With the death of Sheldon Adelson, it’s time to seriously review the Wire Act

Now that the biggest opponent of the Wire Act has passed away, Hartley thinks it's time for the 1961 law to be repealed.

Will Adelson's death restart repeal movement?

One law that has been hanging over the heads of the betting industry more than any other is the Wire Act of 1961. Introduced by Attorney General Robert F. Kennedy and passed by the John F. Kennedy administration, the Wire Act was written to give the Department of Justice and state police a means to arrest organized criminals who were involved in various illicit activities, including gambling. The biggest problem with gambling was that most of the funds that organized crime used for dangerous and illicit activities, like drug trafficking, came from sports betting. So, Kennedy decided to pass a law that made it illegal to use "wired communication devices", i.e. telephones and telegraphs, to take bets from clients and also to transmit betting information across state lines. The crime syndicates had illegal bookmaking operations in every state, but they were difficult for the police to catch and convict. With this new law, if any bookmaker was caught trying to lay off action with a bookie in another state using a telephone or if they passed on gambling information, such as updated lines using a telephone, the police had grounds to arrest them. Sports betting was legal in Las Vegas at the time, but few bettors had the money or desire to travel thousands of miles to place bets on games, so underground local bookies were extremely popular and successful.

Eventually a different law that specifically dealt with criminal activity was passed in 1970 called the Racketeer Influenced and Corrupt Organizations (RICO) Act, which gave police grounds to arrest those involved in organized crime for any reason from drugs to fraud, as well as for illegal gambling. The section of the RICO Act that has always been applied with gambling is money laundering. The exact definition of money laundering is "the illegal process of concealing the real origins of money by passing it through a complex sequence of bank transfers and complex commercial transactions". The Feds have contended that with illegal gambling operations, criminals operated what appeared to be a legitimate business, but the money raised for that business was through gambling, which is an illegal activity under the criminal code. In the 1970s and early 1980s the RICO Act was generally used to arrest local bookmakers, but in the 1980s until today it usually applies to offshore operators who use telephone lines and the Internet to accept wagers. Jay Cohen from World Sports Exchange was the first offshore bookmaker to be found guilty of money laundering and a few years later David Carruthers from BetonSports and the two founders of NETeller (Stephen Lawrence and John Lefebvre) were charged under the RICO act as well. Other bookmakers have also been charged, but have not had the same notoriety.

Does Internet gambling apply?

While the Wire Act could have been specifically used for the charges against offshore operators, there has been a question as to whether the Internet really applies under the Wire Act, since it is not a "wired communication". As well there has always been the question of whether it only applies to sports betting or any form of gambling.

Internet gambling Wire ActThe Republican DOJ under George W. Bush suggested that the Wire Act applies to all forms of gambling and any means of transmission, whether wired or wireless. But the courts disagreed on the first part in 2002, when a Fifth Circuit court ruled that betting by the Internet was illegal under the Wire Act, but also ruled that the Wire Act only applied to sports betting. Nevertheless, the DOJ ignored that ruling and issued arrest warrants against any operator that provided gambling on the Internet, whether it was sports, casino or poker.

In 2006 the government finally tried to identify what was illegal or not by passing the Unlawful Internet Gaming Enforcement Act (UIGEA), after attaching it to the Safe Port Act. Under that law, any form of gambling was illegal on the Internet, unless the betting was completely confined within a state. It also gave carveouts for lotteries and fantasy sports. At the same time instead of charging individuals specifically, the rules under the UIGEA put the onus on banks to identify illegal transactions and block them or face fines and/or jail time themselves. It also said that the UIGEA did not supersede any current laws like the Wire Act or the Travel Act.

The confusing regulations for the UIGEA resulted in very little movement by states in the area of online gambling (except for daily fantasy sports), but in 2011 some states asked Attorney General William Holder to decide if online gambling was legal under the Wire Act or not. Along with casinos and poker, the states weren't sure if it was legal to offer lotteries online, considering many lotteries like PowerBall and Mega Millions span several states. After reviewing prior opinions, the DOJ gave its opinion that the Wire Act only applied to sports betting, affirming the 2002 Fifth Circuit Court ruling. This paved the way for states to move forward with Internet gambling and almost immediately states started licensing online lotteries. Some states also started looking at online casino and poker, but many were still spooked by the fact that the DOJ ruling was just an opinion and not a law. To date only New Jersey, Delaware, Nevada and Pennsylvania offer online casino wagering, but other states are still considering it and are hoping for more clarification. The reason, most have not pushed forward is that their lawyers have told them that the only Federal laws that still apply to gambling on the Internet are the Wire Act and UIGEA, and there was concern that if they started offering online gambling it would be taken away from them when a new government took power and changed the opinion. There was also some dissent among casino owners who wanted the new opinion declared null and void.

Sheldon Adelson's influence

Sheldon Adelson death Wire Act repealThe main threat to the DOJ decision came from Las Vegas Sands owner Sheldon Adelson, who made it his mission to reverse that DOJ decision and make all Internet gambling illegal. Adelson purchased the Sands Casino in Las Vegas, located in a primary part of the strip for $110 million and a few years later decided to transform it into a luxury hotel and casino. The Venetian hotel was built in 1999 and immediately became the talk of the strip. Its Italian based theme, including gondoliers giving rides on a little man-made pond, was something to behold. In 2007 a sister property, the Palazzo hotel was built as well. Adelson also built major resort hotel casinos in Macau and Singapore. With the huge investment in the Venetian and Palazzo and the popularity, Adelson decided that it was foolhardy to give away comps for regular casino play. Consequently in 2010 he told company executives that he was changing the focus of the company to ancillary revenues rather than casino play.

"We've essentially cut all of our comps except our most highly-rated players," he said. "No more comped rooms, no (free) food and beverage and no showroom credits. We're selling rooms.”

This new decision helped Las Vegas Sands become far more profitable, especially among convention attendees who stayed there at their company’s expense. The fact Adelson owned the Sands Expo Convention Center, which was practically attached to the hotel, didn’t hurt. Steve Wynn also lent his support to Adelson’s mission, although the other casinos believed online gambling was the future. As a result of this new focus, the DOJ decision to authorize Internet casino gambling the following year came as a big blow to the Las Vegas Sands.

At first Adelson was not completely opposed, but then concluded that it would in fact be detrimental to Las Vegas Sands' profits. The slight increase in online play from Nevada residents would not make up for the lost revenue from both casino patrons and hotel guests. Moreover, he was concerned that if online gambling became the norm across the United States, then trips to Las Vegas, including those going to conventions, would tumble as well. Consequently, Adelson asked some friends in Congress to create a new bill for him called Restore America’s Wire Act (RAWA) and he spent millions on lobbyists and a website to try and convince Americans that online gambling was dangerous. Effectively, he used the old concerns about underage kids betting, the inability to block problem gamblers online and concerns that the games would be rigged. He wanted the 2011 DOJ opinion struck down and replaced with the interpretation under George W. Bush that the Wire Act applies to any betting done on the Internet. From all accounts, the members of Congress he solicited didn't necessarily buy his reasoning, but felt owing to Adelson, due to political contributions from him. Adelson was one of the biggest contributors to the Republican Party. So, Congressmen Jason Chaffetz from Utah and Senator Lindsay Graham from South Carolina introduced the bill for him and got bi-partisan support from those on Capitol Hill who felt the support would help them in their campaigns going forward. Not surprisingly the bill went nowhere during Obama's term in presidency.

Revisit the Wire Act 

So that brings us to the current situation and with Adelson's recent passing it's time to revisit the Wire Act and determine if it still serves a purpose or whether it should be amended or repealed. The original purpose of the Wire Act is no longer relevant since crime syndicates using any form of communication can be charged under the RICO Act, and blocking the transmission of information for sports betting, which was the original intent of the law, is completely meaningless with sports betting being legal.

Even with offshore gambling operations the Feds have shown that they are willing to work with them to make things right. PokerStars, Party Gaming and most recently, the owner of 5Dimes, cut deals with the Feds to give Uncle Sam what was won from American gamblers via online gambling in exchange for wiping the slate clean, immunity from prosecution and the right to seek legal opportunities in the U.S. The only ones really being penalized with the Wire Act now are states that want to expand gambling options and the tribes who are restricted to offering Internet gambling to only those placing bets while on the reserve, which most tribes say is unfair. As one analyst said to me, "the Wire Act now is completely irrelevant and using it to stop sports betting makes about as much sense as trying to charge people in Colorado or Washington with a felony for possession of marijuana, citing a 1960 law, despite the fact that possession and purchasing marijuana is decriminalized in those states."

There is no reason the coming Biden administration would challenge the opinion they issued in 2011 and the Republicans only tried to change it to appease Sheldon Adelson. He is no longer a factor and other casinos, like MGM and Caesars, have stated publicly that they disagreed with Adelson's attempts to block online gambling and were hoping for some clarity by either repealing the Wire Act or amending it to make it clear once and for all what is legal online at a Federal level. The Supreme Court has already more or less indicated that they believe gambling is the sole discretion of the states when they cited the 10th amendment in repealing PASPA and many lawyers believe that if states really wanted to offer interstate wagering they can legally do so under the commerce clause, which mandates that if something is legal in two or more states then it is also legal among those states.

The courts, Congress and the states must also look at 2020 and realize that this was a wakeup call. Eventually the COVID crisis will end but many experts believe pandemics will be a regular issue moving forward. And with social distancing requirements and especially with the lockdown, casinos were only viable if they allowed wagering online. New Jersey, Pennsylvania and Delaware held their own during the pandemic due to legalized online gambling, but states that did not legalize, saw minimal casino revenue and huge overall losses. Moreover, many Tribal advocacy groups said they were decimated by the pandemic and are planning to petition the new government to overturn or amend the Wire Act because it is grossly unfair to the tribal groups who can't possibly survive only catering online to people situated within their reservations.

So, if there is a time to finally decide on what to do with the Wire Act, it is now. Joe Biden already hinted he wants to address it in his first term and there is little standing in the way of it being tossed out or seriously amended. It serves little to no purpose now and its main proponent has passed away. If it gets to SCOTUS, everyone except Amy Coney Barrett was on the bench when they chose to repeal PASPA, and the person she replaced, Ruth Bader Ginsburg was only one of three judges to dissent on the PASPA ruling. Some laws are just dinosaurs and the Wire Act should become extinct.

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