Last Minute Memo Throws A Wrench In Wire Act Lawsuit

A late DOJ court filing includes a memo suggesting its new Wire Act interpretation does not apply to lottery. It could get the NH Lotto suit dismised.

The legal compass of the Wire Act has changed once more with a new 11th-hour filing. The DOJ filed new evidence, including a memo on how the new Wire Act opinion applies to state lotteries. Or rather, that it does not apply to state lotteries.

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DOJ conducting a review of state lotteries

In the memo the DOJ filed, state lotteries are exempt currently from the opinion issued by the DOJ OLC on January 15, 2019. That new opinion stated that any transmission of a bet or wager across state lines would violate the Wire Act.

Deputy Attorney General Rod Rosenstein stated in the memo that Office of Legal Counsel’s opinion earlier this year did not address the issue of state lotteries or their vendors.

Vendors are companies like NeoPollard and Pollard Banknote that provide lottery technology. These companies successfully joined into the New Hampshire suit against the DOJ.

The DOJ alleges it is now conducting a review on the applicability of the Wire Act to state lotteries and will not be prosecuting such cases while the DOJ conducts the review. The group will look both at multi-state draw games like Powerball and Mega Million and online lottery games.

The 11th-hour legal maneuver by the DOJ

State lotteries and their vendors can breathe a heavy and collected sigh of relief for now. However, what follows from this new memo released by the DOJ is a downright brilliant and shrewd legal maneuver.

It is also one that can extricate the government from the pending litigation brought by New Hampshire and NeoPollard. The case impacts other states too. Many states with a stake in online gaming and lottery, including Pennsylvania, filed amici briefs in the case.

Because the DOJ exempts state lotteries and its vendors out of the most recent opinion regarding the Wire Act, this potentially leaves New Hampshire, NeoPollard, and Pollard Banknote with no standing to bring suit. The New Hampshire Circuit Court could dismiss the case because there is no expectation or fear of prosecution for violation of the Wire Act.

NeoPollard’s attorney speaks out

Matthew D. McGill of Gibson Dunn & Crutcher LLP, represents NeoPollard in the suit. He told Law360 (paywall) via email that the DOJ considers state lotteries as “felonies in progress.” McGill further stated:

“Desperate to avoid judicial review of its radical reinterpretation of the Wire Act, DOJ now is backtracking from the clear import of the reversal of position that it supposedly had so carefully considered. DOJ’s eleventh-hour statement that it may — or may not — further revise its interpretation of the Wire Act only underscores the arbitrariness of the reversal of DOJ’s long-held position that the Wire Act addresses only sports betting activities.”

As both sides have filed motions for summary judgment, all parties plus those who filed amici briefs will appear for oral arguments as scheduled on April 11.

Sheldon Adelson involved again

Two weeks ago, the National Association of Convenience Stores and Coalition to Stop Internet Gambling (CSIG) filed amici briefs on behalf of the DOJ. CSIG is made up of many conservative Christian groups. Sheldon Adelson founded the group in 2013. The convenience stores group has always opposed lottery expansion online.

This is not the first instance of alleged meddling by Adelson. NJ Attorney General, Grubir S. Grewal, filed a Freedom of Information Act request to uncover links between Adelson and the issuance of the January 15, 2019 OLC opinion. The Wall Street Journal has also alleged a direct link between Adelson and the DOJ’s OLC opinion.

What happens next for the DOJ Wire Act case?

The NH District Court is expected to rule on the summary judgment motion as early as May. An appeal will likely be filed to the First Circuit Court of Appeals. The First Circuit Court of Appeals has previously stated that the Wire Act only applies to ‘wagers on any sporting event or contest,’ that is, sports betting.”

Feinstein And Graham Are Trying To Spoil PA’s Online Gambling Party

In response to PA passing online gambling legislation, two US Senators are asking the DOJ to change the legal opinion that allowed the state to do it.

In response to Pennsylvania passing online gambling legislation last month, two US Senators are asking the US Department of Justice to change the legal opinion that allowed the state to do it.

Sens. Diane Feinstein (D-CA) and Lindsey Graham (R-SC) co-wrote a letter to Deputy Attorney General Rod J. Rosenstein asking that the DOJ revisit and withdraw its 2011 legal opinion on the 1961 Federal Wire Act. It was that same opinion that paved the way for PA and three other states to legalize and regulate internet gambling.

The DOJ issued its legal opinion that 1961 Federal Wire Act only applies only to sports betting in December 2011. It was in response to questions about the legality of online lottery sales. However, several states took this to mean the act did not apply to online gambling either.

Online gambling legislation in the US

Four states have since passed online gambling legislation, including Delaware, Nevada, and New Jersey. New Jersey’s online gambling industry is now averaging approximately $20 million a month in revenue. In October 2017, Pennsylvania became the fourth state to pass online gambling legislation. The state is still at the licensing and regulation stage. PA’s first online gambling sites have yet to open up.

In the meantime, Sens. Feinstein and Graham say the question of whether online casinos should be allowed in the US is one better left to Congress to decide.

They are now asking that the the DOJ reverse its position, fearing that if it does not, online casinos will soon “sweep across our country.”

Anti-online gambling fear mongering

This latest letter from Sens. Feinstein and Graham is a follow-up to one from three years ago. At that time, Sens. Feinstein and Graham said the the DOJ opinion could turn “every smartphone, tablet, and personal computer in our country into a casino available 24 hours a day, 7 days a week.”

It provides no evidence to back it up. However, the letter also claims online gambling preys upon children and society’s most vulnerable.

The internet itself, and online gambling, are still not yet 50 years old. However, the letter from Sens. Feinstein and Graham claims the DOJ opinion “reversed 50 years of interpreting the Wire Act to prohibit all gambling online.”

The letter also mentions a 2013 Federal Bureau of Investigation statement that online casinos are vulnerable to a variety of criminal activity, like money laundering. However, the FBI claims clearly referred to offshore online gambling operations, not online casinos that are legal and regulated by US states with a variety of consumer protections in place.

A reiteration of RAWA

The letter appears to be a reiteration of the arguments made in favor of a bill called the Restoration of America’s Wire Act (RAWA). RAWA was first introduced in 2014. The legislation would effectively rewrite the Federal Wire Act to ban most forms of online gambling. This includes state-regulated online gambling in PA, New Jersey, Delaware and Nevada.

RAWA is widely believed to be backed by casino mogul Sheldon Adelson.  He is founder, chairman and chief executive officer of Las Vegas Sands Corporation. Sands owns and operates Sands Casino Resort Bethlehem in PA.

Several drafts of RAWA have been introduced in both chambers of Congress, but have failed to advance.

Sens. Feinstein and Graham are clearly hoping to shut down online gambling in the US and take away states’ rights to pass online gambling legislation. However, they readily admit it is a growing market.

In fact, their letter suggests other states are “lined up to follow suit” after PA passed online gambling legislation last month.

Sands Bethlehem Fined For Underage Gambling

Sands Bethlehem has been fined $36,000 by the state of Pennsylvania for alleged underage gambling violations at its casino.

Sands Bethlehem has been fined $36,000 by the state of Pennsylvania for alleged underage gambling violations.

The Sands violations

The Pennsylvania Gaming Control Board announced the violations via its website this week. From the PGCB:

A fine of $36,000 was levied against Sands Bethworks Gaming, LLC for three instances in which individuals under the age of 21 gained access to the casino floor and gambled:
• A 20-year-old female was on the gaming floor for a period of one hour and 50 minutes on August 29, 2015 and wagered on a slot machine;
• A 19-year-old male was on the gaming floor for a period of two hours and 23 minutes on August 17, 2015 and wagered at multiple table games;
• A 19-year-old female was on the gaming floor for a period of four hours and 45 minutes on August 16, 2015 and wagered at multiple slot machines.

No other fines for underage gambling were levied against any other Pennsylvania casino. A fine was issued to Rivers Casino in Pittsburgh for an automatic shuffler error.

A report at LehighValleyLive.com had more details on the violations, and other Sands Bethlehem violations in the past:

The previous underage-gambling fines paid by the Sands were $48,000 for six violations under an order dated June 10, 2010; $48,000 for four violations, ordered May 23, 2012; $68,000 plus the $2,500 investigative fee for six violations, ordered March 13, 2013; $56,000 plus $2,500 fee for four violations, ordered Sept. 18, 2013; and $85,000 plus $2,500 fee for seven violations, ordered June 11, 2014.

Underage violations from an Adelson property?

Given the stance of Sheldon Adelson — the owner of Sands Bethlehem and a variety of other casinos around the world — on online gambling, the fines are pretty ironic.

Adelson’s lobbyists and politicians who support the Restoration of America’s Wire Act — a bill to ban online gaming — contend that children could gamble online if it were easily accessible. For instance, from the Coalition to Stop Internet Gambling website:

Underage Gambling: It will be nearly impossible to prevent minors from gambling online. State regulatory agencies will be unable to prevent adults from allowing minors to play  on their accounts. States will have little incentive to bar participation by minors living in other states, and could allow college students to gamble online by setting the minimum age at 18 years old.

That assessment has little merit based on the experiences of the regulated online poker and casino markets in New Jersey, Nevada and Delaware.

Seeing as underage gambling a major point of contention in the fight against allowing regulated online gaming, one would think Adelson’s brick-and-mortar gaming establishments would have a sterling track record on the subject. However, that is obviously not the case.

Sands Bethlehem is the only property that is opposed to legislation that would allow Pennsylvania online casinos.

The latest on online gambling in PA

Online gambling appears to be a part of ongoing budget discussions in the state, although to what extent is unknown.

At worst, it appears that online gambling will be considered in the spring, apart from budget talks.

Sheldon Adelson Could Stand Between Pennsylvania And Online Gambling Regulation

Casino magnate Sheldon Adelson is making a push against legislation that would legalize and regulate online gambling in Pennsylvania.

Nearly all Pennsylvania casinos, and a number of key legislators, are principally united in support of online gaming. But those hoping to cross the regulatory bridge must first contend with an imposing foe: Sheldon Adelson.

And backed by the casino magnate’s estimated $28 billion fortune, an oppositional campaign is already underway in the state.

Adelson, Sands exerting influence in Harrisburg

Sands Bethlehem boss Mark Juliano testified recently at a hearing of Senator Kim Ward’s Community, Economic and Recreational Development Committee. Echoing Adelson’s opposition, Juliano sharply criticized regulatory efforts.

“Today, proposals are being considered which will erode the successful progress we have made in Pennsylvania,” said Juliano, who also cautioned against allowing off-track betting and tavern gambling in the state. “Approving these proposals will undermine the operators who have built destinations and will place thousands of jobs at risk.”

Juliano said the additional options would counteract 11 years of operator investment in the state’s brick-and-mortar casinos. He noted Sands, which purchased and converted factory space once owned by the iconic Bethlehem Steel Corporation, has since poured almost $900 million into developing its Pennsylvania facilities.

Internet gambling is a job killer that seeks to move jobs from casinos in Pennsylvania to server farms in foreign countries,” he said.

Regulation, Juliano told legislators, would “hurt the businesses that many in Harrisburg say they want to help.”

A powerful force in Harrisburg, Sands Bethlehem currently commands a market share of 15.9 percent among Pennsylvania casinos, second only to the 16.4 percent share posted by Bensalem-based Parx.

Earlier this year, a poll funded by Adelson was blasted by State Representative John Payne, an online gaming advocate and chair of the Pennsylvania House Gaming Oversight Committee.

“The entire poll is designed and orchestrated to give the answers they want,” said Payne, who sponsored a bill to regulate online play.

Adelson-backed lobby active in Pennsylvania

The Coalition to Stop Internet Gambling, a lobbying group funded by Adelson, recently lauded efforts from Pennsylvania legislator Mario Scavello to thwart regulation. A ban was floated by Scavello, then a member of the Pennsylvania House, in 2014.

The bill proposed by Scavello, who is now a Senator representing the state’s 40th district, would have explicitly outlawed online gaming in Pennsylvania, punishing participants with fines and possible jail time.

Polls, however, indicated a resounding lack of support for the bill, and Scavello’s proposal soon lost traction.

CSIG made headlines last week after deluging Luzerne County with anti-online gaming mailers.

“Internet gambling is bad for workers and bad for families,” read the CSIG-branded literature, which encouraged citizens to contact Representative Aaron Kaufer with concerns. Kaufer confirmed last week that he had received several such phone calls.

On its website, CSIG assails virtual casino operators as irresponsible and reckless. Online gaming, the group says, could be co-opted for “nefarious purposes.”

Internet gaming “will reduce participation at brick and mortar casinos, with a commensurate impact on jobs in lodging, restaurant, entertainment and retail industries,” the group claimed.

CSIG lists a number of allies in Pennsylvania, including the Pennsylvania Pastors Network, led by former Representative Sam Rohrer.

Former senator spearheading campaign

Serving as CSIG co-chair is former Arkansas Senator Blanche Lincoln, who appeared last month in the pages of Harrisburg’s Patriot-News. In an op-ed column, Lincoln reiterated a number of key CSIG talking points.

“Could your child access these games?” Lincoln wrote. “Would they want to try it?  Would they want to see what it’s like to gamble, with your money?”

Lincoln has also speculated that virtual casinos could be used for criminal purposes.

“The FBI has said already that there is a definite threat there. It could be used for fraud and money laundering,” she said last year.

Lincoln’s lobbying firm, Lincoln Policy Group, was originally contracted by Adelson in 2014 as part of an “all hands on deck” push by the billionaire to outlaw online gaming.

Lobbying efforts continue elsewhere

Even in New Jersey, where no Adelson casinos currently operate, the 81-year-old resort magnate nonetheless attempted to influence online gaming policy in the state through personal ties to Governor Chris Christie.

Adelson also remains involved in efforts to outlaw online gaming at a federal level. South Carolina Senator and 2016 presidential hopeful Lindsey Graham, a key Adelson ally in Washington, recently introduced a bill to overturn the United States Department of Justice’s interpretation of the Federal Wire Act, the 2011 decision which paved the way for legalized online gaming in the country. Graham’s bill was written, in part, by Adelson lobbyists.

Since announcing his presidential bid, Graham has made opposition to online gaming a campaign centerpiece. Adelson has reciprocated with avid support for Graham, having donating to his past senatorial campaigns and, more recently, hosting fundraisers on behalf of a Graham Political Action Committee.

During the 2012 Republican primaries, Adelson and his family injected $20 million into the coffers of a foundering Newt Gingrich campaign, a move which substantially influenced the electoral landscape.

These Are The Hurdles That Could Trip Up PA Online Gambling Regulation

Pennsylvania appears to be on its way to offering legal online poker and casino games, but there are a few potential roadblocks to online gaming regulation.

With four online gaming bills introduced by Pennsylvania legislators in 2015 (and a fifth due shortly), proponents of online poker in the state have cause for a healthy sense of optimism.

But before setting up shop in Pennsylvania, virtual casinos must navigate a few more hurdles.

The Adelson factor

One major stumbling block faced by PokerStars and other platforms hoping to break into the Pennsylvania market is the staunch opposition of Sands chairman Sheldon Adelson.

The resort mogul, who has described himself as “morally opposed” to online gaming, is a prolific contributor to political campaigns and lobbying efforts, and a powerful force in both state and federal policymaking.

With Adelson’s Sands Bethlehem commanding a strong market position among Pennsylvania casinos, the billionaire will continue to play a central role in any talks surrounding proposed legislation. Adelson’s Pennsylvania campaign has already enlisted prominent lobbyist Blanche Lincoln, who last month criticized online gaming in a PennLive op-ed.

“The risk to our families, Pennsylvania jobs and our communities is just not worth the reward,” wrote the former Arkansas senator, adding the venture has been a “proven, consistent fiscal loser” in Delaware, New Jersey, and Nevada.

Speaking before Pennsylvania’s Gaming Oversight Committee in April, Sands executive Andy Abboud reiterated the company’s opposition to the proposed legislation.

“Our investment has had profound effect on Bethlehem,” Abboud said. “None of this investment would have occurred if Pennsylvania had Internet gambling. None of these good jobs would have been created.”

Abboud argued online gaming would undermine the state’s efforts to keep minors from participating.

“There is no way to prevent a player from logging on and handing their iPad to a minor,” he said.

Bridging the tax gap

Also standing between PokerStars and the Pennsylvania marketplace is the question of proposed tax rates. In HB 649, the last bill to be formally introduced, virtual casinos would be taxed at a rate of 15 percent, significantly lower than the rates at which live casinos are taxed.

But some lawmakers fear that such a low figure would cause casinos to divest from brick and mortar establishments, lowering overhead costs to cash in on higher Internet profit margins, in turn costing the state much-needed tax dollars.

In a memorandum last week, Senator Sean Wiley announced plans to draft a new online gaming bill – which would be the fifth such bill of the year for Pennsylvania – which would instead tax virtual casinos at a rate of 36 percent.

Wiley’s bill would be contingent on a proposed study “to determine the impact online gaming would have on existing brick and mortar casinos,” as the memorandum read.

Where exactly does Parx stand on PA online gambling issue?

Further complicating matters for virtual casinos is an amendment recently proposed by Parx, which would require on-site casino registration for online players. Parx Senior Vice President of Gaming Development Don Ryan said the tactic would “strengthen the relationship” between the casino and its clientele.

While the widely-criticized demand is unlikely to find its way into a finalized bill, it reflects the generally tepid approach of Parx and its boss Bob Green toward online gaming in Pennsylvania.

“The first priority must be to protect the bricks and mortar casino industry,” Green told the Pennsylvania gaming board last year. Green has said that New Jersey’s legalization of online gaming caused a decline in Parx poker room receipts.

But Parx has nonetheless prepared for the possibility of online gaming in Pennsylvania, announcing a partnership last year with online platform GameAccount Network.

Four Outlandish Things Andy Abboud Will Say At Thursday’s Online Gambling Hearing

A preview of what to expect from Las Vegas Sands’ Andy Abboud when he appears at this week’s hearing to discuss regulating Pennsylvania online gambling.

Andy Abboud, the Las Vegas Sands Senior Vice President of Government Relations and Community Development, has submitted written testimony ahead of Thursday’s online gambling hearing in front of the Pennsylvania House Gaming Oversight Committee, and as is usually the case with Abboud, his statements are long on fear and short on facts.

Here are some of the mischaracterizations, hyperbole, and outright lies Abboud will attempt to spew forth this week.

Claim #1: The Wire Act has always banned online gambling

In his written testimony Andy Abboud states, “Despite the fact the Justice Department’s Criminal Division had strongly and consistently interpreted the Wire Act as prohibiting all forms of online gambling.”

First, the Wire Act was written in 1961, long before the Internet. The first official opinion on the Wire Act as it relates to online gambling came in 2002.

And while Abboud is correct in asserting the DOJ was consistent in this application from 2002 through 2011, the courts were not in agreement.

So, for nine of its 54 years (2002-2011) the DOJ did officially interpret the Wire Act as prohibiting illegal online gambling.

Click here to learn more about the Wire Act and online gambling.

Claim #2: The 2011 Opinion is just, like, your opinion, man

Abboud will also claim, “No laws were changed by Congress…There was just an opinion letter – A letter which as Attorney General Nominee Loretta Lynch said during her nomination process, does not have the force of law and can be changed at any time.”

As I noted in this column and above, the Wire Act Abboud and his boss Sheldon Adelson want is the 2002-2011 Wire Act, which just so happens to be the very thing they are now railing against, an opinion letter by the DOJ.

And here is what Loretta Lynch had to say about the OLC opinion in full context:

“[…] it is my understanding that the Office strives to provide an objective assessment of the law using traditional tools of statutory interpretation. These tools would not include seeking the views of Congress, the public, law enforcement, or state and local officials on a question of statutory interpretation.”

“It is my understanding that OLC opinions customarily are treated as authoritative by executive agencies. I am not aware of any statute or regulation that gives OLC opinions the force of law.”

Claim #3: Land-based cannibalization and job loss

Andy Abboud apparently hasn’t gotten the memo that online gambling is now seen as complimentary to land-based gaming, since he continues to assert, “Internet gambling is designed to replace people with computer servers – because Internet gambling requires no community investment, no tradesmen, no dealers, and no maintenance workers or servers.”

The idea that online gambling will cannibalize land-based gaming and kill jobs has been debunked over and over again. Online gambling can also be a boon for a local economy.

What online gambling would do is create new jobs in the market, while at the same time insuring Pennsylvania’s land-based casino industry remains healthy and competitive.

The two industries won’t just live side-by-side, they will reinforce one another.

Claim #4: Technology doesn’t work

The last Abboud talking point I’ll address in this column is the following:

“Don’t be fooled by the technology companies that come before this committee today or in the future promising Internet technology that will be able to prevent kids from getting online to gamble – because it is nearly impossible to prevent minors from gambling online.”

Basically, what Abboud is saying is don’t believe what you see with your own eyes, don’t believe experts in the field or the people who regulate them, and forget all the data – just trust me on this…it doesn’t work.

Furthermore, the way Abboud portrays the inability of technology is somewhat surprising since Las Vegas Sands relies on the same technology to safeguard its own on-property online gaming options – yes, you read that right, you can gamble online at the Venetian Hotel and Casino in your hotel room.

Abboud’s go-to example of the inadequacies of the technology is of an adult signing on and then handing their phone to a minor – what seems like an ultra-rare occurrence. This is no different than an adult buying alcohol or any other age-protected item, which is a crime punishable by law whether it’s alcohol or online gambling.

And let’s not forget that same adult could hand their phone to any minor in any hotel room at the Venetian.

If I was GeoComply or CAMS or any other company involved in Internet technology I’d be frothing at the bit at this comment, as it’s patently untrue and borderline libel.

This claim is even more outrageous when you consider the number of cases of underage gambling and drinking Sands Bethlehem has been fined for over the years: