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Department of Justice Changes Stance On Online Gambling: UPDATES

Last week the Department of Justice (DOJ) handed the online gaming industry a pretty sweet Christmas present by changing their interpretation of the Federal Wire Act of 1961. For all practical purposes, the new interpretation left basically all gaming except sports betting in the hands of State Governments.

Because the announcement came on the day before Christmas Eve, reaction from the industry was fairly muted. Now that Christmas is in the rear-view mirror, gaming industry figures have had an opportunity to speak out and analyze this abrupt about-face from the DOJ.

What it Means for Affiliates

For affiliate marketers, last week’s ruling could potentially mean big business in the coming year. But the keyword here is potentially. The DOJ’s announcement left online gaming in the hands of state governments, but how many states will be on board is anybody’s guess.

Throughout 2011, we’ve seen gaming companies getting their ducks in a row in anticipation of some form of legalized online gaming in the US. And now those plans are getting set in motion.

So far Nevada and Washington D.C. are well ahead of the rest of country when it comes to legalized online gaming and should be the first to implement the new plans. Just last week gaming giant 888 Poker applied for a Nevada gaming license. And earlier in the year they entered into a partnership with Caesars Entertainment Corp. to start developing online gaming.

There’s been some talk about whether states will be able to take international players and players from other states, but no one is certain how that will work out. But if more than a couple states enter into the online gaming business, there’s a good chance that there would be some kind of affiliate program.

What the Industry is Saying

In the wake of the DOJ announcement, opinions from gaming and legal experts have been trickling into the media. Opinions ran the gamut from excited to cautious optimism. Here’s some of what’s been said so far.

When asked what this opinion meant long term, Las Vegas gaming attorney Greg Gemignani told the Reuters News Agency, “This is just an opinion of the Department of Justice and only reflects what the Obama administration would bring charges on. Future departments of Justice could interpret the Wire Act differently.”

PPA Reacts

In an announcement on their website, Poker Players Alliance (PPA) Executive Director John Pappas saw the news as a step in the right direction, but not a total victory, “This is a much needed clarification of an antiquated and often confusing law. For years, legal scholars and even the courts have debated whether the Wire Act applies to non-sporting activity. Today’s announcement validates the fact that Internet poker does not violate this law.”

But he noted that the battle is far from over, “However this ruling makes it even more important that Congress act now to clarify federal law and to create a licensing and regulation regime for Internet poker, coupled with clear laws and strong enforcement against other forms of gambling deemed to be illegal.”

Alfonse D’Amato Worries

PPA Chairman, former U.S. Senator Alfonse D’Amato, saw a darker aspect in leaving gaming decisions to the states, “State by state licensing and regulation could result in a Balkanized online poker world where players across the nation would be limited in their choices of where and against whom they could play,” he said in a statement on the PPA site.

“This could potentially reduce the number of total players, reducing revenues state lawmakers project from this activity. At the same time, it would deter entrepreneurs from entering the online poker market, as there would essentially be 50 different sets of laws and rules to which they would have to adhere.”

Clearly, the PPA is going to continue to press for federally regulated, legal online poker.

Poker Sites Muted Reaction

One might expect that poker sites like Full Tilt and Poker Stars would be jumping for joy and trumpeting the announcement, but that wasn’t the case. As of this writing, neither site had any mention of last week’s announcement. Both sites did, however, carry the same message from the DOJ regarding their seized domain names that they’ve been carrying since Black Friday.

This muted reaction is likely an indication that both companies are interested in staying on the DOJ’s good side and see no reason to rock the boat with excessive celebration. It’s also an indication that they’ll be towing the PPA line and continue pressing for federally regulated gaming.

Going Forward

So what’s the next step for American iGaming in the wake of this latest turn? That appears to be entirely in the hands of the American States. Watch for Nevada, Washington D.C. and California to take the lead, but don’t be surprised to see a flood of states to follow over the course of the next couple of years. After all, gambling of one kind or another is legal in every state but Utah and Hawaii.

The legal battles over online gaming are far from finished, and don’t surprised if we see a few more twists and turns in 2012.

What do you think will happen with American iGaming in 2012? Let us know in our Online Gambling Laws and Regulations Forum.