- U.S. Justice Department’s online gambling restrictions to affect lotteries and other online betting platforms
- Affected companies to gauge the effect of the expanded federal prohibition
- The reversal of federal law has affected the shares of casino operators and suppliers
Back in 2011 the U.S. Wire Act only barred sports betting under the law that’s been passed 50 years earlier. Now, it bars all internet gambling which involves interstate transactions. Besides lotteries and online gambling companies, The U.S. Justice Department’s decision to expand a federal prohibition on internet gambling will also affect blockchain-based betting platforms. One of these platforms could be Augur, which is a cryptocurrency and an online betting platform that powers prediction markets. It can be used to bet on different things in the prediction markets such as political outcomes, economies, and sporting events.
Chilling effect on the industry
The federal law forbids transmission of related information and wagers across the state line. In line with this, it could also affect all online gambling transactions as it’s difficult to guarantee that no payments are routed through different states.
In a statement by an attorney with Glaser Weil Fink Howard Avchen & Shapiro LLP, Aaron Swerdlow, he said,
“This will have a chilling effect on investment and expansion in the industry. You are going to see legal challenges.”
Reversal of Federal Law
The shares of casino suppliers and operators dropped in response to the news. Shares in MGM Resorts International, fell by 1.3%, while International Game Technology Plc’s shares dropped as much as 3.7%.
According to the Justice Department, this new reading will be tested in the courts to see if judges could entertain challenges to the government’s view of the law’s scope. States that started selling lottery tickets online after the 2011 opinion could feel the effect of this change. Casinos that offer online gambling are also not exempted.
Billionaire casino executive Sheldon Adelson backed a coalition lobbying the Justice Department in 2017, to see if they can reconsider its 2011 decision which cleared the way for states to enable online gambling. Dennis Gutwald, an attorney with McDonald Carano LLP, also said that other businesses that could be directly affected are interstate lotteries that were established after 2011. On the other hand, it will not affect intrastate online wagering because patrons here are only betting from within a single state.
Last year, The U.S. Supreme Court ruled that states could also permit sports betting with the exemption of Nevada. As for New Jersey and other states that allow sports wagering, they should now restrict those activities to individuals who are physically within the state. The changes done by the Justice Department will be a challenge except between Delaware, Nevada and New Jersey as these states allow people from those states to play poker against each other online.