Rosenstein Tries to Diffuse Wire Act Lawsuit Against DOJ

The United States Department of Justice, headed up by Attorney General William Barr, wants the lawsuit against them to go away.

The lawsuit stems from the Department of Justice’s Office of Legal Counsel’s own actions, a new interpretation of the 1961 Wire Act that it penned in early November 2018. The opinion was made public in January 2019 and undid the 2011 DOJ decision that relegated the Wire Act to applicability to sports betting only. This opened up the online wagering market so states could legalize and regulate online lotteries, internet poker and casino games.

The most recent opinion reversed that, sending all states with online lottery or gaming industries into a state of confusion.

Within weeks, the New Hampshire Lottery Commission filed a civil lawsuit against Barr and the DOJ in opposition to the opinion, with the goal of saving its lottery and the public education programs it benefits. The NHLC requested a speedy judgment on behalf of it and other lottery commissions around the US.

NeoPollard Interactive joined the lawsuit as the service provider for the online lottery upon which the NHLC operates. And other states did begin to chime in by filing amicus briefs with the US District Court for the District of New Hampshire, all on behalf of the futures of their own state lotteries.

On March 22, the DOJ filed a motion to dismiss the case on the basis that the court lacked jurisdiction for a Wire Act-related case. The document stated that the DOJ should make decisions regarding prosecution with OLC direction and should be “subject to the government’s prosecutorial discretion” rather than the court’s interpretation of the law. The document also contended that the plaintiffs had no standing to bring the case in the first place. And if the court chooses to rule against the DOJ in the end, the only possible relief should be declaratory in nature.

Several weeks later, the DOJ returned with Deputy Attorney General Rod Rosenstein taking the lead. He penned a letter this week stating that the OLC opinion does not apply to state lotteries or their vendors.

An interesting twist in Wire Act legal case. The DoJ is now contending that their new interpretation may not apply to state lotteries and their vendors. Huh?!?! Hopefully the judge sees through this maneuver. https://t.co/rB9ujknRsX

— Poker Alliance (@ppapoker) April 9, 2019

Lotteries, It’s Not You

The Rosenstein letter was introduced via a court filing by Steven Myers, a trial attorney in the Federal Programs Branch of the DOJ’s Civil Division, acting as counsel to the defendants. The letter was titled, “Notice Regarding Applicability of the Wire Act.”

With regard to the latest DOJ opinion, he wrote:

“The OLC opinion did not address whether the Wire Act applies to State lotteries and their vendors. The Department is now reviewing that question. Department of Justice attorneys should refrain from applying Section 1084(a) to State lotteries and their vendors, if they are operating as authorized by State law, until the Department concludes its review. If the Department determines that the Wire Act does apply to State lotteries or their vendors, then Department of Justice attorneys should extend the forbearance period for 90 days after the Department publicly announces this position. This would allow State lotteries and their vendors a reasonable time to conform their operations to federal law.”

Essentially, Rosenstein said that the DOJ attorneys are looking into it, so the lawsuit is useless right now. If, however, the DOJ attorneys find that lotteries are, in fact, affected by the Wire Act decision, they’ll have 90 days to comply.

All in all, the letter does little to allay the fears of state lottery operators like the NHLC.

It seems that Rosenstein wants the plethora of states with online lotteries out of the mix. If they drop the current lawsuit, the DOJ may be more willing to take on states like New Jersey with relatively small online gaming sectors, as there are fewer of them. In addition, lotteries affect many more people and their revenue many more programs, whereas other forms of online gaming could more easily be categorized as gambling. While this is purely speculation, it seems that Rosenstein went out of his way to ease the fear of states with lotteries only, without addressing any other form of online gaming.

A federal judge will probably not be too impressed by a federal agency moving the goalposts like the DoJ did today in an attempt to manipulate or undercut the court’s subject matter jurisdiction. Raising it for the first time in a reply brief is also somewhat sketchy. #WireAct

— Daniel Wallach (@WALLACHLEGAL) April 9, 2019

Case Moves Forward This Week

Oral arguments are set to begin on Thursday, April 11. Attorneys for the plaintiffs, defendants, and those granted standing per amicus briefs will be allowed to address the court. The schedule seems to be in place despite Rosenstein’s attempt to stop it.

Big news out of New Hampshire Wire Act teleconference. We have an oral argument scheduled for April 11, 2019 and the DoJ's 12 (b)(6) motion (failure to state a claim) has been converted to a rule 56 (summary judgment) motion.

— John Holden (@Johnsportslaw) April 5, 2019

Per Online Poker Report, a decision may come from the US District Court before the end of May, a prediction with which New Hampshire Attorney General Gordon MacDonald agreed.

NHLC Executive Director Charles McIntyre told OPR, “In a statutory issue, there are a lot of things to look at. We’re talking about a law passed pre-internet. Most laws have been updated to reflect technology, and this one obviously hasn’t. (Judge Paul J. Barbadoro) is a very deliberate, considerate judge, so I think he’ll take at least 30 to 40 days to make a decision.”

The estimate makes sense, especially in light of the fact that Rosenstein had previously delayed enforcement of the Wire Act opinion until June 14, 2019. He reiterated the applicability of this date in his aforementioned April 8 letter to the court. A judgment should provide time for the plaintiffs and affected parties to adjust to the new opinion if necessary.

Also, per McIntyre, New Hampshire must finalize a two-year budget by the end of June, and internet lottery revenue is a significant part of that. They plan to include $192 million from that revenue source, but only if the judge rules in their favor.

Those in attendance for the oral arguments will likely provide some assessment of the process upon its conclusion of this step this week.

Update on NH Wire Act case: Judge Barbadoro has entered an order converting the DoJ’s Rule 12(b)(6) motion to dismiss into one for summary judgment. As a result, both sides are asking for SJ in a case involving a pure interpration of law. In other words, this gets decided soon.

— Daniel Wallach (@WALLACHLEGAL) April 4, 2019