Should states be allowed to sell lottery tickets online? Should online gambling be legal?
The Justice Department has reversed its long-held opposition to many forms of Internet gambling, removing a big legal obstacle for states that want to sanction online gambling to help fix their budget deficits.
The legal opinion, issued by the department’s office of legal counsel in September but made public on Friday, came in response to requests by New York and Illinois to clarify whether the Wire Act of 1961, which prohibits wagering over telecommunications systems that cross state or national borders, prevented those states from using the Internet to sell lottery tickets to adults within their own borders.
Although the opinion dealt specifically with lottery tickets, it opened the door for states to allow Internet poker and other forms of online betting that do not involve sports. Many states are interested in online gambling as a way to raise tax revenue.
Estimates of the size of the online gambling industry vary widely, from as low as $6 billion to as high as $100 billion. But even at the lower end, Mr. Grossman said, “that’s tens of billions of dollars that goes offshore.”
New York has offered an online subscription service since 2005 that allows state residents to enter a string of Lotto or Mega Millions drawings.
The director of the New York Lottery, Gordon Medenica, said Saturday that the lottery had built a broader online gaming system for New York, but that the contractor that put the system together was wary about moving forward because it feared it could get into legal trouble.
“We’ve been waiting for a couple years,” Mr. Medenica said in a telephone interview. “We’re thrilled that this ruling has now come down and confirmed that our legal analysis was correct all along.”
As a result of the new policy, New York Lottery officials said they planned to add two additional jackpot games, Powerball and Sweet Million, to its current online lottery subscription service, and would allow New York residents to buy single-draw tickets online for the first time.
Mr. Medenica said it would take several months for the lottery to finalize the new offerings, and he said officials would “take a very cautious initial approach” in rolling out additional online options.
The District of Columbia and Nevada have both approved limited forms of Internet gambling, and New Jersey has been considering legislation allowing sports betting and other forms of Internet gambling.
Online gambling has been a focus in the Justice Department for years, but it burst into public view in April, when federal prosecutors charged the operators of three of the most popular online poker sites with fraud and money laundering.
The three sites, Full Tilt Poker, PokerStars and Absolute Poker, are based in Antigua and the Isle of Man, where online gambling is legal. That had made it difficult for American authorities to crack down on the operations, which had millions of United States customers.
But the Justice Department charged that the companies had used United States banks to process their transactions, violating the 2006 law that governed payment processing.
Those payment restrictions do not apply to transactions within a single state, however. With the ruling that the Wire Act applies only to sports betting, the way is clear for in-state online poker and other games.
Some gambling experts believed that the Justice Department’s position that the Wire Act prevented any Internet gambling conflicted with a federal appeals court decision, and therefore the new opinion simply confirmed what was already law.
But states have been reluctant to rely on the appeals court decision, handed down in 2002 by the United States Court of Appeals for the Fifth Circuit in New Orleans, because, in addition to the Justice Department’s continued crackdown, other federal and state court opinions offered conflicting directions.
The Justice Department previously tried to crack down on Internet gambling by going after companies that facilitated advertising for the gambling sites. In December 2007, Microsoft, Google and Yahoo paid a combined $31.5 million to settle federal charges that they promoted illegal gambling by serving ads for the gambling operations to other Web sites.