The Wire Act Ñ Don’t Fix What Isn’t Broken | Commentary

Posted March 18, 2015 at 3:48pm

The House Judiciary Subcommittee on Crime, Terrorism, Homeland Security and Investigations will hold a hearing soon on the Restoration of America’s Wire Act introduced by Rep. Jason Chaffetz, R-Utah. You may wonder why there’s a sudden interest in “restoring” the Wire Act of 1961. Oddly, the answer has to do with online gaming and a perceived executive overreach.

Chaffetz blames the Obama administration for opening the doors to states licensing Internet gaming. While the use of executive branch powers can be debated, there is no debate the Department of Justice correctly interpreted the Wire Act.

First, a little background. The Wire Act was enacted in 1961 to stop the mob from illegally “booking” sports bets nationwide via a wire. Thirty years later, in the 1990s, when offshore Internet gaming operators began taking bets from Americans, the DOJ took the position such activity violated the Wire Act, whether it involved sports betting or casino-style bets or wagers.

Since then, the DOJ’s decision has been called into question by the federal courts such as in 2002, when the highest court to examine the question, the 5th Circuit Court of Appeals (In re: MasterCard International Inc.), held that the Wire Act only applied to sports betting.

Lawmakers have also considered alternative solutions for addressing offshore gambling. In fact, the House has passed many different variations of Internet gambling prohibitions, but every one that received serious consideration respected states’ rights by exempting state-licensed intrastate bets from its prohibition or enforcement mechanism.

Between 1996 and 2006, Congress considered a series of bills to update the Wire Act, all of them authored by then-Sen. Jon Kyl, R-Ariz., and current chairman of the Judiciary Committee Rep. Robert W. Goodlatte, R-Va. Each of these would have applied the Wire Act to non-sports betting, but specifically exempted from the Wire Act intrastate bets accepted by a state-licensed entity.

In the end, Congress was unable to update the Wire Act; but in 2006, President George W. Bush signed into law the Unlawful Internet Gambling Enforcement Act. Though it did not amend the Wire Act, it contained a definition of “unlawful internet gambling” and it exempted from that definition state-licensed intrastate wagers.

Finally, in 2011, the DOJ found its expansive interpretation of the Wire Act was incorrect and rewrote the policy to meet the actual language of the legislation.

Despite all the evidence to the contrary, Chaffetz is convinced it was Congress’ intent when the act was passed, more than 50 years ago, to prohibit all forms of gambling over the Internet. RAWA would not “restore” the Wire Act, it would actually create a brand new federal law that would usurp states’ rights to regulate and police online gaming within their own borders. Perversely, prohibition would roll back successful consumer protection driven policies states have already established to authorize Internet poker and other forms of online wagering, leaving consumers completely unprotected and doing nothing to stop illegal offshore Internet gambling from continuing to attract U.S. customers.

Advocates of RAWA claim their bill will ban online gaming, yet it does nothing of the sort. RAWA contains two major exemptions for Internet horse racing and fantasy sports — both of which are widespread and available throughout the United States today. It also does nothing to address the current offshore and unregulated market that exists today in all 50 states. The only thing RAWA bans is states from authorizing and safeguarding online gaming for its citizens.

This is particularly dangerous because it prevents state regulators from setting strict licensing standards that require operators to use sophisticated age verification technologies to keep minors off the websites as well as technologies to identify and block problem gamblers. RAWA would also keep trusted and well known U.S. and internationally regulated companies from providing American consumers with a fair game and hamstring U.S. law enforcement from rooting out and prosecuting unregulated operators.

And federal lawmakers don’t have to wonder, “Can Internet gaming be regulated?” It is not a theory; it is reality. Not only can we now reference the current U.S. regulated Internet gaming market, we also have the benefit of learning from Europe, where Internet gaming has been successfully regulated for more than 10 years.

If Chaffetz is concerned about executive overreach, he should first consider how his own legislation would empower a federal overreach into states’ rights as established by the U.S. Constitution. Members of the subcommittee must recognize RAWA is not a “fix,” but rather an attempt to rewrite history at all Americans’ expense.

John Pappas is the executive director of the Poker Players Alliance.