Poker Laws Beyond the Wire Act: Examining New Developments and Impacts
The Wire Act has been a big part of the online poker laws storyline, despite its original intention that pertained to sports betting. Only in 2021 did the courts deliver clarity on the law’s wording that exempts online poker, lotteries, and casino games from the Wire Act’s scope.
Understanding the Origin of the Wire Act
Leading up to the 1960s, the United States had an organized crime problem. Generally run by mafia members, the groups relied predominantly on criminal activities for their livelihoods. From racketeering to money laundering, organized crime members integrated themselves into the fabric of American life.
The US government tried to stop it – or at least minimize it – with various laws through the years.
- 1946 Federal Anti-Racketeering Act (Hobbs Act) to prohibit robbery or extortion through interstate or foreign commerce (amended version of Anti-Racketeering Act of 1934)
- 1961 Interstate Wire Act (Federal Wire Act) to prohibit interstate betting via wired communication devices
- 1970 Bank Secrecy Act (Currency and Foreign Transactions Reporting Act) to stop money laundering and tax evasion
- 1970 Organized Crime Control Act (RICO) to prosecute groups of five or more people involved in criminal activities
It was an arduous task to infiltrate and upend organized crime. Many presidential administrations dealt with it, but when President John F. Kennedy became the US President, he appointed brother Robert F. Kennedy to the position of US Attorney General. He suggested that Congress pass a bill to provide the US Justice Department with tools to stop interstate gambling, often conducted by mafia organizations.
President Kennedy signed the Interstate Wire Act into law on September 13, 1961.
“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”
Wire Act Interpretations
The Wire Act served its purpose for many years, as it allowed federal law enforcement officials to break up large betting rings and prosecute the organizers.
It was only when wired communications began to change that the law’s relevancy came to be in question. What had been relegated to wires and telephones transformed into computers. The numerous technological advancements allowed people to place wagers online, to bet on sports and games without the use of wired communication.
In 2002, the Nevada Gaming Commission and Nevada Gaming Control Board saw internet gambling as a threat to its massive land-based casino industry. They asked the US Department of Justice (DOJ) for guidance, as the Nevada legislature passed a bill in 2001 that gave the Control Board authority over all things interactive gaming. The DOJ confirmed to Nevada that the Wire Act does, indeed, prohibit gambling over the internet, including casino games.
Through subsequent years, a handful of cases worked their way through the US court system with various rulings on the scope of the Wire Act. One of the main points of contention was the “sporting event or contest” clause of the law, whether it applied only to sports betting or also included other types of wagers.
In 2010, as lotteries began offering online sales, which would constitute wagering over wired (or wireless) communications, several states wanted clarity on the Wire Act. Specifically, Illinois and New York attorneys general wanted to know if their lottery ambitions would violate the Wire Act or the Unlawful Internet Gambling Enforcement Act of 2006, better known as the UIGEA.
The DOJ’s Office of Legal Counsel (OLC) responded in 2011 with a formal opinion that the Wire Act only applied to sporting events or contests.
“Given that the Wire Act does not reach interstate transmissions of wire communications that do not related to a ‘sporting event or contest,’ and that the state-run lotteries proposed by New York and Illinois do not involve sporting events or contests, we conclude that the Wire Act does not prohibit the lotteries described in these proposals. In light of the conclusion, we need not consider how to reconcile the Wire Act with UIGEA, because the Wire Act does not apply in this situation.”
RAWA Efforts
Casino magnate and billionaire Sheldon Adelson saw the proliferation of online gambling and feared – without evidence – that it could subtract revenue from his land-based casino empire. He was no stranger to donating to political campaigns of members of Congress, so he began to give to some whom he convinced would fight to restore the original meaning of the Wire Act.
This spurred many efforts from 2014 through 2018 to pass a law called the Restoration of America’s Wire Act, or RAWA for short. Representatives Jason Chaffetz and Charlie Dent, and Senators Diane Feinstein and Lindsey Graham all tried to pass RAWA bills or insert language into other bills that would serve the same purpose.
Nothing worked…until Donald Trump became the US President in 2016. Trump elevated Senator Jeff Sessions to the position of US Attorney General, and it just so happened that Adelson had supported Sessions. The former Senator had hinted at his confirmation hearings that he would reverse the 2011 DOJ OLC decision, as he opposed it, but said he would make a decision “based on careful study.” When his conflict of interest was revealed, he did recuse himself from a decision regarding the Wire Act.
That development led four Adelson-funded Congressmen to ask the DOJ’s OLC to reverse the Wire Act decision in 2018. The office of the Justice Department did, in fact, do it, writing a new opinion that opened the Wire Act to online activities beyond sports betting.
“This Office concluded in 2011 that the prohibitions of the Wire Act in 18 USC 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.”
Assistant Attorney General Steven Engel added:
“Only the second prohibition of the first clause of section 1084(a), which criminalizes transmitting ‘information assisting in the placing of bets or wagers on any sporting event or contest’ is so limited. The other prohibitions apply to non-sports-related betting or wagering that satisfy the other elements of section 1084(a). We also conclude that section 1084(a) is not modified by UIGEA. This opinion supersedes and replaces our 2011 opinion on the subject.”
Taking DOJ to Court
When the OLC’s Wire Act reversal opinion became public in early 2019, it didn’t take long for states that offered online gaming and lotteries to step up and threaten lawsuits. After trying to obtain clarification from the then-US Acting Attorney General Matthew Whitaker or US Deputy AG Rod Rosenstein, the new interpretation of the law remained ominous. No one at the DOJ could say if online lotteries, poker, and casino games were deemed illegal or not.
It was time to take it to court.
Within one month, the first lawsuit moved forward. New Hampshire Governor Chris Sununu and NH Lottery Executive Director Charlie McIntyre announced that the New Hampshire Lottery Commission (NHLC) was suing the DOJ and US Attorney General Bill Barr. States across America filed amicus briefs to support the civil complaint.
In June 2019, the US District Court for the District of New Hampshire handed down a ruling. Judge Paul Barbadoro ruled that the latest DOJ OLC memo regarding the Wire Act was not valid and should be set aside. That put the 2011 memo back into effect.
The Department of Justice appealed the case to the US Court of Appeals for the First Circuit. In January 2021, that court affirmed Barbadoro’s ruling, affirming that the Wire Act pertained only to sports betting.
(Note that the unusual length of time for the Appeals Court to hear arguments and then issue a ruling was due to the pandemic and the numerous briefs and delay requests from the DOJ.)
On the day of that Appeals Court ruling, the Biden Administration took over, meaning a new person would become the US Attorney General. By the summer of 2021, the DOJ under Attorney General Merrick Garland – notably a person with no ties to the then-deceased Sheldon Adelson – confirmed that it would not appeal to the US Supreme Court.
Finally, the DOJ agreed that the 2011 opinion would stand. The Wire Act pertained only to sports betting.
Sports Betting Challenge
It was clear that there was no disputing the core of the Federal Wire Act that prohibited sports wagering across state lines. There was a different law, however, that stood in the way of most American states legalizing sports betting.
That law was the 1992 Professional and Amateur Sports Protection Act. It relegated sports betting to Nevada, Oregon, Delaware, and Montana, as those were the states that legalized it prior to the 1992 law.
New Jersey wanted to regulate sports betting within its borders – specifically in Atlantic City, and the voters agreed, voting for a constitutional amendment that would permit it in 2011. New Jersey lawmakers passed the Sports Wagering Act in 2012, and then-Governor Chris Christie signed it.
The National Collegiate Athletic Association (NCAA) was one of many professional sports leagues upset by the bill. That college basketball league sued the state of New Jersey and Governor Christie and won in the US District Court. Christie appealed but lost there, too. He then requested a ruling from the United States Supreme Court. Lawyers delivered oral arguments in December 2017, and SCOTUS delivered its decision on May 14, 2018.
With only two dissenting opinions and one partial dissent, the majority opinion came from Justice Samuel Alito. They overturned PASPA, ruling that it violated the anti-commandeering doctrine of the US Constitution by dictating what a state legislature may or may not do.
“There is simply no way to understand the provision prohibiting state authorization as anything other than a direct command to the States. And that is exactly what the anti-commandeering rule does not allow.”
“Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”
What started as Christie vs NCAA became Murphy vs NCAA when Phil Murphy took over as the governor of New Jersey. And both governors celebrated the victory.
Sports Betting with Online Poker?
While the SCOTUS decision overturning PASPA was a massive win for sports betting, the online poker community saw hope in it. If state legislatures began to look at legalizing sports wagering, both live and online, it would make sense to put online poker and possibly casino games with it.
State after state legalized sports betting. New Jersey was the first, obviously, and states like Pennsylvania, West Virginia, Rhode Island, and New Mexico followed within months. By the end of 2023, there were 38 states plus the District of Columbia offering live sports betting, with 29 of them (and DC) also operating online.
Most of the states, however, only legalized sports betting. Few included any kind of online casino or poker gaming. That is why states like Connecticut, West Virginia, and Rhode Island do have the ability to issue licenses for online poker and casino games, but the focus has been on sports and casino games. (Poker has the lowest profitability margin for gaming operators.)
The hope that online gaming, including poker, would accompany sports betting in the updated state laws was dashed. Sports betting, for the most part, left other forms of online wagering behind.
State Legislation for Poker Online
There are eight states with state-regulated online poker as 2024 gets underway.
- Nevada: online poker only
- New Jersey: online poker and casino games
- Delaware: online poker and casino games
- Pennsylvania: online poker and casino games
- Michigan: online poker and casino games
- West Virginia: online poker (not launched) and casino games
- Connecticut: online poker (not launched) and casino games
- Rhode Island: online poker (not launched) and casino games
Each January brings the possibility of new bills introduced in state legislatures. States like New York will continue to examine the issue of legalizing online gaming, but it may be months into 2024 before anyone knows the outcome of those proposals.
Meanwhile, there are still three states with legal online poker that have yet to launch online poker. Those three states have small populations – too small to sustain an appealing and profitable online poker site. The only way for operators to see the value in such small markets is if the states are a part of the Multi-State Internet Gaming Agreement (MSIGA). This interstate contract enables operators to connect those states that sign on to the agreement, putting the players in those states in the same player pool.
A larger player pool means more game choices, more cash games and tournaments available, and higher tournament guarantees. In poker, since players compete against each other – not the house/operator – the size of the player pool matters a great deal in the offerings available.
Late in 2023, West Virginia did sign on to MSIGA, which will now incentivize online poker companies to establish poker sites in the state and connect them to other states. WSOP, for example, currently connects its player pools in Nevada and New Jersey. PokerStars connects its New Jersey and Michigan players. Either of those companies could establish a West Virginia presence and enable people in that state to log on to state-licensed online poker sites.
Why Online Poker?
A quick glance at any state’s gambling revenue breakdown shows that online gaming is a very profitable endeavor. It has proven to complement land-based casino revenue in significant ways. Years of worry about cannibalization – online gambling hurting land-based gambling’s bottom line – never came to pass and were, in fact, proven wrong.
A further breakdown of gambling revenue in any particular state shows that online poker is a very small sliver of the online gambling pie. Online slots and table games deliver a majority of that revenue. This is because players compete in those games against the house, and they lose more often than they win. It’s why gambling, in general, is profitable for casinos. In traditional online poker, on the other hand, players compete against each other, so the house has no stake in wins or losses. The only profit the operator collects is rake – a percentage of each pot or set fee for each hand.
With that said, states do still benefit from offering licensed online poker. It does add to the overall online gambling revenue, as it often produces hundreds of thousands – millions in some cases – of dollars every month. And players who log on to play online poker often dabble in other casino games and sports betting. There is crossover.
Wire Act and Poker Growth
At one time, prior to the UIGEA, the United States was the largest online poker market in the world. Global poker sites took significant hits when they had to depart the US market. There is great potential in a new, thriving online poker market in America.
The only way for said market to thrive, however, is through the operators’ ability to link player pools across state lines. MSIGA makes that possible.
Had the Wire Act been relegated to its original purpose, without clarification that it pertained only to sports betting, there would be no opportunity for online poker growth in America. There would also be no way to expand casino gambling or state lotteries into the online sphere.
Technology can make or break industries. In the case of gambling, with the right responsible gambling tools in place, technological advancements can enhance and expand gambling as an accessible form of entertainment for all.
