US Policy Reversal on Online Betting Spurs Suit by New Jersey

TRENTON, N.J. (CN) – Hinting at a larger fight to come, New Jersey filed a federal complaint Tuesday for records on the new hurdle to online gambling that the Trump administration revived from a bygone era.

“Online gaming is an important part of New Jersey’s economy, and the residents of New Jersey deserve to know why the Justice Department is threatening to come after an industry we legalized years ago,” state Attorney General Gurbir Grewal said in a statement about the suit filed in U.S. District Court for the District of New Jersey.

Citing lobbying efforts by casino magnate Sheldon Adelson and others, Grewal added: “It’s especially important that we figure out whether this federal crackdown is the result of a lobbying campaign by a single individual seeking to protect his personal business interests.”

Along with Delaware, Nevada and Pennsylvania, New Jersey legalized non-sports betting in the years following a 2011 determination by the Justice Department under former President Barack Obama that non-sports betting in states does not violate the federal Wire Act.

This past November, however, the agency reversed course.

“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling,” the Justice Department announced in a 23-page opinion.

The Wire Act, passed in 1961 to fight the mafia, has long been debated among gambling enthusiasts and opponents due to its wording. The statute’s prohibition on “bets and wagers” made online or over the wires is immediately followed by “on any sporting event or contest,” leading some to believe it pertains only to sports betting.

For the Trump DOJ, the 2011 interpretation of the Wire Act prohibiting only online sports betting “represented a marked shift” in agency policy. Trump officials also saw significance in the omission of commas from a key sentence in the act, saying Congress intended to prohibit both sports betting and transmitting information related to other bets or wagers.

Denying that it sought to toss out the old interpretation arbitrarily, the Justice Department insisted that it was honoring agency precedent, and that the 2011 interpretation “devoted insufficient attention to the statutory text and applicable canons of construction.”

Some claimed at the time that the position reversal stemmed from significant pressure by casino moguls like Adelson who oppose online gambling. Adelson, who is CEO of the Las Vegas Sands, had formed the Coalition to Stop Internet Gambling lobby to combat the legalization of online gaming.

He is also a major Trump backer and is considered one of the top donors to the Republican Party during the 2016 election, giving well over $100 million to conservative causes. 

In early 2017, then-Attorney General Jeff Sessions vowed to revisit the online gambling policy, saying he had been “shocked” by the DOJ’s 2011 interpretation.

Former Arkansas Senator Blanche Lincoln, a member of Adelson’s coalition, applauded the DOJ under Trump after it reversed course last year, calling the opinion “a win for parents, children, and other vulnerable populations.”

Several online gaming associations and states voiced apprehension meanwhile that the reversal would drive a federal crackdown on gaming operations.

In February New Jersey filed an expedited request under the Freedom of Information Act to access Justice Department documents and information relating to the agency’s position reversal.

At the time, New Jersey Governor Phil Murphy warned that the new interpretation could jeopardize Atlantic City, which has seen a minor resurgence due to online gaming.

“For five years, our gaming industry and our regulators have relied on the Justice Department’s promises to develop a strong online gaming industry that generates hundreds of millions of dollars, and is key to Atlantic City’s vitality,” Murphy said in February after he FOIA request was filed. “With the stroke of the pen, the Justice Department is trying to take that all away.”

Grewal claims the Justice Department did not provide the requested documents within the mandated 20-day window, instead claiming that “unusual circumstances” have prevented it from fulfilling the request.

Pennsylvania Attorney General Josh Shapiro joined with Grewal in calling the reversal “deeply troubling,” and noting it could have a detrimental effect on state online lottery games.

A spokesperson for the Justice Department did not immediately return an email seeking comment.

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