US gaming and lottery operators can trade without the threat of falling foul of the Wire Act after the deadline passed this week for the US Department of Justice (DOJ) to appeal against the most recent legal interpretation of the federal act which found it applied solely to sports betting.
The DOJ’s inaction brings to an end nearly three years of uncertainty for the gaming and lottery sectors following a ruling in 2018 by the Office of Legal Counsel (OLC) on behalf of the DOJ that overturned a 2011 ruling by extending the Wire Act to cover all forms of internet gambling.
That 2018 ruling was successfully overturned by the District Court for the District of New Hampshire in 2019 in a suit brought by the New Hampshire Lottery and NeoPollard. It was upheld by the US Court of Appeals for the First Circuit in January this year.
According to legal expert Jeff Ifrah of iDEA Growth, by allowing the deadline to pass the DOJ is sticking to its original 2011 opinion that the Act applies only to sports betting. In a statement, he said: “The DOJ’s decision to not seek Supreme Court review—as well as all the court decisions thus far nullifying the 2018 opinion—signifies that confusion around the interpretation of the Wire Act may be a thing of the past.
“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.”
While the threat of litigation is now effectively removed, New Jersey Attorney General Gurbir S Grewal is calling on the DOJ to go one step further and formally rescind its 2018 opinion.
In a letter to US Attorney General Merrick B Garland, he joins 26 Attorneys General from around the country in urging that the DOJ issue a formal memorandum rescinding its 2018 opinion “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling”.
According to the State of New Jersey Department of Law and Public Safety, the letter urges the DOJ to abandon its 2018 position and adopt the reading of the Wire Act set forth by the First Circuit Court of Appeals, specifically that the Wire Act applies to only sports betting.
The First Circuit’s February 2021 decision rejected DOJ’s Trump-era opinion as overbroad and found that the 1961 Wire Act was intended solely to address sports bookmaking, but its holding only applied to the litigants in the case and did not include New Jersey.
In addition to requesting formal rescission of the 2018 DOJ Wire Act “reinterpretation”, the letter calls on DOJ to go on record as officially reverting to its Obama-era position that the Wire Act applies to only sports-betting-related activity and that lotteries and other online gambling options do not conflict with federal criminal law.
“New Jersey’s legal gambling industry – and the many state services and programs supported by gaming revenue and tax dollars — would have been devastated in 2020 without online gaming. Internet gaming has for years been, and remains, an essential industry here, one the Department of Justice viewed since 2011 as perfectly legal until its baseless backtracking in 2018,” said Grewal.
While the First Circuit ruling was a triumph for New Hampshire and other states, including New Jersey, its reach was limited.
As Friday’s letter led by Michigan and Ohio points out, the ruling set a binding precedent only within the First Circuit, and applied to only the specific parties in the suit brought by New Hampshire.
With the Trump-era DOJ opinion still in place, and the First Circuit ruling not applicable everywhere, “there remains substantial uncertainty” as to whether states and the industry can move forward with existing online gaming platforms and also invest in new online gaming products without fear of future criminal prosecution, the letter asserts.
That uncertainty is heightened, the letter contends, by the fact that a purported DOJ “review” of the applicability of the Wire Act launched 764 days ago remains unresolved.
Noting that President Biden has publicly disagreed with the Trump-era DOJ opinion and vowed in 2019 to reverse it if he became president, the letter asks DOJ to now provide “clarity and finality,” because “states and the industry need to understand what their rights are under the law without having to file suit in every federal circuit”.
“It’s time for DOJ to lift the fog of ambiguity surrounding this important national issue, do the right thing and rescind the opinion it issued in 2018,” added Grewal. “We maintained from the start that the Trump-era Wire Act ‘reinterpretation’ was politically-motivated and wrong on the law, and we’re proud to now join with our fellow states in calling for its official elimination.”