To techies who've decided they're above following politics or only pay attention to News if it's prefixed by 'Hacker:' the US is in the middle of a government shutdown.
It has been for some time now. You may have noticed some of the effects of this when it took you twice as long to get through the line at the airport. As it turns out, delaying salaries indefinitely tends to put a damper on worker morale. And TSA agents just stop showing up to work. Inspections of chemical factories, oil refineries, and water treatment plants also grind to a halt because the EPA can't afford its employees. Scientific research is put on hold because National Science Foundation grants can't be wired over to fund the research.
You can imagine my surprise, then, when I learned the government was able to put forth a herculean-by-government-standards effort to publicly declare a pre-2011 interpretation of the Wire Act. In the middle of the shutdown!
What is the Wire Act?
The Wire Act pretty much bans all online gambling in the US. The actual legal verbiage, though, reads:
"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers...shall be fined under this title or imprisoned."
Notice "wire communication" and not "Internet." That's because this thing was drafted in the 1960s when there really wasn't an Internet. In fact, the Wire Act's original intention was to combat the mafia by preventing bookies from taking bets and phoning it into their mob bosses across state lines. The DOJ interpreted it to mean all online gambling was illegal, though, when online gambling became a thing. Then in 2011 the legal definition was limited only to sports betting since the original legal document specifically identified sports events and contests.
Fast-forward to present day, the interpretation's back to meaning all online gambling (according to the US Justice Department) largely due to gajillionaire Sheldon Adelson funding the push for the reversal. Sheldon also coincidentally owns a lot of physical, offline Las Vegas casinos.
This hurts the average consumer
When online betting is banned, we see cases similar to what's unfolding in D.C. sports betting. The D.C. lottery has a complete monopoly on sports betting, so the uninformed customer is charged exorbitant fees to participate. Competition is outlawed and liquidity is at an all time low.
What does this have to do with crypto?
One of the more popular responses to the Wire Act re-re-interpretation:
Decentralized prediction markets can be made on a blockchain project called Augur. Basically, users on Augur make a prediction about something like, say, the weather in Paris next week, and people can stake money on certain outcomes. A lot of these bets are considered gambling.
On the protocol level, Wire Act wouldn't mean much for Augur. The argument would go something like: Augur is simply a decentralized protocol, overseen by a nonprofit foundation (the Forecast Foundation). They don't create the markets or profit from the markets directly. Kind of like building a toolbox anyone can use. If someone uses it for illegal activity, that's on them.
For the companies building on Augur, however, it's a different story.
Companies like Veil, Guesser and BlitzPredict, are going to have to ban US users on their markets and UIs for now or get slapped with a cease and desist.
On the whole this doesn't seem to change much considering the majority of Augur's traffic is non-US anyway.
What's going to happen in court?
Since the Department of Justice is part of the executive branch, not the judicial branch, this still has to be tested in courts. Assuming it passes, though, this weirdly might be a good thing for online sports betting.
There's no faster way to unite people than by giving them a common enemy.
When the Wire Act targeted online sports betting, only online sports betting companies and their customers cared. But with this new reversal, the Powerball, online poker, anyone in this market, really, will work to see the Wire Act get rewritten or revoked altogether. Because these companies all have skin in the game, it should be a completely different legal fight this time around. That is, if our government ever finds a way out of this shut down.
(Thank you to Joey Krug from Augur/Pantera Capital and Brett Richey from BlitzPredict for all their help with today's ToTD)
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