by Ron Mitchell

In a reversal from its long-standing interpretation, the
U.S. Department of Justice has determined online gambling does not violate
federal laws as long as it is conducted on non-sports. The decision could spur
a boost in gambling, mainly through state lotteries.

The Dec. 23 announcement, first reported by the Wall Street
Journal, illustrates an interpretation by the Obama administration that
reverses the way the law prohibiting illegal bookmaking was interpreted by
previous administrations. The decision appears to open the door to state
lotteries being able to proceed with offering online poker games.

Written by assistant attorney general Virginia Seitz, the
decision came in response to requests from Illinois and New York on whether
Internet gambling violated the Wire Act or the Unlawful Internet Gambling
Enforcement Act. Seitz said the federal laws prohibit online gambling on
sporting events but not lotteries.

“The ordinary meaning of the phrase ‘sporting event or
contest’ does not encompass lotteries,” Seitz said in the 13-page opinion.
“Accordingly, we conclude that the proposed lotteries are not within the
prohibitions of the Wire Act.”

Pari-mutuel wagering on horse races has been the only legal
form of online wagering in the U.S. Advance deposit wagering is legal across
state lines.

“Another fly has been thrown into the Internet gambling
ointment,” American Horse Council president Jay Hickey said Dec. 27. “The
recently released memorandum from the Department of Justice concludes that the
Wire Act does not prohibit states from selling lottery tickets to in-state
adults over the Internet, even if the Internet transmissions necessary to
complete the transactions cross state lines, because the lottery bets do not
relate to a sporting event or contest and therefore fall outside the Wire Act
prohibitions.

“This settles a long-time debate about whether the Wire Act
applies to all forms of wagering or just sports betting. The memorandum does
not specifically get into the relationship between the Unlawful Internet
Gambling Enforcement Act and the proposed Internet lottery transactions, but
notes there is an exemption in UIGEA for intrastate activities, as proposed here.

 “The DOJ statement
alludes to this and clarifies some of the issues surrounding (the Wire Act) and
these transactions. The position appears to lay a foundation for states to
offer lottery sales and perhaps other forms of wagering over the Internet provided
they are intrastate, don’t involve sports betting, and are not barred in the
state.”

The Wire Act was clarified in 2001 to specifically allow
interstate account wagering. The horse racing industry sought the language to
ensure activities permitted under the Interstate Horse racing Act were legal.

Hickey and other officials are taking time to digest the
opinion, which does not address pari-mutuel horse racing and the Wire Act.

“Clearly this will bring even more Congressional focus on
this issue in the months to come,” Hickey said.

Nelson Rose, a professor at the Whittier Law School who
often writes about Internet gambling, said the Department of Justice decision
will lead to an explosion of online gambling, both within and between states.

“The United States Department of Justice has given the
online gaming community a big, big present, made public two days before
Christmas,” Rose wrote at his gamblingandthelaw.com website. “President Barack
Obama’s administration has declared, perhaps unintentionally, that almost every
form of intrastate Internet gambling is legal under federal law, and so may be
games played interstate and even internationally.

Rose suggested the action has eliminated “almost every
federal anti-gambling law that could apply to gaming that is legal under state
laws.”

Tom LaMarra contributed to this story