Legal

Will DOJ Ruling Put The Brakes On Legal Online Sports Betting?

Will DOJ Stop Legal Online Sports Betting?

As the Feb. 3 Super Bowl approaches — heaven for football fans and gamblers, including bettors who make wagers via online channels — federal authorities have brought a new level of uncertainty into the prospect of those legal bets. Now the operators of sports betting websites are wondering if the U.S. Department of Justice (DOJ) will essentially shut down a source of revenue made possible by a 2018 U.S. Supreme Court decision.

At issue is the Federal Wire Act, enacted in 1961.

That law — obviously passed when the internet was merely an idea of science fiction and computer scientists — prohibits betting via electronic forms of communication. A new interpretation from the DOJ “now makes the Wire Act applicable to any form of gambling that crosses state lines, including online gambling and online lottery,” according to an account. That new view of the Wire Act reportedly follows a long lobbying effort by Las Vegas casino owner Sheldon Adelson.

Gambling Progress

The new view of the Wire Act comes months after the Supreme Court in May 2018 struck down a 1992 law passed by Congress that made it illegal for most states to legalize sports betting within their borders. The decision came down 6-3, representing a victory for several states that would like to tap into sports gambling as a way to generate revenue and bring in tourism. New Jersey was the ringleader of the effort, though it did enlist support from 17 other states and three additional state governors.

Now, at least eight states have some form of legal online sports betting, with more states moving toward that goal.

Legal online sports gambling is providing business opportunities not only to payment services providers, but also to companies that sell digital ID authentication services. That’s pushing companies like casino site 888.com to invest in automated authentication processes, according to Russell Medley, 888’s director of fraud and risk management, according to PYMNTS research.

And the revenue potential has become much clearer in recent weeks as football teams competed in the playoffs, and other sports, such as pro basketball and hockey, went deeper into their seasons. That potential applies to multiple players and includes credit card providers, which stand to lose out on the interchange of legal gambling transactions.

Betting Revenue

According to an analysis released earlier this month, for instance, “New Jersey’s online sportsbooks accounted for $241.05 million, or 76 percent, of bets in December.” The NFL Super Bowl is expected to bring in some $100 million in revenue for New Jersey sportsbooks, though it was unclear how much of that would come from online bets. Another report pegs the total spending via online sportsbooks in the U.S. at more than $40 billion by 2020.

It is unclear whether the new view of the Wire Act will have major impacts on Super Bowl online betting, though that is unlikely, as the DOJ has said it will not enforce the new interpretation of the Wire Act immediately. But backers of online sports betting are understandably worried. Even if declared legal by one branch of government (or state governments), online gambling — much like legal pot — remains for the time being on that fuzzy border between lawful and illegitimate. Significant consequences for this fledgling market are not out of the question.

“This revised opinion will likely have serious ramifications for burgeoning online betting programs,” reads an article from Fast Company. “While there are already a bunch of laws that make most forms of online gambling illegal, programs that are currently kosher have not had to conform to the Wire Act. Now that they do, this could seriously hinder their legality.”

That said, there is not yet a clear idea about how the DOJ might enforce its fresh view of the 1961 Wire Act. The best idea of what’s to come, perhaps, comes from various reports in which anonymous federal sources talk down the idea that the growing market for legal online gambling will suddenly be shut down.

It’s hard to give odds on the outcome of all of this. But given the revenue already flowing into state coffers from online gambling, and the pull of the Supreme Court decision, a bet in favor of the industry doesn’t seem entirely unreasonable.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.

TRENDING RIGHT NOW