AG Grewal Files Amicus Brief Supporting New Hampshire's Challenge to Updated DOJ Opinion on Internet Gambling Legality

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Lee Moore

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TRENTON – Acting to protect New Jersey’s online gaming industry in the face of a U.S. Justice Department (DOJ) opinion that threatens its future, Attorney General Gurbir S. Grewal has filed an amicus brief supporting the New Hampshire Lottery Commission in its federal lawsuit challenging the opinion.

Issued in November 2018, the DOJ opinion holds that all forms of online gaming – not just internet sports betting – is potentially subject to federal criminal prosecution. In 2011, DOJ issued an opinion saying the opposite – that most forms of online gaming (aside from internet sports wagering) were permissible under federal law.

The amicus filing by Attorney General Grewal notes that, a year-and-a-half before DOJ reinterpreted its 2011 opinion, a lobbyist for Sands Casino CEO Sheldon Adelson – an avid opponent of online gaming – submitted a memorandum to DOJ seeking reversal of the agency’s Obama-era determination.

“The future of New Jersey’ online gaming industry is at stake because of DOJ’s unlawful about-face regarding internet gaming – activity that DOJ promised us was perfectly legal just eight years ago,” said Attorney General Grewal. “We will not stand by and let this arbitrary, politically-driven reinterpretation destroy a vibrant and essential industry here in our state. Online gaming is vital not only to the economic well-being of Atlantic City and New Jersey, and we are proud to stand with New Hampshire in challenging the opinion.”

In 2011, DOJ reviewed the law commonly known as the Wire Act and announced that, based on its review, most forms of online gaming were legal because federal criminal law only applied to internet sports wagering. Following that opinion, online lotteries and other forms of on-line gaming emerged and became popular in New Jersey and in other states across the country.

Now, however, DOJ has revisited the Wire Act and – without citing any new information – issued an opinion holding that any form of online gaming could violate federal law and be subject to criminal prosecution.

The New Hampshire Lottery Commission filed a lawsuit challenging the opinion and seeking to have its implementation blocked by the court on February 15 of this year.

Filed in U.S. District Court for the District of New Hampshire, Attorney General Grewal’s amicus filing supports New Hampshire in seeking to have the updated DOJ opinion declared unlawful and vacated under the federal Administrative Procedures Act (APA).

“Only an order and declaration that the 2018 (Wire Act) reinterpretation is invalid and of no legal effect, without regard to any geographic or jurisdictional limitation, will suffice” to protect the interests of New Jersey and other states that will be harmed if the DOJ opinion is allowed to stand, the brief asserts.

“Otherwise,” the brief adds, “the threat of prosecution will be sufficient to chill participation in New Jersey’s iGaming industry by many of the necessary partners to this enterprise, with resulting losses to the government and people of New Jersey.”

The amicus filing notes that, since its inception in 2013, internet gaming is estimated to have created nearly 3,400 new jobs and paid $218.9 million in wages to employees in New Jersey. Internet gaming has also brought significant resources to private and public entities, the brief explains, generating approximately $998.3 million in total sales in New Jersey from 2013 to 2016.

Over the same three-year period, internet gaming produced $124.4 million in tax revenue to New Jersey’s state and local governments. In addition, from November 2013 to the present, the New Jersey Division of Gaming Enforcement has collected a total of $35 million in fees.

Moreover, the brief observes, “it appears that New Jersey’s online gaming industry has not yet reached its full potential, as revenue has grown at the rate of 27 percent annually since 2013.”

The brief notes that New Jersey and many states across the U.S. have invested in and developed “thriving non-sports-related legal internet gaming industries” that in large measure help to drive their state economies.

Among other arguments, the brief asserts that DOJ had a duty under the APA to take into account the heavy reliance states now have on an industry that exists solely because DOJ assured them in 2011 that it was legal.

Noting that DOJ failed in that duty, the brief points out that the U.S. Supreme Court has repeatedly held that an agency’s reinterpretation of a statute “must be rejected” under the APA if it reverses a prior interpretation by the same agency “without adequately accounting for reasonable reliance interests that have accrued in the interim.”

New Jersey has invested heavily in legalized online gaming and has a substantial reliance interest to the extent the State has “budgeted and planned for a continuing return on its investment, as have operators, vendors and new employees” of the internet gaming industry, the brief argues.

Were the industry to close abruptly, the brief contends, “New Jersey would suffer a devastating setback. The State would lose: funding from taxes and fees; hundreds of jobs for its citizens; the secondary gains to its economy from the development of new in-state businesses and jobs; and of course, years’ worth of public and private resources that could have been expended on any number of other projects.”


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