AG Grewal Urges Federal Appeals Court to Protect New Jersey`s Online Gaming Industry from DOJ Crackdown

TRENTON – Continuing to fight for New Jersey’s online gaming industry against the latest Trump Administration efforts to shut it down, Attorney General Gurbir S. Grewal today filed a brief explaining to a federal court of appeals why federal law permits most forms of online wagering.

At issue is a November 2018 opinion by the U.S. Justice Department (DOJ) holding that all forms of online gaming – not just internet sports betting – is potentially subject to federal criminal prosecution. That was a major about face for the government; in 2011, DOJ had issued an opinion saying the opposite – that most forms of online gaming (aside from internet sports wagering) were permissible under federal law. And this reversal came just a year and a half after a lobbyist for Sands Casino CEO Sheldon Adelson – an avid opponent of online gaming – submitted a memorandum to DOJ seeking a change in position from the agency’s Obama-era determination.

Thankfully, a federal district court in New Hampshire held that DOJ’s 2018 opinion had misread federal law and the court issued an opinion specifically blessing state efforts to continue engaging in online wagering. DOJ has now appealed to the Court of Appeals for the First Circuit, continuing to put online wagering at risk.

“I was proud to help lead the successful fight for the future of New Jersey’s online gaming industry against the Department of Justice, and I’m committed to defending our victory on appeal,” said Attorney General Grewal. “Lawful online gaming is both effectively regulated in New Jersey and vital to the economic well-being of Atlantic City and our state. DOJ was right to promise in 2011 that online gaming was perfectly legal, and New Jersey staked a significant part of its economic future to that promise. We’re going to keep pushing back against the politically-driven reinterpretation.”

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.

But in 2018 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 it prevailed before the U.S. District Court for the District of New Hampshire on June 3, 2019.

The District Court stated, “After operating for years in reliance on OLC guidance that their conduct was not subject to the Wire Act, the plaintiffs have had to confront a sudden about-face by the Department of Justice.  Even worse, they face a directive from the Deputy Attorney General to his prosecutors that they should begin enforcing the OLC’s new interpretation of the Act after the expiration of a specified grace period.”

DOJ has now appealed.

As he did in the District Court, Attorney General Grewal is filing a brief before the First Circuit opposing DOJ’s position. Indeed, if the District Court’s judgment is reversed on appeal and DOJ’s 2018 reinterpretation ends up being adopted for enforcement of the Wire Act nationwide, it has the potential to end New Jersey’s iGaming industry.

Such a decision would pose a substantial threat to jobs and revenue in New Jersey, which developed a significant online gaming industry in reliance on the 2011 opinion.  Since its inception in 2013, the iGaming industry in New Jersey is estimated to have directly or indirectly created 3,374 jobs and paid $218.9 million in wages to employees in New Jersey.  Further, it has generated hundreds of millions of dollars in sales for private and public entities in New Jersey, and has been a substantial source of tax revenue to State and local governments.

Among other things, the amicus brief filed by Attorney General Grewal argues that DOJ had a duty under the federal Administrative Procedures Act (APA) to take into account the heavy reliance multiple states, including New Jersey, took on the 2011 DOJ opinion assuring them that the online gambling was legal.

The amicus brief filed by Attorney General Grewal yesterday, marks just one of a series of actions he has taken to protect New Jersey’s internet gaming industry following the DOJ’s 2018 reinterpretation, which have also included suing for public records under FOIA related to the likelihood that DOJ’s decision to reinterpret the federal Wire Act was driven by Sheldon Adelson and his lobbyists.

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