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New Ruling May Facilitate the Launch of Online Statewide Gambling

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A new Justice Department ruling clarifies the Wire Act prohibits interstate transmissions on sports betting—but not all gambling. The updated wording clears a path for state lotteries to offer online gaming, reported The Hill.

The September 20-dated ruling crossed the desks of Senate Majority Leader Harry Reid (D-Nevada) and Senator Jon Kyl (R-Arizona) on Friday, December 23.

"The DOJ has finally confirmed what we believed in Illinois to be true all along—that intrastate gambling is an issue that is within the sole discretion of a state to regulate, as it deems appropriate," said Melissa Riahei, general counsel of the online gaming firm U.S. Digital Gaming, to The Hill. "This is wonderful Christmas gift to state governments nationwide. States can now comfortably move toward the implementation of Internet gaming programs that can generate much-needed revenue to fund essential government services."

Online gaming has taken center stage this year, especially since April 15, when the FBI shut down the three largest online poker sites. The bureau indicted the executives of PokerStars, based on the Isle of Man; Full Tilt Poker in Dublin, Ireland; and Absolute Poker of Costa Rica for bank fraud and money laundering, reported Bloomberg. Then on September 20, the U.S. Justice Department accused poker stars Howard Lederer and Christopher Ferguson, directors of Full Tilt Poker, of operating a ponzi scheme and defrauding poker players out of $300 million, reported the Wall Street Journal.

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Opinions of the new ruling vary. The Hill reported that the casino industry at large objects to the Justice Department's shift in stance on Internet gambling on the basis that it opens avenues for unregulated sites to defraud players. But the American Gaming Association (AGA) ensures federal guidelines would implement strict measures to prevent and shut down illegal Internet gambling operators. "These federally mandated protections are vital no matter the interpretation of the Wire Act, and they must be enacted in order to avoid a patchwork quilt of state and tribal rules and regulations that would prove confusing for customers and difficult for law enforcement to manage," the AGA said in a statement.

At the National Indian Gaming Association’s (NIGA) mid-year conference, which took place October 17-19 at Mohegan Sun, Internet gaming emerged as a major concern among Indian tribes. While opinions about legalizing online gaming appeared divided in Indian country, the majority unified behind a nuanced position developed by NIGA and tribal leaders: Indian country opposes any Internet gaming legislation that doesn’t include protections for tribal sovereignty and tribal gaming. So far none of the known proposed legislation does.

Still, some tribes are preparing for states to legalize online gaming. For instance, the California Online Poker Association, a coalition of card rooms in the sunshine state led by the Morongo Band of Mission Indians, recently launched CalShark.Com, an online free-play poker room to promote legalizing Internet gaming. Similarly, the Barona Band of Mission Indians started its own Barona Online Poker, reported The Sacramento Bee. The trend is catching on among tribes, according to a lobbyist for the California Tribal Business Alliance, which opposes the current gambling legislation in the state. “It’s branding, creating customer loyalty, getting a database,” lobbyist David Quintana told The Sacramento Bee. “Then when something happens to make it legal they can flip the switch from a free site to a paid site.”