravely concerning to all of us that a single special interest appears to have manipulated an office of the federal government into bending the law to suit his personal interests.