The U.S. Department of Justice Gambling Reversal Explained

The Department of Justice (DOJ) has called for all forms of internet gambling to be made illegal.

On Monday, an opinion from the DOJ’s Office of Legal Counsel was made public. In it, regulators reversed a 2011 ruling from Barack Obama’s administration that prohibited only certain types of gambling in the U.S., including sports betting.

The DOJ claimed that the 2011 opinion misinterpreted the statute, adding that the Wire Act, a 1961 federal law banning certain types of betting businesses, should cover all forms of gambling across different states. That includes betting done on the internet.

Most online gambling had already been made illegal, thanks to a number of state and federal laws, including the 2006 Unlawful Internet Gambling Enforcement Act. However, the DOJ’s decision to add the Wire Act to the list of laws should now make it even easier to bring cases against online gambling operations.

“The change here will have some impact, but it doesn’t mean that large swaths of gambling that were once legal are now illegal and vice versa,” an anonymous Justice Department official familiar with the matter told the The Washington Post. “Not to say that there couldn’t be some situation where this extends the reach; this is just one more tool.”

Ruling Likely to be Tested in Court

Unsurprisingly, the new reading of the law was not well received by the online betting industry. Fierce opposition to the ruling means that the opinion is now expected to be tested in the courts.

The biggest victims are companies who began selling lottery tickets online after the 2011 opinion, together with casinos that offer online gambling. Boyd Gaming Corp. (BYD) and Penn National Gaming Inc. (PENN) saw their shares fall 3.24% and 4.59%, respectively, after the opinion was made public.

British betting companies have also been impacted. Several U.K. gambling firms have been expanding into the U.S. to escape tight domestic regulations and take advantage of a Supreme Court ruling in May that paved the way for sports betting to be legalized in numerous states.

The share prices of William Hill Plc, Paddy Power Betfair Plc and 888 Holdings Plc fell 0.95%, 2.16% and 7.93%, respectively, in London trading.

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