The gambling industry scored a decisive legal victory over the Trump administration’s attempt to kneecap online gambling in the US – at the behest of a wealthy political donor.
The New Hampshire Lottery brought the case following a 2018 Department of Justice opinion that reversed a 2011 DOJ opinion that concluded the Wire Act only applied to sports betting and not online casino games, poker, or lottery.
But the victory wasn’t absolute. The DOJ decided not to appeal the case to the Supreme Court, leaving the ambiguity of the Wire Act intact and limiting the decision to the New Hampshire Lottery and doesn’t apply to other locales.
One company, IGT, was hoping to put a final nail in the Wire Act coffin. Unfortunately, the DOJ has decided it wants to keep the Wire Act door open, as the Department of Justice recently filed a motion with a Rhode Island District Court to dismiss the follow-up case brought by IGT.
You Have Nothing to Worry About
In its filing, IGT was seeking a declaratory judgment that the 2018 Wire Act opinion “is contrary to law and that the Wire Act applies only to bets or wagers on any sporting event or contest.”
The DOJ asked the court to dismiss the case, citing its belief that IGT lacks standing as there is no threat of prosecution against the company.
In its filing, the DOJ asserts:
“To the extent that IGT implicitly seeks to extend the benefit of favorable First Circuit precedent to other jurisdictions where it engages in non-sports gambling — jurisdictions where courts have not yet decided whether the Wire Act reaches any non-sports gambling — IGT fails to establish a credible threat of prosecution even in those jurisdictions.”
Taken at face value, the DOJ having no interest in prosecuting jurisdictions offering legal online gambling is good news. However, if you consider the history of the Wire Act in the era of online gambling, the DOJ’s argument – that IGT has nothing to fear – doesn’t exactly instill confidence.
Essentially, without a Supreme Court opinion or Congress amending the Wire Act, the threat of a new administration performing another about-face remains in place.
I think the law is clear. The Wire Act does not apply to non-sports betting. But you are correct that iGaming may never be free from politically motivated shenanigans.
— John A Pappas (@yanni_dc) June 22, 2021
And as the gaming industry saw in 2018, the fear of the unknown can unnerve lawmakers and regulators.
The DOJ’s On-Again-Off-Again Relationship with the Wire Act
The DOJ has had no less than four stances on the Wire Act’s applicability to online gambling since 2002, each of which deserves a brief explanation.
2002: The First Salvo
The DOJ’s first foray into the Wire Act as it pertains to online gambling arena was in 2002, in response to a query from Nevada regulators about a recently passed law that opened the door for online gambling in the Silver State.
The then-acting Assistant Attorney General in the DOJ’s Criminal Division, Michael Chertoff, responded by saying, “[T]he Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style gambling.”
North Dakota received a similar response from the DOJ in 2005.
2011: The Floodgates Open
In 2011, in response to queries by the Illinois and New York lotteries, the Office of Legal Counsel issued an opinion that directly contradicted the DOJ’s 2002 stance.
The 2011 opinion concludes that “… interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 USC. § 1084(a), fall outside of the reach of the Wire Act.”
The 2011 opinion led to the onset of the online gambling era in the US, with Nevada, New Jersey, and Delaware passing laws authorizing online casinos and/or poker and several states offering online lottery products within a couple of years of the opinion.
2018: The DOJ’s 180-Degree Pivot
A second OLC opinion issued in 2018 returned the DOJ’s Wire Act position to pre-2011. The new opinion, believed to be the work of anti-online gambling stalwart Sheldon Adelson, was immediately challenged, as the number of online gambling and lottery states had grown since the first wave in 2012-2013.
The ensuing lawsuit filed by the New Hampshire Lottery and its supplier NeoPollard, made its way through the court system, beginning with the United States District Court for the District of New Hampshire. The plaintiffs scored a decisive victory from District Court Judge Paul Barbadoro and later the First Circuit Court of Appeals.
As noted, the DOJ had the opportunity to appeal the decision, thereby bringing the case before the Supreme Court. Had the Supreme Court taken the case, it would have provided a permanent solution, but the Biden administration decided not to pursue the case it inherited.
2021: Nothing to Worry About… For Now
There was no official opinion from the DOJ in 2021. Still, the Department’s unwillingness to appeal the First Circuit Court of Appeals decision to the Supreme Court created the strange situation IGT’s suit sought to clarify.
That situation is one where the current DOJ has accepted failure and can’t/won’t enforce the 2018 opinion. Still, a subsequent DOJ could decide to enforce the opinion (and restart legal battles), or write yet another opinion on the Wire Act, thereby restarting the whole process.
All Evidence Points to a Positive Outcome
The industry was well-equipped to push back against the 2018 opinion, and the First Circuit ruling gives the industry even more ammunition to fight a future, negative DOJ opinion.
All that said, the 2018 opinion was a politically-motivated and amateurishly argued assault that can be easily improved upon by more sincere players.
the 2018 opinion was thrown together pretty haphazardly. Any of us could play devil's advocate and present a better argument.
— Steve Ruddock (@SteveRuddock) June 22, 2021
But What About Sports Betting?
Somehow the Wire Act (as a negative force) has become synonymous with online casinos, online poker, and online lottery. The arguments are almost philosophical, as they revolve around comma placement and what one of the most terribly worded laws does and doesn’t cover.
Yet the type of gambling it clearly covers is never mentioned, sports betting, and it’s not out of the realm of possibility that any interstate communications between sportsbooks, or even something as innocuous as customers accessing their accounts from out of state could trigger some form of legal backlash.
Upshot
The Wire Act will remain an obstacle to legal, regulated online casinos and poker in the US, as it provides a convenient excuse for lawmakers to dismiss legalization efforts. It’s also a potential ticking timebomb for the current sports betting landscape.
The simple solution is for Congress to rewrite this antiquated and incomprehensible law for the 21st Century. Of course, letting Congress “fix” the Wire Act could result in even bigger problems.
