Online Gaming Stocks Nosedive on Justice Department Wire Act Reversal Opinion
Posted on: January 16, 2019, 11:00h.
Last updated on: January 16, 2019, 10:54h.
Online gaming companies focused on interactive casinos and sports betting saw shares dive into the red on news that the US Department of Justice (DOJ) was again modifying its opinion on the Wire Act.
William Hill, Paddy Power Betfair, and 888 Holdings, three UK-based gaming and sportsbook firms that have recently been expanding across the United States in the wake of the Supreme Court’s federal repeal of the sports betting ban, saw shares fall as much as seven percent.
GVC Holdings, which signed a multiyear and multi-state deal with MGM Resorts in October to provide online sports betting, saw shares plummet nearly 11 percent on Tuesday.
Late Monday, an opinion from DOJ Office of Legal Counsel (OLC) Assistant Attorney General Steven Engel was released that said a 2011 opinion reached by the office he now serves was erroneous. The 1961 Wire Act bans the transmission of interstate bets or wagers relating to “any sporting event or contest.”
Seven years ago, the OLC was asked by Illinois and New York if intrastate online lottery games were barred by the federal statute. Then-Assistant AG Virginia Seitz opined that no – the Wire Act applied only to sports betting, and not all forms of gambling.
The decision effectively spurred Nevada, Delaware, and New Jersey into legalizing online gambling within their borders. Now, Engel says that interpretation was wrong, and the Wire Act “prohibitions are not uniformly limited to gambling on sporting events or contests.”
Engel’s opinion was dated November 2, but released only this week. The gaming industry is hoping more clarification will be provided once the US government shutdown is over.
An anonymous Justice Department official talking with the Washington Post said the opinion won’t have an immediate impact on the three states where online gaming is legal, nor the continued expansion of sports betting. Interstate sports gambling was already banned by the Wire Act prior to Engel’s update.
The change here will have some impact, but it doesn’t mean that large swaths of gambling that were once legal are now illegal and vice versa,” the source explained.
While the Wire Act deals with interstate transmissions, former Sen. Blanche Lincoln (D-Arkansas), who lobbies on behalf of an anti-online gambling group, said the reversed opinion “aligns the Department’s longstanding position that federal law prohibits all forms of internet gambling.”
Only those of age and located within New Jersey, Nevada, and Delaware’s borders can access the legal online casinos. However, Engel’s opinion could threaten the three states’ internet poker compact that allows them to share player pools across state lines.
The complete interpretation is still ongoing, as legal experts and gaming industry analysts continue to debate the opinion’s exact scope.
Union Gaming analyst John DeCree said in a note that the paramount concern “is if banks and payment processors shy away from the gambling industry and temporarily halt payments for online gambling activities. This would make it more difficult for customers to deposit cash into the system,” DeCree stated.
He added that his firm doesn’t expect much, if any, change to current online gambling operations in the three legal jurisdictions. DeCree also said the Wire Act opinion shouldn’t immediately threaten sports betting businesses.