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US First Circuit Court Denies DOJ All-Inclusive Wire Act Opinion
By Shane Addinall Jan 25, 2021 LegalityA longstanding point of contention in the online gambling industry’s pursuit of US federal approval has been the DOJ’s misinterpretation of the Wire Act. In a watershed ruling, the First Circuit of Appeals rejected their current all-inclusive opinion.If ever there was a proof case for the adage that “history is written by the victors” it is the ever-shifting legal landscape surrounding online gambling in the USA. Before the Depart of Justice (DOJ) managed to write the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) into force, their primary point of contention was the Federal Wire Act.
The Interstate Wire Act of 1961 reads as follows:
“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 or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”
In 2018 the Department of Justice's Office of Legal Counsel (OLC) released a statement noting that in their opinion the Wire Act does in fact cover all forms of gambling, including lottery and casino games.
The then-Assistant Attorney General for the Office of Legal Counsel Stephen Engel said:
“While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling.”
Despite their opinion, any unbiased reading of the Act clearly shows that the Act refers to betting on sporting events and makes no provision for online casino games, given that it predates the internet by more than twenty years.
The Tide Is Turning
As online gambling begins to gain ground in the court of public opinion and receives state-level approval the issue of the OLC’s 2018 legal opinion has resurfaced as it could become a point of contention as more states look to regulate the practice.
In an interesting turn of events, it is not a push by the online gambling industry that turned the tide on the OLC’s opinion in this matter, but legal action taken by the New Hampshire Lottery Commission and its supplier NeoPollard Interactive (NPi).
The Commission and NPi were concerned that the OLC ruling may negatively impact the sale of online lottery tickets in the state. To secure their position they challenged the OLC’s position in district court and won with Justice Paul J. Barbadoro calling the OLC opinion an “erroneous” interpretation of the Wire Act.
The OLC, in turn, appealed the Barbadoro ruling in the First Circuit court of appeals, only to lose once again. The appeal was heard by Sandra Lynch and William J. Kayatta Jr who pointed out that the Wire Act does not refer to “interstate or foreign commerce” while also clearly stating that it was intended to address “any sporting event or contest”.
The Sword of Damocles
In a last-ditch effort to save face, the OLC argued that the Lottery Commission and NPi had to right to bring this action before the court as an April 2019 memo allowed lottery operators a 90 day “get out of jail free” card. This allowed them to operate legally until 90 days after the OLC “publicly announces its position on the applicability of the Wire Act to them”.
The First Circuit Court slammed this ridiculous notion stating:
“New Hampshire and its vendors should not have to operate under a dangling sword of indictment while DOJ purports to deliberate without end the purely legal question it had apparently already answered,” … “A state-wide operation integrating over a thousand retailers and multi-state relationships to produce almost 100 million dollars in net revenue does not strike us as an operation that can be easily wound-up in ninety days.”
This reference to “the purely legal question it had apparently already answered” addresses the fact that in several previous rulings the OLC had determined the Wire Act to only refer to sports betting. In this case, the 2018 opinion is a clear outlier and as such holds less value in their eyes.
Is This the End?
The question on everyone’s mind at this time is whether the OLC will exercise its right to appeal the First Circuit judgement in the Supreme Court?
As now it stands the fight against online gambling in the US seems a pointless one. The UIEGA is invalid due to each state working with the IRS to control the flow of revenue, the Wire Act has once again been proven to be pointless in addressing online casino games and the states who are offering casino games are balancing safer gambling and strict financial controls.
Yet the USA is known for this ongoing battle between federal and state legislation so only time will tell whether the DOJ will pursue the case or move on to more pressing matters.
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