US Department of Justice and Horse-Racing Industry Lock Horns over Online Gambling

An expensive legal battle could be brewing between the US Department of Justice and the horse-racing industry according to a report in the Financial Times. At the center of the dispute is the legality of horse-betting online. The issue is expected to have a high profile in other news media in the coming weeks, at a level similar to the high profile dispute between Antigua and the US at the World Trade Organization.

The Financial Times article has focused on Twinspires.com, operated by the Kentucky Derby owners. According to Twinspires' Frequently Asked Questions section, the website operates legally in the US. The website goes on to cite recent legislation approved by the US Congress that protects companies offering horse-betting services based on the new regulations.

However, the Financial Times has reported that the Justice Department has confirmed interstate betting on horses via the internet is illegal. This position was disclosed in a recent letter to a Democrat legislator, who wrote that the status of interstate horse-betting remained unaffected by the Unlawful Internet Gaming Enforcement Act (UIGEA). The letter went on to state that the new laws are aimed at offshore online gaming firms and are not "intended to resolve any existing disagreements over how to interpret" federal laws on horse-betting. Previously the omission of horse-betting online from the UIGEA was thought to be Congress' attempt to protect the domestic horse-racing industry.

To make matters more complicated, a 2000 amendment to the Interstate Horseracing Act (IHA), which has legalized online gambling in some US states, takes precedence over federal laws that ban interstate gambling. The Financial Times article raises the question of the US Department of Justice initiating possible legal action and explores the consequences of such action. So far no prosecution against any horse racing firm that offers online betting services has been forthcoming, however the Justice Department has informed Congress that it is investigating its options.

However, some industry insiders believe the prospect of legal action is nothing more than a storm in a teacup. The Financial Times quotes one expert in its report, who said: "My gut feeling is that they haven't tried to prosecute somebody because they don't want to lose, because then you have case law that says they're wrong. And I think they would lose." And it would appear that many believe the Justice Department may not have the last word on the issue. "The IHA sets forth that this is legal," says the Kevin Flanery of Churchill Downs, the owner of Twinspires. "What we do is look at the law...The voice that matters in this situation is, in fact, Congress."

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