US DoJ Refuses to Provide Documentation on Unlawful Lottery Purchase Ban

by Hillary LaClair, Senior Editor
April 15, 2009

                The U.S. Department of Justice has declined to provide iMEGA, the Interactive Media Entertainment & Gaming Association, with information about blocked sales of state lotteries online by credit card companies in the company’s lawsuit with the U.S. 3rd Circuit Court of Appeals.  Perhaps due to the threat of the UIGEA, Visa and Mastercard have begun to deny state lottery purchases over the internet using the same text that applies to online casino gambling. However, the Unlawful Internet Gambling Enforcement Act specifically exempts online state lotteries from the law which prevents financial institutions from accepting payment for virtual gaming.

                The loss of Visa and Mastercard payments has cost New Hampshire and North Dakota a great deal in state lottery funding which is put toward, educational systems, road construction and similar federal programs.  In New Hampshire alone, online lottery tickets account for 24% of the industry’s revenue.

                “Credit card companies are finding out when their customers sign up for the online subscription service that it is a state lottery and coding their transactions as betting,” said Donna Thronson, director of communications for the North Dakota Lottery.

                In 2006, when the UIGEA was passed, the U.S. federal government placed banks and other financial institutions with the responsibility of enforcing the ban against internet casino gambling. Since its reintroduction late last year, the government has threatened the banks with more severe consequences if they do not comply.

                iMEGA has asked the DoJ to submit the information it has on the blockage of internet lottery purchase as a crucial evidence in its case against the UIGEA (iMEGA v. Keisler, et al), where it claims that the legislation has led to “overblocking” of online gambling transactions. The DoJ has since declined to provide the information, alleging that it was “inappropriate absent unusual circumstances.”

                The decision to withhold this information from iMEGA, evidence that gives the pressure group a great deal of clout in its case, has frustrated those involved in the case – including iMEGA chairman, Joe Brennan Jr., an active supporter of online casino gambling.

                “The Justice Department doesn’t think that there is anything ‘unusual’ about credit card companies blocking purchases that are clearly allowed by the very law they’re trying to defend?,” asked Brennan Jr. “The New Hampshire lottery is losing a quarter of its sales even though they’re supposed to be protected by this law. I’m not a lawyer, but that seems like ‘unusual circumstances’ to me.

                “It’s our right and it is consistent with the rules on supplementing the record to have this information added. Since the last brief was submitted to the court, the final regulations for UIGEA were published and have gone into effect, and as a result, the state lotteries – which are exempt from this law – have been affected. The Court should, and would, want to consider this.”

                Brennan Jr. believes that the DoJ has withheld this information because it proves the inefficacy of the ban on online casino gambling. iMEGA is not prepared to let this matter drop. Instead its legal team has prepared a formal motion to subpoena the information which is expected to be filed within two days.

               “I’m not surprised the DoJ does not want this Court to have this information. It’s proof of what iMEGA has said from the beginning: this law is so vague the banks and credit card companies would wind up blocking every gaming transaction – even the exempted ones – rather than risk violating the law,” Brennan Jr. concluded. “It’s no longer just a theory. It’s a fact.”


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