Michigan Plans To Call Feds’ Online Gambling Bluff

The state of Michigan so far is considering the new Wire Act memo just a bluff against states' rights, and so it will proceed as planned.
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Michigan is calling the bluff, so far.

A new Department of Justice legal reading of the 1961 Wire Act was handed down earlier this month, leading to a strong reaction from the gaming industry. Effectively, the memo came thanks to the lobbying of long-time online gambling opponent Sheldon Adelson, owner of the largest brick-and-mortar casino company in the world.

The memo has been widely dissected, but the bottom line right now is that it’s just a memo in the absence of any enforcement action based off what it says. The opinion did cause the state of Pennsylvania to indicate that changes will be made to ensure that all forms of state-sanctioned gambling are happening entirely intrastate. The Wire Act applies strictly to interstate activity.

Still, the decades-old law and the latest interpretation of it reeks of trampling on states’ rights when it comes to gambling. The state of Michigan hasn’t legalized online casino gambling yet, unlike Pennsylvania, but the Wolverine State is so far unfazed by the feds. Both Michigan and Pennsylvania have active online lottery industries, which also could potentially be in the legal crosshairs under the vague and convoluted new Wire Act interpretation.

Online gambling to receive another push

As rumors swirled late last year regarding a new DOJ opinion on the Wire Act, Michigan lawmakers from both political parties weren’t too worried. A package of gambling bills, including the legalization of online casino gaming, was sent to desk of outgoing Gov. Rick Snyder, a Republican.

Snyder shocked even members of his own political party by vetoing the proposal, effectively saying that he wasn’t sure about more gambling in Michigan at this juncture. It was a very unexpected move by Snyder, who prevented the state from enacting a consumer protection and revenue-generating law on his way out the door.

Michigan State Rep. Brandt Iden, a Republican who sponsored the Michigan Lawful Internet Gaming Act during its two-year trek through the legislature, was part of an ICE North American webinar last week that focused on the impact of the Wire Act memo.

Iden reiterated that Michigan is moving forward with another stab at online gambling, despite the DOJ memo. There’s real promise this year, thanks to a newly elected governor who many feel will be receptive, and thus supportive, of a plan to modernize Michigan’s casino market and protect consumers from offshore, black-market platforms.

“At the end of the day, I really don’t think it will impact our efforts to move forward at all,” Iden said during the webinar. “First and foremost, it’s simply an opinion, that’s all it is. It would take some enforcement. I’m not sure that the federal government has the desire to fight the states on this again. The states are going to step up, especially those with iLottery. If you think of Michigan, we have a very robust iLottery with a tremendous amount of revenue. Plus, the upside for potential revenue from online gaming, as well as sports betting.”

Iden pointed to the success of the New Jersey online gambling market, which includes sports betting, as a reason why Michigan, and other states, aren’t going to miss out on the opportunity thanks to a half-baked memo coming out of D.C.

“We’ve seen the revenues from New Jersey, and that’s just the beginning,” Iden said. “We haven’t seen the bets come in from the Super Bowl yet. My colleagues in Michigan and others are saying, look, we recognize that [online gambling] isn’t just about the revenue. It’s also about consumer protection. It’s already going on in the marketplace. Is the federal government really going to challenge us? Probably not. This could be viewed similar to how states are dealing with marijuana legislation. The federal government is just sort of hands off. At the end of the day, is the federal government going to approach us on this?”

Memo meant to scare some states?

The new Wire Act interpretation doesn’t carry with it the force of law, so it’s really just a scare tactic at this point. Again, Michigan isn’t buying it.

“I believe this was really set up to slow states like Michigan, West Virginia, others, that have began to take the lead on this,” Iden added. “This was meant to slow us down. There is no desire on my end to do that. If you recall, the bills that came out of the legislature had tremendous bipartisan support, veto-proof support. If we had had more time I believe we would have discussed an override. We’re going to get right back on the horse and go after [online gambling again].”

Iden said that his legislation already included provisions for online gambling servers and related equipment to be housed in a Michigan casino, and not located in another state, which he thinks will help minimize legal risk for the state’s new industry whenever it launches.

“I think that this is going to be key going forward,” Iden said with regard to the servers and equipment.

Michigan unlikely to preemptively sue over the memo

An idea that has been floated in numerous places suggests having states challenge the Wire Act interpretation prior to any potential enforcement action.

According to Iden, lawmakers and other officials in Michigan are unlikely to commit state resources to fight against federal overreach prior to the actual act of overreach. New Jersey spent more than $8 million in legal expenses to have PASPA overturned. It was well worth the expense, but that strategy isn’t for every state.

“It comes back to a simple states’ rights issue,” Iden said. “I understand that sorting it out on the federal level might make it easier for everyone, but the whole point of New Jersey getting involved in this was to say that states control gaming and states have always controlled gaming. If the federal government isn’t going to take the initial first step, then it’s just their opinion. The DOJ put the opinion out and the onus is now on the federal government to try some sort of enforcement action with a state. It would be, for academic purposes, easier if the states would just step up and respond quickly by trying to secure their rights. But, from a state perspective, why spend the money?”

Iden questioned why a state should use part of its budget to file a lawsuit over the memo.

The re-introduction of the Michigan Lawful Internet Gaming Act, which seeks to also pave the way for sports betting, could happen in February.

Photo by Shutterstock.com


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