Nevada Receives Guidance from Justice Department

The U.S. Department of Justice has written a letter of guidance on the legality of online gambling, and the results don't look good for the future of Internet gambling in Nevada.

The Nevada Gaming Commission and Gaming Control Board had asked the opinion of the Department of Justice regarding the legality of Assembly Bill 446, a law passed in Nevada in June 2001 that makes Internet gambling legal in the state.

"As set forth in prior Congressional testimony, the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling."

-US Department of Justice

The Justice Department's letter, delivered Wednesday, says it believes that Internet gambling is illegal in the United States because of the Wire Act.

"As set forth in prior Congressional testimony, the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling," the letter states.

The Justice Department also provided guidance on the question of where it believes Internet gambling takes place--in the location of the gambler or in the location of the company providing the gambling service.

Internet gambling occurs in both places, the Justice Department decided..

"Additionally, it is the Department's view that the gambling activity occurs both in the jurisdiction where the bettor is located and the state or foreign country where the gambling business is located," the Justice Department writes.

Dennis Neilander, chairman of the Nevada Gaming Control Board, said that when AB 466 was passed, the legislature charged his group with finding out whether online gambling could be legally conducted in Nevada. The opinion contained in the guidance letter doesn't show a change of heart on the part of the Justice Department regarding online gambling, he said.

"This basically reaffirms the Justice Department's position in respect of that activity, so it makes clear to us that [Internet gambling] cannot be conducted within the U.S. and still be in compliance with all applicable laws, because the federal law, at least their interpretation of it, is that it prohibits that activity," he said.

Bryan Sierra, a public affairs specialist with Justice Department, acknowledged that the guidance letter is a reiteration of the department's previously held opinion on online gambling.

"It's been our position from quite some time that the federal law would prohibit Internet gambling in the forms that are being talked about and also that there are jurisdictions and locations including where the person who is engaging in the gambling is and also where the business operation is located," he said.

Sierra said the guidance letter is not an advisory opinion and does not indicate a formal position of the department relating to a specific case.

The letter does not mean that AB 466 will be repealed, Neilander said. Rather, the Gaming Control Board is looking at other forms of interactive gaming, such as offering online gaming to only people inside Nevada's borders. Neilander said the door hasn't yet closed on I-gaming in Nevada.

"There are various bills pending in Congress that could affect the legality of online gaming," he said. "There's also some court decisions that are making their way through the system that could have an impact. AB 466 also directed us to look at interactive wagering, which goes beyond the Internet."

The guidance letter could put a damper on any number of Nevada companies that might have had their sights set on the Internet gambling marketplace, even if the regulations for such businesses were still pending. Neilander said the letter definitively states that Nevada will not be home to companies that offer worldwide Internet gambling.

Some established gaming companies that call Las Vegas home, however, such as MGM Mirage and Station Casinos, have been making preparations for entrance into the I-gaming business. Station this week scaled back its efforts by converting its 50 percent interest in Kerzner Interactive, which operates the online version of Casino Atlantis, to an option to buy.

MGM Mirage, on the other hand, received an online gambling license from the Isle of Man last September and is going ahead with plans to launch an Internet gambling site. Neilander said the guidance letter wouldn't affect those plans.

"I think that they had proceeded under the assumption that it was illegal in the U.S., so they've attempted to design their systems in such a way that no one from the U.S. can place a wager," he said.

One industry expert, Frank Catania of the Catania Consulting Group, said the letter probably won't cause a ripple effect in New Jersey, where to pro-online gaming bills are on the legislative agenda.

"I'm sure [Assemblyman] Tony Impreveduto is still going to continue with it and there are alternatives--those alternatives are the casinos taking bets from within the state and ... outside of the country," he said.

To read the press release from the Nevada Gaming Commission and Gaming Control Board and the guidance letter from the Justice Department, click here.