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Court Finds Wire Act Pertains to Sports Betting Only

Written by Jennifer Newell
Last updated on
Jennifer Newell

In June 2021, the US Court of Appeals for the First Circuit affirmed a US District Court ruling regarding the Wire Act. The ruling stated that the Wire Act pertained only to sports betting, not to online lotteries, online casinos, online keno, or online poker.

It was a victory for the New Hampshire Lottery Commission and NeoPollard Interactive, the latter the provider of its online lottery platform. They sued the United States and the Department of Justice under the Trump Administration for clarity regarding the Wire Act. And when the US Court of Appeals affirmed that lower court decision, the US Department of Justice decided not to appeal again.

That wasn’t enough for most states that operated online lotteries, though. They wanted a definitive answer regarding the Wire Act, something the DOJ refused to issue.

So, International Game Technology (IGT) sued. And won.

This should be the clarity needed for all online lottery and gaming operations to move forward without fear of prosecution by the US government under the Wire Act.

Victory Number One

The initial problem came from the Trump Administration.

In January 2019, the then-Acting Assistant Attorney General of the United States, Steven Engel, reversed the 2011 opinion from the DOJ’s Office of Legal Counsel. That original memo told Illinois and New York that their inquiries regarding the Wire Act were of no worry. Their ability to sell lottery tickets on the internet and use payment processing companies across state lines was safe, and the DOJ would not cause any problems. The DOJ under the Trump Administration, heavily influenced by anti-online gambling tycoon Sheldon Adelson, reversed that eight-year-old opinion.

The New Hampshire Lottery Corporation and NeoPollard sued the DOJ for clarity, as the US Attorney General’s office issued numerous memos that only muddied the waters.

In June 2019, the US District Court for the District of New Hampshire called the Wire Act a “mess of a statute” and ruled that it pertained only to sports gambling. Judge Paul Barbadoro granted the plaintiffs’ motion for summary judgment. This officially set aside the 2019 reversal of the 2011 memo.

Then-US Attorney General William Barr appealed that decision. The US Court of Appeals for the First Circuit heard oral arguments in June 2020 and issued a decision in January 2021. The judges affirmed Judge Barbadoro’s decision.

The Biden Administration then took over, and the new US Attorney General, Merrick Garland, declined to appeal the case again. The Appeals Court decision would stand.

Not Good Enough

International Game Technology, better known as IGT, and IGT Global Solutions Corporation were not satisfied. They sued AG Garland and the US Department of Justice in November 2021. They asserted that the New Hampshire victory was limited to only the plaintiffs in that case.

“The 2018 OLC opinion remains DOJ’s binding policy today. As a result, IGT’s entire non-lottery gaming business is subject to prosecution, and DOJ has offered only the promise of a 90-day heads up before it can subject IGT’s lottery business to the Wire Act as well.”

Since IGT operated as a technology and management operator to 37 of the 46 state lotteries in America, it wanted to be sure that it’s business wouldn’t be subject to further US government scrutiny.

IGT wanted a declaratory judgment that stated, in no uncertain terms, that the Wire Act pertained only to sports betting. The 2018 DOJ memo needed to be overruled once and for all.

Victory Number Two

The DOJ’s initial response to that filing was to file a motion to dismiss for lack of jurisdiction. IGT responded with an opposition to that motion and a memo in support of its own cross-motion for a summary judgment.

On September 15, 2022, the US District Court for the District of Rhode Island issued its ruling. Judge William Smith denied the DOJ’s motion to dismiss and, at the same time, granted IGT’s cross-motion for summary judgment.

“The Court declares that, as to the parties now before it, the Wire Act applies only to ‘bets or wagers on any sporting event or contest.’”

The 24-page ruling reiterated much of the scope of the New Hampshire Lottery decision. Specific to the IGT case, Judge Smith found that IGT did have standing because of the threatened enforcement of a criminal law – the Wire Act – being sufficiently imminent. And as compared to the previous case, IGT had just as much standing as did the New Hampshire Lottery and NeoPollard.

“The DOJ’s shift in positions has created substantial uncertainty for broad swaths of IGT’s business, which developed under the 2011 OLC opinion. … That uncertainty ripples outward. Should the DOJ issue guidance ending its deferral period for state lotteries, IGT would have ninety days to substantially revamp or end state lotteries in thirty-seven states. … Given these concerns, there is no question that a judgment ‘will serve a useful purpose in clarifying and settling the legal relations in issue’ and afford significant relief ‘from the uncertainty, insecurity and controversy giving rise to the proceeding.’”

Of course, the US Department of Justice could appeal the decision. But considering it did not appeal under the Biden Administration in 2021, the DOJ is unlikely to do so this time.

 

 

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