Lottery Online Gambling

Battle Over Wire Act ‘Likely’ Headed To Supreme Court, Judge Says

supreme court

A recent memo by the United States Department of Justice that appeared designed to try to immediately knock the New Hampshire Lottery out of the battle over limitations on legal sports betting failed in federal court on Thursday.

Judge Paul Barbadoro of New Hampshire, after listening to four hours of oral argument, denied the DOJ’s motion to dismiss the lottery’s lawsuit over alleged “lack of standing.” In fact, he poured cold water on the idea in the first 10 minutes of the proceeding.

And perhaps in recognition that there are vague echoes here of another vaguely-worded federal law that led to New Jersey’s victorious sports betting battle at the nation’s highest court last year, the judge noted: “I have a strong feeling that however I resolve the case, or however the First Circuit resolves the case, it is likely going to be resolved by the U.S. Supreme Court either way.”

That comment had the gaming industry buzzing.

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Meanwhile, an attorney for the Michigan Attorney General’s office was rebuffed in a longshot bid seeking a ruling that flatly declares that the 1961 Wire Act only applies to sports betting. The judge indicated that his ruling would stay within the bounds of the First Circuit, whatever that ruling may be.

That was enough to make former New Jersey state Senator Ray Lesniak celebrate, in the sense that he has been urging his state’s officials not to wait and hope for a national edict from the New Hampshire court. (But our sense that the supplemental memo gambit might pay off for DOJ did not happen – not yet, anyway.)

The case of the mysterious memo

Much of the discussion centered on that memo that was sent by DOJ to federal prosecutors on Monday. The memo by Deputy U.S. Attorney General Rod Rosenstein directed those prosecutors to refrain from including lotteries as possible targets due to a controversial reinterpretation of the Wire Act made by the DOJ in January.

The lotteries and their business partners instead were supposed to be treated as if they are authorized, pending possible further investigation, Rosenstein said.

“If the Department determines that the Wire Act does apply to state lotteries and their vendors, then Department of Justice attorneys should extend the forbearance period for 90 days after the department publicly announces this position,” Rosenstein said

In light of that memo, DOJ attorneys argued that there was no threat of prosecution that would require judicial review.

“Because Plaintiffs do not have a current credible fear of prosecution, Plaintiffs lack standing to challenge [DOJ’s] interpretation of the Wire Act,” read part of the 32-page filing. “Any challenge is premature.”

Instead, Barbadoro focused his attention on that January Opinion that upended a 2011 DOJ interpretation that had clarified that the Wire Act applied only to sports betting. That seemed to leave multi-state lotteries and online poker compacts in the clear, and erase concerns about legal intrastate online sports betting in states such as New Jersey.

An industry in limbo

But the rather confusing new interpretation – of a rather confusing 58-year-old federal law – has produced nationwide agita within the U.S. legal gambling industry (except for horse racing, which has decades of separation from other types of gambling, which was true even in the case of the now-voided Professional and Amateur Sports Protection Act of 1992.

Barbadoro has previously indicated that he expects to rule by the end of May – not long before the New Hampshire legislature seeks to finalize its budget. On Thursday, Barbadoro gave the DOJ just two weeks to figure out if the state’s lottery was in potential jeopardy for prosecution.

State officials have expressed concern over the uncertainty created by the DOJ’s opinion and memo.

The January DOJ opinion reads in part, “This Office concluded in 2011 that the prohibitions of the Wire Act in 18 U.S.C. § 1084(a) are limited to sports gambling. Having been asked to reconsider, we now conclude that the statutory prohibitions are not uniformly limited to gambling on sporting events or contests….. While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling.”

Super-lawyer Olson is back

There was another interesting twist in the case on Thursday.

Ted Olson, who last year added a takedown of PASPA to his string of landmark legal victories that includes the Bush v. Gore 2000 election and the Prop 8 gay marriage case in California, filed a five-page brief in response to Monday’s memo by the DOJ.

Olson is representing NeoPollard Interactive, the New Hampshire Lottery’s technical service provider which also is a plaintiff in the case.

Yes, Olson’s filing specifically was about now backing a reconsideration of the court for reversal of a recent ruling denying the participation of the online gambling trade group iDEA – the iDevelopment and Economic Association – in the lawsuit.

The reason his client had not taken a position previously on iDEA’s addition to the case, Olson said, was “because, at the time, there was no indication that the [DOJ] would take voluntary action to frustrate or delay judicial review.”

“The [DOJ’s] apparent willingness to gerrymander its recently released opinion to frustrate judicial review,” therefore, should open the door for iDEA on the standard of ‘permissive intervention’.”

The filing gave Olson an opportunity for more rhetorical flourishes.

So the Monday filing is a “late-breaking memorandum” that, while Olson says does not change the court’s jurisdiction in the issue, it could “call into question” the concept that the New Hampshire Lottery and its partner could adequately represent the trade group’s interests.

The January opinion, says Olson, “makes NeoPollard’s business unlawful, and while NeoPollard waits in a purgatory of indefinite duration for the [DOJ] to complete its ‘review’ of that conclusion, employees and investments will flow elsewhere.”

“And the larger lottery industry likewise will be forced to sit on tenterhooks, with state budgets, thousands of jobs, and numerous legitimate businesses carefully built over nearly a decade hanging in the balance.”

It does not appear as if that “balance” will be settled anytime soon.

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