The oral argument in an online conference call on Thursday in the U.S. First Circuit Court of Appeals lawsuit against the federal government’s threat to many forms of online wagering tread on some familiar ground.
But this time, three judges appeared to support the same sort of skepticism about a warning against the New Hampshire Lottery that a lower court had already ruled against last year.
At issue is a December 2018 formal opinion by the U.S. Department of Justice’s Office of Legislative Council that the Federal Wire Act of 1961 does not — as previously recognized — only bar interstate sports betting.
That ruling seemed to make vulnerable not only the interstate online poker compact among New Jersey, Nevada, and Delaware, and the multi-state Mega Millions and PowerBall lotteries, but also state lotteries themselves. In the latter case, even a mundane lottery ticket purchased at a 7-Eleven incorporates technology that technically crosses state lines.
As has been the case throughout this saga, the New Hampshire Lottery has painted that 2018 opinion as dire — even as the federal government has aggressively described how toothless it is.
“As of now, [the New Hampshire Lottery faces] no threat of prosecution for anything they have done in the past, anything they are currently doing, or anything they will do in the future indefinitely,” said a government attorney.
Nothing to see here, move it along
The claim was further buttressed by Monday’s announcement that no action on the matter would be considered before Dec. 1 — perhaps coincidentally, after the next presidential election.
The 2018 opinion, the government insisted, is merely a toothless agency “giving advice to another part of the executive branch.” Therefore, they said, the case is not “ripe” for judicial review at this point.
“There is not only no credible threat of prosecution — there is no threat at all,” the government said. “We take no position on whether the Wire Act may apply to state lotteries or their vendors, or whatever conduct is unlawful.
“The role of the court is to get involved when there is a credible threat of prosecution. It’s not to generate disputes — to force the federal government to give an advisory opinion before it is ready to do so.
“Here, the government has reached no conclusion that states [lotteries] are encompassed within the language of the law.”
A federal attorney admitted that the 2018 opinion reversed a 2011 interpretation that opened the door for several states, including New Hampshire, to offer lottery tickets online.
But the attorney insisted that in a half-century, the government has never taken action against a state lottery, so there is no need for concern now.
“There’s no threat of enforcement against these parties,” the attorney said.
More “nothing to see here”
An April 2019 memo on the issue was not what it seems, the attorney added, calling it “a temporary act of prosecutorial discretion that holds out only that the department may revise its position in the future. But certainly that could be retracted tomorrow.”
The modern version of state lotteries did not come into existence until about a decade after the Wire Act was enacted, so both sides agreed that it was not part of the original rationale.
The government claimed that its 2018 ruling was “vague” — but Judge Sandra Lynch noted that “hundreds of millions of dollars” were at stake based on states like New Hampshire investing in infrastructure on the assumption of legality. It was later noted that the state collected $87 million from the lottery in fiscal year 2018.
“You may say it is vague, but they certainly felt that their interests were threatened,” Lynch said.
Judge William Kayatta noted that however toothless the OLC may claim to be, the stage is set for the option of the DOJ “tomorrow” setting a 90-day timetable — if it chooses — to mandate a total shutdown of all state lotteries, with jail time in the event of a failure to complete the mission.
“On the 91st day, you could be arrested,” Kayatta said.
Kayatta likened the bureaucracy of a state lottery to “an aircraft carrier — you can’t turn them around that quickly.” A lottery attorney agreed that such a demand would be impractical.
Judge Lynch did not appear to accept the government’s claim that it was not inclined to act on the two-year-old opinion.
“You ask us to parse the language, and look at it in terms of the lack of any assurance of non-prosecution, after clear statements that seem to say that the lotteries were subject to prosecution,” she said.
The dog that didn’t bark on the call
While Las Vegas billionaire Sheldon Adelson’s name did not come up in the call, his influence on banning of online gambling and on Republican Party fundraising was implied.
The claim is that the 2018 opinion by the Office of Legislative Council was purely political.
“This is not any ordinary OLC opinion,” the government attorney said. “The OLC opinion here is performing a rule-making function. If this opinion was issued as a regulation of the Federal Communications Commission [for example], there would be no doubt that it was a final agency action, subject to court review.
“It’s not deliberative advice internal to the department. It’s an edict solicited by interested private persons that was published to the public at-large precisely to end businesses’ reliance on the 2011 OLC opinion, and to generate compliance in that public at-large with the new opinion.”
The online poker compact got two passing mentions on the 45-minute call, but no light was issued on its relevance in this case.
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