US DOJ Confirms No SCOTUS Appeal in Wire Act Case
Online poker wins. Online lotteries win. Any state with an interest in online gambling in any form wins.
The United States Department of Justice confirms that it will not appeal the decision of the US Court of Appeals for the First Circuit in the case of New Hampshire Lottery Commission and NeoPollard Interactive versus US Attorney General Merrick Garland and the DOJ.
Garland had the opportunity to appeal the case to the United States Supreme Court. However, his DOJ – which acted under the direction of the Trump Administration in 2018 – lost in the US District Court and again in its appeal. Garland decided not to take it any further. This gives standing to the decision against the DOJ, vacating its 2018 memo creating chaos around the Wire Act.
It reverts the prevailing understanding of the modern interpretation of the 1961 Wire Act to the 2011 memo from the DOJ’s Office of Legal Counsel. That memo stated that the Wire Act pertains only to sports betting, not to online lotteries or other forms of online gambling. That memo gave states the authority to legalize online lotteries and games.
In particular for poker, it gave states the authority to connect online poker player pools across state lines.
Update for an Outdated Law
On September 13, 1961, the Federal Wire Act became effective. Congress enacted the law to reign in organized crime-driven gambling activities across state lines.
“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission of 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.”
Never mind that sentence being clownishly long, it was also pertinent to 1961 in scope and understanding. Wire communications at that time – telephones – were truly wired. People placed bets over the phone.
In 2011, wishing to steer clear of the Wire Act, the Illinois governor’s office and New York lottery sought the advice of the DOJ’s Office of Legal Counsel. They wanted to sell lottery tickets on the internet and use payment processing companies and transmission lines based in other states.
Assistant Attorney General Virginia Seitz penned a response to the states. With a dozen pages of explanation, she determined that “the Wire Act does not reach interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’” and that the games in question “do not involve sporting events or contests.” More importantly, she wrote:
“In sum, the text of the Wire Act and the relevant legislative materials support our conclusion that the Act’s prohibitions relate solely to sports-related gambling activities in interstate and foreign commerce.”
We now refer to this as the 2011 DOJ memo – or decision, ruling, opinion, or interpretation – as the prevailing and modern understanding of the Wire Act.
And it is the basis by which New Jersey, Nevada, and Delaware first legalized online poker and signed a multi-state online poker sharing agreement to connect player pools over state lines. Pennsylvania, West Virginia, Michigan, and Connecticut all legalized online gaming by the same precedent.
Under the Influence of Sheldon Adelson
In January 2019, the general public discovered that US Acting Assistant Attorney General Steven Engel penned a reversal of that 2011 opinion. From the Office of Legal Counsel, he declared that the Wire Act was not limited to sports betting. “This opinion supersedes and replaces our 2011 opinion on the subject.”
Oh boy! This new #WireAct opinion is a doozy. R.I.P. to Internet gambling. online lottery, and possibly DFS and any Internet, email, or social media based marketing campaign for casinos (i.e., assisting in the placement of bets or wagers). Might be time to amend!! #gambling
— Jennifer Roberts (@JRoVegas) January 15, 2019
What prompted such a reversal, seemingly apropos of nothing? Casino magnate Sheldon Adelson, who since died, had fought for years to outlaw online gambling. He financed many politicians’ campaigns for Congress in the hopes that they would pass the Restoration of the Wire Act (RAWA) bill. He started a lobbying group, the Coalition to Stop Internet Gambling (CSIG), that made numerous false claims about internet gambling. And he admitted in 2013, “I am willing to spend whatever it takes” to stop online gambling.
Adelson did just that, found investigations by the Wall Street Journal, Intercept, and Washington Post.
Subsequent Attorneys General and Acting AGs extended effective dates on the 2018 OLC memo, but those extensions made the ruling no less confusing. And Deputy Attorney General Rod Rosenstein even issued a memo to claim that the DOJ had no position on state lotteries as they pertained to the Wire Act. That only muddied the waters further.
As states rounded up their lawyers to file lawsuits over it, the New Hampshire Lottery Commission took charge, joined by NeoPollard Interactive, its lottery platform provider. They filed the lawsuit in February 2019.
A Win is a Win
Everything happened relatively quickly. Judge Paul Barbadoro heard oral arguments in the US District Court for the District of New Hampshire on April 11, 2019. Even at that time, Barbadoro called the Wire Act a “mess of a statute.”
On June 3, Judge Barbadoro ruled for the New Hampshire Lottery Corporation and NeoPollard in an unequivocal 63-page decision. He first concluded that the Wire Act “is limited to sports gambling.” He then went on to dismiss the DOJ’s motion to dismiss, noting that the plaintiffs clearly had standing. He granted the plaintiffs’ motion for summary judgment:
“I hereby declare that §1084(a) of the Wire Act, 18 U.S.C. §1084(a), applies only to transmissions related to bets or wagers on a sporting event or contest. The 2018 OLC Opinion is set aside. SO ORDERED.”
“We are thrilled with today’s order from NH that has reaffirmed that the Wire Act applies only to sports betting and not mobile gaming. This order today means that states can continue to legalize online entertainment, including casino, lottery and poker. –@jifrah
— iDEA Growth (@iDEA_Growth) June 3, 2019
In mid-August 2019, then-US Attorney General William Barr appealed the case. It took nearly a year for all parties to file briefs and replies. On June 18, 2020, the US Court of Appeals for the First Circuit heard oral arguments virtually, due to the pandemic.
Circuit Court Judges Juan Torruella, Sandra Lynch, and William Kayatta Jr. heard the arguments. Torruella ultimately died on October 26 (he was 87 years old), but the two surviving judges issued their decision on January 20, 2021. They upheld Barbadoro’s decision. In fact, they affirmed his rulings on the motions in the 49-page document, concluding with this:
“We find that the plaintiffs’ claims are justiciable and that the Wire Act applies only to interstate wire communications related to sporting events or contests.”
US Court of Appeals for the First Circuit AFFIRMS narrow reading of Wire Act, limiting application to sports betting. Huge win for online poker and online casinos. https://t.co/G4UUcxQvG7 pic.twitter.com/Ri4M2stuud
— Mac VerStandig (@mac_verstandig) January 20, 2021
Waiting Game is Over
From that point, the system would normally afford the defendants 90 days to appeal to the US Supreme Court. However, with the slowdown caused by the pandemic, the DOJ received a 150-day time period during which to appeal.
Meanwhile, the Biden Administration took control of the government, and President Joe Biden nominated Merrick Garland for the AG position. Congress ultimately confirmed him. Biden had said during his presidential campaign that he would not support a change to the 2011 OLC memo. He also did not support “adding unnecessary restrictions to the gaming industry like the Trump Administration has done.” And without the Adelson influence in play, there seemed little incentive to take the case further, especially with the two rulings already firmly denying the DOJ’s 2018 changes.
June 20 was a Sunday. On the following day, interested parties across America tried to obtain a statement from the US Justice Department. As we reached out to numerous entities, no one could confirm that the 150-day deadline was official, nor could they obtain a DOJ confirmation that they would let the Appeals Court ruling stand.
Gaming attorney Jeff Ifrah did obtain confirmation on June 22. “The government is not planning to seek Supreme Court review of the First Circuit’s decision,” Ifrah wrote.
— Jeff Ifrah (@jifrah) June 22, 2021
As General Counsel for iDEA Growth (iDevelopment and Economic Association), an advocacy organization for interactive gaming in the US, he said the decision by the DOJ was a “victory for states’ rights, for clarity in the reading of federal statutes, and for the gaming industry and its consumers.”
He continued, “Now, states considering legalizing online gaming can enter into compacts with other states that offer legal internet gaming, and state legislatures will have the ability to create rational gaming regulations that protect consumers, grow jobs, and generate tax revenues without risk of federal intervention.”
In a positive development for the #iGaming industry, the U.S. DOJ declines to pursue previous Administration’s push to expand the reach of the Wire Act beyond sports betting – https://t.co/6BN5bU631b pic.twitter.com/ZnKUYVzfJ8
— iDEA Growth (@iDEA_Growth) June 22, 2021
State Attorneys General Want More
US Attorney General’s decision not to appeal the Wire Act case is positive news. However, the states want something more concrete on which to move forward without any doubts. The 2018 OLC memo came as such a surprise and created so much ambiguity that states now want confirmation from the DOJ that the 2011 memo will stand.
New Jersey Attorney General Gurbir Grewal and 25 other state attorneys general wrote to AG Garland on June 20 to obtain clarity. They want a formal memo from the DOJ rescinding the 2018 decision. While the First Circuit’s decision was positive, Grewal stated that it applied only to the litigants in the case, not New Jersey or the other states signed to the letter.
Specifically, the AGs want the DOJ to formally and publicly conclude its “review” of the Wire Act by formally rescinding the 2018 opinion and the 2019 memo that adopted it. They also want a formal endorsement of the First Circuit’s interpretation of the Wire Act applying to sports betting only.
Grewal added, “States have no interest in pursuing legal cases in every federal circuit to obtain a ruling like the one issued by the First Circuit, nor is litigation a good use of the Department’s resources. But States need finality on this issue before they invest more resources in the development of online lottery platforms. The Department can and should put an end to this matter once and for all.”
In 2020, online gaming was the centerpiece of New Jersey’s legal gambling industry. That’s why we’re asking @thejusticedept to provide clarity to states by officially rescinding the Trump-era Wire Act which looks to criminalize online gaming: https://t.co/hTEJNkBwKu pic.twitter.com/j8ocVK6jnS
— Attorney General Matt Platkin (@NewJerseyOAG) June 21, 2021