* Justice Department reverses decades of policy
* Sets stage for states to legalize, tax more betting
By Jim Wolf and Nicola Leske
WASHINGTON, Dec 26 (Reuters) - The Obama administration has
cleared the way for U.S. states to legalize Internet poker and
certain other online betting in a switch that may help them
reap billions in tax revenue and spur web-based
A Justice Department opinion dated September and made
public on Friday reversed decades of previous policy that
included civil and criminal charges against operators of some
of the most popular online poker sites.
Until now, the department held that online gambling in all
forms was illegal under the Wire Act of 1961, which bars wagers
via telecommunications that cross state lines or international
The new interpretation, by the department's Office of Legal
Counsel, said the Wire Act applies only to bets on a "sporting
event or contest," not to a state's use of the Internet to sell
lottery tickets to adults within its borders or abroad.
"The United States Department of Justice has given the
online gaming community a big, big present," said I. Nelson
Rose, a gaming law expert at Whittier Law School who consults
for governments and the industry.
The question at issue was whether proposals by Illinois and
New York to use the Internet and out-of-state transaction
processors to sell lottery tickets to in-state adults violated
the Wire Act.
But the department's conclusion would eliminate "almost
every federal anti-gambling law that could apply to gaming that
is legal under state laws," Rose wrote on his blog at
If a state legalized intra-state games such as poker, as
Nevada and the District of Columbia have done, "there is simply
no federal law that could apply" against their operators, he
The department's opinion, written by Assistant Attorney
General Virginia Seitz, said the law's legislative history
showed that Congress's overriding goal had been to halt wire
communications for sports gambling, notably off-track betting on
Congress also had been concerned about rapid transmission of
betting information on baseball, basketball, football and boxing
among other sports-related events or contests, she summarized
the legislative history as showing.
"The ordinary meaning of the phrase 'sporting event or
contest' does not encompass lotteries," Seitz wrote.
"Accordingly, we conclude that the proposed lotteries are not
within the prohibitions of the Wire Act."
The department expressed no opinion about a provision in the
law that lets prosecutors shut down phone lines where interstate
or foreign gambling is taking place.
Many of the 50 U.S. states may be interested in creating
online lotteries to boost tax revenues and help offset the
ripple effect of a federal deficit-reduction push.
The global online gambling industry grew 12 percent last
year to as much as $30 billion, according to a survey in March
by Global Betting and Gaming Consultancy, based on the Isle of
Man, where online gambling is legal.
Federal prosecutors in April charged three of the biggest
Internet poker companies with fraud and money-laundering along
with violations of another federal law, the Unlawful Internet
Gambling Act of 2006.
The government outlined an alleged scheme by owners of the
three largest online poker companies - Full Tilt Poker, Absolute
Poker and PokerStars - to funnel gambling profits to online
shell companies that would appear legitimate to banks processing
(Editing by Derek Caney)
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