A visit to Twinspires.com, a website operated by the owners of the Kentucky Derby, offers a reassuring message to betting enthusiasts worried about whether online gambling on horses is legal.

Under a list of “frequently asked questions”, Twinspires says it operates legally in the US. It cites legislation passed by Congress last year that toughened federal anti-gambling laws, while protecting companies that run internet bets on horses from the new rules.

What Twinspires and several other websites fail to disclose is that the US justice department disagrees with this assessment.

In a recent letter to a senior Democratic lawmaker, who was seeking clarification about the status of online horse betting, the department said its long-held view – that interstate betting (within the US) on horses online was illegal – had not been affected by last year’s passage of the Unlawful Internet Gaming Enforcement Act.

This law was targeted at foreign online gaming companies and explicitly stated it was not “intended to resolve any existing disagreements over how to interpret” federal laws on online horse betting.

Its exclusion of online horse betting was seen by some industry observers as a way for Congress to protect the domestic gaming industry by keeping some rules intentionally ambiguous.

At the centre of the legal wrangle between law enforcement officials and the industry is a dispute over whether a 2000 amendment to the Interstate Horseracing Act (IHA), which legalised online pool betting in some states, trumps federal criminal laws that prohibit interstate gambling.

The online horse betting industry says the IHA, in effect, amended the Wire Act – the main federal anti-gambling statute – but the justice department has stated publicly that it believes the Wire Act remains paramount and that interstate horse betting online remains illegal.

However, in spite of its tough stance, the department has never brought a case against a company that runs internet horse betting, although in testimony before Congress in April 2006 it said it was investigating the activity.

“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,” says Steven Barham, associate co-ordinator of the race track industry programme at the University of Arizona.

While most industries might be alarmed by a pronouncement by justice officials that it is operating illegally, the leading industry body takes the department’s latest opinion with little more than a shrug.

The willingness of established companies to defy the department highlights the industry’s confidence that it has the upper hand in its analysis of the law.

It reflects, too, the private view among Washington insiders that the industry, which is dependent on the internet for future growth, is too politically protected to be vulnerable to law enforcement.

“The IHA sets forth that this is legal,” says Kevin Flanery, vice-president of national public affairs at Churchill Downs, which owns Twinspires.com. “What we do is look at the law…The voice that matters in this situation is, in fact, Congress.”

One of the largest sites, TVG, is owned by Gemstar, the publisher of TV Guide that is partially owned by News Corp. An investment group controlled by Anthony Pritzker, a member of the family that founded the Hyatt hotel empire and a director at Evercore Partners, owns 9.3 per cent of Youbet.com, a publicly traded company in California. JPMorgan Chase also owns 6.5 per cent of the group.

Gemstar declined to comment, and Youbet did not return a call.

The Department of Justice did not comment.

Get alerts on News when a new story is published

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article