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Permit Given To US Online Gambling

by Glen Shapiro,, New York

30 December 2011

A United States Department of Justice (DOJ) memorandum opinion on online gambling, which was formulated in September this year, and could mean a significant increase for state tax revenues, has just been made public.

The DOJ’s legal counsel had been asked their opinion regarding the legality of proposals by the states of Illinois and New York to use the internet to sell lottery tickets to in-state adults. Previously, it had been considered that the Wire Act of 1961 prohibited states from conducting in-state lottery transactions, or other forms of gambling, via the internet if the transmissions during the transaction crossed state lines.

However, in essence, the DOJ has now said that interstate transmissions of internet communications that do not relate to a “sporting event or contest” fall outside the reach of the Wire Act, and, as the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not prohibit them. Equally, just as a lottery does not include the placing or accepting of bets or wagers on sporting events or contests, the same could be said, for example, of online poker.

It is now expected that a number of states looking for additional revenues to reduce their large fiscal deficits will move into online ticket sales and other forms of gambling, or will authorize private companies to operate online sites.

It has been estimated that online poker alone could be worth USD6bn in the US, and the executive director of the Poker Players Alliance (PPA) John Pappas released a statement, saying that the DOJ decision “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.”

He added that: “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.”

However, others opposed to online gambling are questioning, not only the provision of such an opinion by the DOJ, but also why its disclosure should have been delayed for three months by the government and then issued after Congress had gone into recess over the Christmas and New Year period.

A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at and a description of the report can be seen at
TAGS: tax | business | gambling tax | law | internet | gambling | licensing | legislation | United States | regulation

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