Obama's DOJ Gambles with Economic Recovery

President Obama’s Department of Justice placed a bet that online lottery ticket sales are the cure to states’ fiscal challenges when it sidestepped Congress and overturned 50 years of consistent interpretation of a law that forbade Internet gambling.

Through the years, gambling required careful, judicious consideration and planning at the state and federal levels to stop revenue-hungry operators from going all-in on the latest gambling-related quick fix. Released on Christmas Eve, the Obama’ DOJ’s policy change was a gift-wrapped -- but discreet -- reward to powerful political allies. But in placing more emphasis on timing than policy, the DOJ rushed to judgment, setting a dangerous precedent. 

Since the early 1960s, the gambling debate was framed within the parameters set by the Wire Act, which the Justice Department has long interpreted as prohibiting most forms of Internet gambling, including online lottery ticket sales.

In 2011, two cash-strapped states (President Obama’s home state of Illinois, and New York) wrote a letter asking the Obama administration to break with precedent and give them the ability to raise the revenue needed to fund bloated state governments by expanding online gambling sales. 

How did this administration, the most liberal administration in a generation, handle this request? Naturally, by ignoring constitutional checks and balances and singlehandedly rolling back the longstanding interpretation of the Wire Act. And it did so without input from consumer advocates, small business interests, or any impacted parties other than state bureaucrats looking to keep their paychecks. This change in policy removed legal barriers to online lottery ticket sales and other casino-style games, which are often run by foreign gambling conglomerates.

There is also some significance in which states have been quickest to take advantage of the DOJ ruling. The Wall Street Journal reports: “The lotteries' first test is in Illinois, where lottery director Michael Jones … beat back opposition from convenience-store owners to begin the first online lottery sales for individual drawings in the U.S. … Other state lotteries hope to push the envelope further into areas -- such as instant tickets, slot-machine games and blackjack -- that could invite more controversy.”

The piece also noted that “In Delaware, the lottery has developed a plan … allowing the lottery to offer online blackjack and slot-machines games, in addition to ticket sales.” 

The fact that Illinois (Obama’s home state) and Delaware (Vice President Biden’s home state) are the standard bearers for this ill-fated policy seems like a mighty big coincidence.

The regressive and short-sighted nature of such policies throws out the wisdom of experience and incentivizes strategies that do more harm than good. Furthermore, it differs from the reform-first approach that other states, especially Wisconsin, employed to control spending and decrease excess government waste before seeking additional revenue sources.

Quick revenue fixes, as Illinois and Delaware have sought to enact following the Obama administration’s ruling, will fail to cure states’ long-term fiscal imbalances, and will do most harm to the least fortunate.

Executive orders overturning a half-decade of consistent policy should not be delivered on the back of a napkin when no one is looking. Such important changes require Congress to step back from focusing on the immediate needs of a particular state and determine what is best for the country as a whole.

Instead of engaging Congress in an informed dialogue through the normal legislative process, the constitutional scholar-in-chief demonstrated his continued commitment to bypassing Congress if doing so hands political allies a victory.  

In order to ensure this doesn’t happen, Congress must act to check the Obama administration’s runaway rulemaking before it is too late.