In the wake of the Department of Justice’s expansion of the Wire Act to include online gambling beyond sports wagering, the Pennsylvania Gaming Control Board (PGCB)  has decided to postpone the launch of PA online casinos.

PGCB Executive Director Kevin O’Toole broke the news during a 1-hour, 8-minute budget hearing this past week. O’Toole responded to questions from Rep. George Dunbar about the Wire Act’s effects on PA online gambling.

Basically, O’Toole told the PA House Appropriations Committee casinos need to review their online gambling operations. As a result, there will be a delay in launch dates. He told Dunbar:

“As soon as that reinterpretation of the Wire Act occurred, with the help of our office of chief counsel, we prepared a letter and we sent it to all the (casino) general managers and their council. What we wanted to accomplish in that letter was to make sure that the casinos thoroughly read that reinterpretation and looked very closely at their plan for implementing interactive gaming in Pennsylvania.”

Big Wire Act issue is server location

The gist of the DOJ’s reinterpretation is that the Wire Act applies to all types of internet gambling. This means iGaming operators and casinos would be limited to moving money and data within the state of Pennsylvania.

So, if an operator had a server in New York, for example, the Wire Act would prohibit the operator from transmitting information to and from Pennsylvania via that server. The information would be crossing state lines, which is a violation.

Originally, O’Toole pointed out, out-of-state operators planned on using their existing server infrastructure to run PA online gambling.

“There had been an expectation that those iGaming operators who were partnering with our casinos in Pennsylvania if they already had the infrastructure in another jurisdiction that they could leverage that to reduce the cost of implementing iGaming,” he said.

“But with that reinterpretation, it became quite obvious everything had to be on an intrastate basis and that would be probably the biggest challenge – not so much of a challenge but a modest delay to establish an adequate server location within the Commonwealth of Pennsylvania.”

The expectation is that online gambling will launch this summer.

Lack of consensus means murky legal landscape

The server scenario we presented above is theoretical, though. There’s no guarantee the DOJ will enforce all possible interpretations of the decision.

In fact, PGCB Chief Counsel Douglas Sherman told Dunbar there’s a moratorium on U.S. District Attorneys prosecuting Wire Act violations.

This means there’s some time for state gambling governing bodies, casinos, and operators to make sense of the interpretation of the Wire Act. Then they can safeguard themselves against any theoretical or practical punishment.

Sherman went on to say that there are rumors that the DOJ will provide, “some clarifications with some guidance.”

PGCB legal council says iGaming licensing fees safe

After O’Toole and Sherman gave their perspective on the immediate effects of the DOJ’s decision, Dunbar asked if there is any indication that Pennsylvania casinos will pull out of their purchase of iGaming licenses.

A fair question, considering how fluid the Wire Act situation is.
Sherman responded with decisiveness, telling Dunbar the money is safe. As Sherman said:

“We’ve not heard that any will be pulling out. I think they’re all examining their operation to make sure it’s an intrastate operation and they can fulfill the goal of opening an online gaming (operation).”