U.S. Justice Department lawyers issue softer view on gambling

The U.S. Department of Justice’s lawyers have opened the door to in-state Internet lottery by Illinois and New York.

The written opinion by the Office of Legal Counsel supports a narrow reading of the prohibition in U.S. law against online gambling. The opinion said that the prohibition relates only to betting on sports events and not all gambling.

Both Illinois and New York plan to use out-of-state processors to handle their internet lotteries. Both states asked the Justice Department if this was prohibited by the Wire Act that was set up to regulate gambling. The electronic signals would cross state lines.

Although most lottery tickets in New York would be sold over the counter, the state wants to sell virtual tickets to adults within the state using a computerized system.

The department’s criminal division supported a broad reading of the Wire Act that would make such activity illegal.

The legal office noted that the Wire Act conflicts with the newer Unlawful Internet Gambling Enforcement Act.

Both states argued that lotteries are not sporting events. The legal office cited the congressional record from 1961 when the
Wire Act was passed to show that the intent was to prevent gambling on sports events. Then the technology most used for gambling was the telephone. The Wire Act was updated to include modern technology in 2006.

State lotteries are exempt from federal government control as long as the activities remain within the state.

Said the legal office:

Given that the Wire Act does not reach interstate transmissions of wire communications that do not relate to a “sporting event or contest,” and that the state-run lotteries proposed by New York and Illinois do not involve sporting events or contests, we conclude that the Wire Act does not prohibit the lotteries described in these proposals.

The significance of the ruling is still not clear except that the use if Internet for lotteries in New York and Illinois may go ahead. However, some observers believe that the way is now open for the federal government to institute a national lottery to provide needed income for the U.S. Treasury. State lotteries have proved to be highly lucrative.

The George Bush administration was firmly against online gambling, and the Department of Justice carried out prosecutions against operators of gambling operations in Costa Rica, among others.

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