It’s been more than two years since the Supreme Court invalidated the Professional and Amateur Sports Protection Act (PASPA), allowing states to regulate sports betting within their borders.
And while nearly 50 percent of jurisdictions across the United States have passed legislation doing exactly this, these states are limited by a federal law known as the Wire Act, which forbids, at its core, wagering on sports across state lines.
Which means that sports betting companies that have set up operations in a state like New Jersey, which allows for mobile betting, can take bets from someone sitting on his sofa in Montclair; they can’t do so when that same individual is sitting at his desk in Manhattan.
Of course, it also means that non-U.S. sports betting operators that have operations in places like Costa Rica or Panama can’t legally take action from the United States as well, while the Unlawful Internet Gambling Enforcement Act (UIGEA) similarly prohibits payment processors from facilitating wagers with these platforms.
Notwithstanding these laws, however, sportsbook operators continue to serve the United States illegally, much to the detriment of not only the legal U.S. operators, which have paid millions in licensing fees, but also to state coffers.
States lose out on the tax revenues that these operators generate, and to bettors themselves, who lose the protections that state regulators offer and are subject to chasing down a proverbial ghost in the event that their wagers are not paid out fairly.
Which begs the question: Why does the Department of Justice (DOJ) not do more to enforce these laws and hold operators who illegally serve the United States accountable?
Why do politicians like Lindsey Graham, who only a few months ago stood on a soapbox lamenting the role that he feared legal sports wagering would play in “ruining” college athletics, not seem to care that illegal sports wagering continues with impunity?
Federal prosecutions of illegal gambling have been uneven at best. Much of the gambling world well remembers the “Black Friday” of April 11, 2011, when owners and operators from PokerStars, Full Tilt Poker, and Absolute Poker were charged with money laundering, bank fraud and other criminal violations.
Beyond that, however, these prosecutions have been sporadic and mostly limited in scope, such as the Legendz Sportsbook case in 2013 that resulted in guilty verdicts but no jail time for any of the nearly three dozen defendants. Otherwise, most federal gambling prosecutions have been smaller cases directed to individuals with serious criminal histories — the “Al Capone for tax evasion” style of prosecution.
Whatever the reason for DOJ’s stifled activity, it is not for a lack of interest in the subject matter. Late in 2018, shortly before Attorney General Barr’s confirmation, DOJ quietly rushed to publish a poorly reasoned, contrived memorandum suggesting that the Wire Act applies beyond the context of sports betting, which threatened to disrupt state-regulated or even state-sponsored gaming activities.
The resulting litigation, which resulted in a judge enjoining DOJ from enforcing this opinion and is currently on appeal, nonetheless leaves one mystery intact: What motivated DOJ to overreach in the first place?
And relatedly, if DOJ is interested in sports betting, wouldn’t federal prosecutors be better served by protecting consumers and lawful enterprises alike from offshore sportsbook operators than by threatening the existence of state lotteries?
Fortunately, sports betting is also overseen by state regulators who seem to be more focused on what’s truly important.
For example, David Rebuck, who runs New Jersey’s Division of Gaming Enforcement, has made clear that he will do what he can to prevent operators from illegally serving bettors within his state. But he is limited to New Jersey, both in terms of the laws that he can enforce and the jurisdiction where he can enforce them.
Despite its incoherent approach to the Wire Act’s interpretation, there is still a logical path forward for Barr’s DOJ to do its job sensibly and effectively: Announce with crystal clarity that it has no interest in outlawing regulated (i.e., licensed) sportsbook operations in the United States, which is consistent with internal policies DOJ has promulgated on this topic.
But if the licensed sportsbook is an overseas, unregulated operation that serves the United States illegally, all bets are off, so to speak.
By prosecuting sportsbooks that serve the U.S. market illegally, our government would allow the burgeoning legal market to reach its full potential. If the goal is to protect bettors, protect the integrity of sports and maximize tax revenues, the time for action is now.
