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Wire Act Appeal Window Closes, Opening New Horizons for US Online Gambling
By Jeff Osienya Jun 23, 2021 LegalityThe US Department of Justice ends the Interstate Wire Act case after being a no-show in the appeal field. Read on to understand how it all came to being and the impact that the end of the case will have on the USA’s online gambling sector.In a breakthrough turn of events, the Wire Act case is officially resolved after the appeal window for the US Department (DOJ) of Justice expired without a pursuit to review the decision of the US Court of Appeals for the First Circuit.
Back in January, the New Hampshire Lottery Commission (NHLC) won its case against the DOJ in the First Circuit Court. The DOJ was given a chance to appeal the ruling, with a deadline of June 21st but chose not to, meaning that the Supreme Court battle that might have ensued is out of the question.
The Wire Act: DOJ’s Contrasting Opinions Over the Past Decade
Originally, the Interstate Wire Act was enacted in September 1961 to ban the use of phones or any other wire-based communication devices to place sports wagers across state lines. However, when internet gambling blew up, it has recently been interpreted to apply to online betting as well. And for the past couple of years, the US Department of Justice has been doing one-eighties on on the interpretation of the the Wire Act, leaving the USA’s gaming sector stuck in limbo.
The section of the Wire Act that has been causing all the confusion reads:
Quote“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.”
Going back to 2011 in the Obama era, the DOJ maintained that the passage above only applied to sports wagering. This led to a domino effect where US states started ratifying new gaming laws that abided by DOJ’s opinion at that time. The Justice Department’s interpretation of the section also affected how gaming operators serving the legal USA market set up their business strategies.
Come 2018, during Trump’s presidency, the opinion of the US Department of Justice took a U-turn, saying that only some clauses in the section applied to sports betting. Additionally, the 2018 DOJ interpretation pointed out that overall, the Wire Act was equally applicable to all other forms of gambling.
Why Did the New Hampshire Lottery Commission Go to Court?
As a result of the 2018 opinion, there was a lot of ambiguity in the US gambling sector. Initial plans to form interstate poker compacts to allow for much bigger player pools ground to a halt. Following this confusion, New Hampshire’s Lottery Commission teamed up with one of its vendors, NeoPollard Interactive (NPi), and launched a legal battle in federal court to challenge the reversed DOJ opinion in February 2019.
The duo’s primary motivation was the fear that the 2018 DOJ opinion of the Wire Act may effectively ban interstate lottery jackpots and argued that the language only applied to sports gambling. New Hampshire’s Lottery and its partner prevailed in federal court, and the case progressed to the US Court of Appeals for the First Circuit, which upheld the sports gambling limitation in January 2021. According to an account by Online Poker Report, part of the ruling read:
Quote"Under the government’s reading, anyone can transmit over the wires information assisting someone in placing a bet or wager over the wires on a non-sporting event, but the person receiving the assistance commits a crime if he then places the bet or wager. In short, there is no congruity between the two prohibitions in Clause One under the government’s reading. Conversely, if we read “on any sporting event or contest” as qualifying both antecedents, harmony is restored: You cannot use the wires to place a bet or wager on a sporting event, and you cannot use the wires to send information assisting in placing that bet or wager."
January’s ruling was a massive victory for the NHLC and NPi, but there was still a chance that the DOJ would challenge the First Circuit Court’s ruling and take the battle to the US Supreme Court. With the deadline expired, the sports betting interpretation of the Interstate Wire Act is now set in stone. After the First Circuit Court’s decision in January, the judges went further and transliterated the Interstate Wire Act in plain language as follows:
Quote"No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet."
What Does This Mean for USA’s Online Gaming?
While the NHLC and NPi went to court to protect their interstate lottery jackpots, the fight was much bigger than them. For one, the end of the Wire Act is also excellent news for online poker, which is so far the only iGaming product that the 2018 DOJ all-inclusive opinion had impacted.
Even so, house-banked games such as live dealer games, which are rapidly growing in popularity in the USA market, could greatly benefit from the upholding of the 2011 DOJ opinion. Without interstate limitations, live dealer studios could now serve patrons from different US regions. States that legalize iGaming don’t have to construct new live dealer studios to serve local players. Interstate progressive jackpots, which aren’t currently available in the US, will also benefit from the 2011 interpretation.
But then, it’s worth noting that technically, the January decision of the US Court of Appeals for the First Circuit is only binding for interstate lotteries in four other states under its jurisdiction, i.e., Rhode Island, Puerto Rico, Massachusetts, and Maine. With that technicality in place, Attorneys General from different states have already sent a letter to the DOJ urging it to endorse the January 2021 ruling and rescind the 2018 opinion. Essentially, the DOJ is the only body that will truly put the ambiguity of the Wire Act to rest across all US states.
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