Internet poker may no longer be illegal under federal law, according to a U.S. Department of Justice memo drafted by Assistant Attorney General Virginia A. Seitz in September 2011, but not released until December 23, 2011. The memo responded to questions raised by the states of Illinois and New York as to whether the Wire Act, 18 U.S.C. S. 1084 (2006), “prohibit[s] state-run lotteries from using the Internet to sell tickets to in-state adults (a) where the transmission over the Internet crosses state lines, or (b) where the lottery transmits lottery data across state lines to an out-of-state transaction processor.” The question arises out of the ambiguous statutory language in S. 1084(a) of the Wire Act:

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.

Illinois and New York argued that the Wire Act’s prohibitions were limited to sports-related bets or wagers–not to gambling generally–and that therefore, their proposed state lottery schemes would not be illegal under federal law. Both states developed plans to sell lottery tickets online to in-state customers only, but Illinois planned to route transaction data across state lines, and New York planned to route the transaction data through data centers and networks controlled in other states. The two states, therefore, sought advice from the DOJ’s Criminal Division about whether their proposed lotteries would violate the Wire Act.

The memo concluded that Section 1084(a)’s prohibitions are limited to sports-related wagers or bets. Specifically, “interstate transmissions of wire communications that do not relate to a ‘sporting event or contest,’ 18 U.S.C. S. 1084(a), fall outside the reach of the Wire Act.” Therefore, because the lottery schemes proposed by the states of Illinois and New York do not involve wagering on sporting events or contests, the Wire Act does not prohibit them.

Scveral states have interpreted the opinion broadly, concluding that online gambling is not prohibited by the Wire Act so long as it does not relate to any “sporting event or contest.” However, poker enthusiasts should not rejoice just yet, as several practical and potential legal obstacles remain. First, only Washington, D.C. and Nevada currently allow Internet gambling within their borders. A gambler in one state would not be able to place online bets in another state without an agreement between the two states or a reciprocity clause in both laws. Second, the new interpretation engendered a debate within the gambling industry over what structure the regulatory framework should take. If federal law does not ban Internet gambling generally, should states or the federal government be tasked with regulating Internet gambling? Third, “[w]ho gets the money?” While revenue from online gambling may help revive stale economies and help close staggering budget deficits, lotteries, Native American-run casinos, and traditional card rooms may all compete for a share in the profits.

Finally, the DOJ memo did not define a “sporting event or contest,” leaving interpretive issues for courts, federal and state governments, and private parties to sort out in the future. In fact, the DOJ memo discussed only state lotteries, without considering online poker, blackjack, and the like. One definition of “sport” is “an athletic activity requiring skill or physical prowess and often of a competitive nature.” While playing poker online may not be “athletic”–aside from the athleticism required to repeatedly click a mouse, which may over time lead to an injury much as other sports (carpal tunnel syndrome)–it does require skill and is “of a competitive nature.” How to demarcate the boundary between what is and what is not a sport has proved difficult enough in the offline world–take bowling, for example–such that we may see difficult line-drawing problems in the future. These questions and others will need to be addressed before the online poker industry and poker players may rejoice.

– Ilana Kattan

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