Does The Wire Act of 1961 apply to a broad swath of interstate gambling, or a narrow one?
On Monday, a federal judge in New Hampshire laid down the law: “I hereby declare that … the Wire Act … applies only to transmissions related to bets or wagers on a sporting event or contest. The 2018 OLC Opinion is set aside.”
That is, the Office of Legal Counsel’s formal opinion for the U.S. Department of Justice published in January no longer muddies the waters for the New Hampshire state lottery — or, probably, multi-state lotteries, online poker compacts, and intrastate mobile sports betting.
Depending on a technical analysis of how any of those actions take place electronically — known as “intermediate routing” — all could have been jeopardized by that 58-year-old federal law that prohibits some forms of interstate gambling actions.
As Baruch College law professor Marc Edelman tweeted in light of the ruling:
I just received the New Hampshire Wire Act opinion, courtesy of @Johnsportslaw. My very quick takeaway:s (1) great news for state lotteries, (2) great, great, great news for online poker operators, (3) nothing specifically bad for DFS, and (4) meaningless for sports gambling.
— Marc Edelman (@MarcEdelman) June 3, 2019
Edelman later added, “More than anything else, I expect today’s New Hampshire Wire Act opinion will pave the way for new interstate compacts for online poker. If I am an online poker operator, I am feeling very bullish.”
Now it is clear, at least to one federal judge — pending appeal, and don’t forget that judge Paul Barbadoro, who issued the ruling, sees the U.S. Supreme Court in this case’s long-term future — that forms of gambling that came along after The Wire Act was passed (and that includes modern lotteries) cannot be retrofitted into the law.
How far does this ruling go?
As clear as Barbadoro was in his ruling, it doesn’t go as far as some would like (as Barbadoro hinted in oral argument months ago).
“The parties … disagree as to whether a declaratory judgment should be limited to the parties or have universal effect,” Barbadoro wrote. “The plaintiffs maintain that declaratory relief ‘necessarily extends beyond the [Commission] itself.’ The Government contends that any declaratory relief must apply only to the parties to the case. I agree with the Government.”
In other words, the precedent in this First Circuit — covering much of New England — would prove crucial if there was a lawsuit involving an online poker compact among those states. But it doesn’t quite provide “lockdown security” for gambling in other circuits, said Fort Lauderdale-based sports law attorney Daniel Wallach.
But it’s a powerful weapon anyway, Wallach tweeted:
Judge Barbadoro just gave a golden gift to other state lotteries: they can now bring their own declaratory judgment lawsuits against the DoJ in other circuits fortified by the judge's ruling on both standing and the underlying merits. This is now the leading case on both issues.
— Daniel Wallach (@WALLACHLEGAL) June 3, 2019
The risk is real, judge says
There was a second aspect of this ruling: “I deny the Government’s motion to dismiss for lack of jurisdiction because the plaintiffs have established standing, and the Government has not met its burden to show that the case is moot.”
The Department of Justice was on shaky ground here. Its claim was that because the DOJ had yet to prosecute anyone involved with a lottery, and because there was a prohibition on such charges until June 14, that there was no point in a lawsuit yet.
But Barbadoro ruled that “the risk of prosecution is substantial. After operating for years in reliance guidance that their conduct was not subject to the Wire Act, the plaintiffs have had to confront a sudden about-face by the Department of Justice. Even worse, they face a directive from the Deputy Attorney General to his prosecutors that they should begin enforcing the new interpretation of the Act after the expiration of a specified grace period.”
As for the main ruling, Barbadoro wrote: “In 2011, the Justice Department’s Office of Legal Counsel (“OLC”) issued a formal opinion declaring that the Wire Act only punishes activities associated with sports gambling.
“Last year, the OLC changed its mind. It now asserts that the Act also covers lotteries and other forms of gambling that do not involve sports. The New Hampshire Lottery Commission has long offered lottery games such as Powerball that necessarily use interstate wires. Fearing that these games, which produce substantial revenue for the State, will be deemed to be criminal activities under the OLC’s current interpretation of the Wire Act, the Commission filed a complaint in this court seeking both a declaratory judgment that the Act is limited to sports gambling and an order under the Administrative Procedure Act setting aside the OLC’s new interpretation … I agree with the plaintiffs.”
Barbadoro noted that the New Hampshire Lottery’s servers are based in Vermont and Ohio, leaving the lottery potentially vulnerable under DOJ’s revamped opinion.
Clauses and effects
In reaching his verdict, the judge went down a necessary rabbit hole that dissected, and then rejected, the DOJ’s amended interpretation of The Wire Act. That led to analysis such as:
“As the OLC concluded in 2011, the omission of the interstate-commerce modifier from the second clause suggests that Congress used shortened phrases in the second clause to refer back to terms spelled out more completely in the first clause.”
“Under the current interpretation, the section’s first clause prohibits transmissions of all bets or wagers but bars transmissions of information that assist the placement of only those bets or wagers that concern sports.”
Ultimately, Barbadoro found, “Limiting the entire section to sports gambling renders the statute coherent and makes the 2011 Opinion the better reading of the text.”
If you’re confused, you’re not alone. During oral argument, Barbadoro called The Wire Act “a mess of a statute.”
Anti-gambling group’s failed bid to join the lawsuit
Meanwhile, The Coalition to Stop Internet Gambling (CSIG) and the National Association of Convenience Stores (NACS) recently filed a motion to be granted formal intervenor status. The groups already had filed “amicus,” or “friend of the Court” briefs, but dissatisfaction with the narrow focus in filings by the Department of Justice in the case led to the request.
Basically, much of the case centers on what the definition of “whoever” is in The Wire Act — another messy grammar dispute. The groups say that anyone involved with the New Hampshire Lottery is in legal jeopardy.
The DOJ, however, has been less than aggressive on that front — instead, as noted above, seeking dismissal on the grounds that the New Hampshire Lottery was not yet in danger of prosecution.
The two groups wrote: “The only way to ensure that the Court of Appeals (and, potentially, the Supreme Court) receives vigorous and sustained argumentation on the ‘whoever’ issue — an issue that, it bears repeating, is potentially dispositive — is to grant CSIG and NACS intervenor status. Anything less would leave CSIG and NACS without adequate representation and threaten their interests.”
The NACS is funded in part by Las Vegas billionaire Sheldon Adelson, and New Jersey’s Attorney General recently filed a lawsuit demanding that the DOJ cooperate in releasing any communications between the federal government and the group.
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