A lottery company is suing the U.S. Department of Justice over a legal ruling last year which critics said could hurt the online gaming and sports betting industry in states such as New Jersey and Pennsylvania.
NeoPollard Interactive LLC and Pollard Banknote Ltd. filed the suit on Feb. 15 in the United States District Court for New Hampshire, seeking to strike down many aspects of the DOJ’s interpretation of the Wire Act, which, as of April 15, would ban any online gaming if it crosses state lines.
The DOJ’s Office of Legal Counsel unveiled the new interpretation in November 2018 and on Jan. 15, 2019, gave companies and states 90 days to comply with the ruling. The move overturns the Obama-era 2011 ruling, which paved the way for many states to enact infrastructures for online gambling, including New Jersey in 2013.
Former state Sen. Ray Lesniak, who played a heavy hand in a U.S. Supreme Court case knocking down the near-nationwide ban on sports betting, said that even if the online gambling is done in New Jersey, businesses could still be penalized because internet connection and payment processes cross state lines.
“This manifests in a reluctance on the part of regulated entities to make ongoing investments in introducing new products to market, innovating within existing product verticals and taking immediate steps to limit legal exposure,” reads a statement Lesniak sent from an “NJ gaming operator.”
Interstate gaming compacts would crumble and customers would stop using online gaming product.
“Without the interstate compacts, there is not enough customer liquidity within New Jersey to provide games on demand,” the statement adds. “Accordingly, we anticipate customers would turn to offshore, unregulated sites that have no integrity protections and certainly do not remit taxes to the state.”
According to the Friday suit, the Wire Act could not ban internet gaming as proposed because that was not the intent of the law — rather, it was a 1960’s era law meant to weaken the mob and organized crime through a crackdown on sports betting.
Both plaintiffs are seeking for the court to rule that the “Wire Act does not prohibit the use of a wire communication facility for the transmission of bets or wagers, the transmission of information assisting in the placing of bets or wagers, a transmission which entitles the recipient to receive money or credit for information assisting the placing of bets or wagers, unless those bets or wagers are on a sporting event or contest.”
New Jersey Attorney General Gurbir Grewal and Pennsylvania Attorney General Josh Shapiro are both opposed to the DOJ’s reinterpretation.
On Feb. 5, Grewal and Shapiro filed a federal Freedom with Information Act with the DOJ, seeking documents that might reveal the role that Las Vegas Sands CEO Sheldon Adelson, a powerful casino lobbyist and mega-donor to the nationwide Republican establishment, might have played in the DOJ’s decision.
“The Pennsylvania Gaming Control Board in a Jan. 18, 2019 letter to ‘all casino general managers and counsel’ stated ‘we no longer believe it is consistent with law…to locate interactive gaming devices and associated equipment in any jurisdiction other than Pennsylvania’, nullifying our legislative intent to be a national and international internet gaming hub,” Senate President Stephen Sweeney, D-3rd District, wrote in a Feb. 13 letter to the DOJ in opposition to the ruling.
Lesniak said the outcome of the legal challenge would still not have a binding or mandatory impact on New Jersey since it is in an entirely separate district.
“But it will be persuasive and coupled with the 5th Circuit Court could convince the DOJ to rescind the OLC opinion,” Lesniak wrote.
Both the 5th District Court and the 1st U.S. Circuit Court of Appeals, where New Hampshire is located, already ruled the Wire Act only applies to sports betting, a point cited in the Friday lawsuit.
Lesniak, at the backing of Sweeney, is eyeing potentially filing a declaratory judgement in the U.S. District Court for New Jersey, seeking a nullification of the DOJ’s reinterpretation of the law.
The ruling, Sweeney said in his Feb. 13 letter, “took 26 pages of tortured analyses of sentence structure and comma placements to determine that the clear language of the Wire Act applied to all forms of gambling.”