This is a breaking story and will be updated as more information becomes available.
The New Hampshire Lottery Commission has won its case against the US Department of Justice (DOJ) regarding the latter’s 2018 revised opinion on the Wire Act. Again.
As first reported on Twitter by Jeff Ifrah, a lawyer affiliated with the litigation, the First Circuit Court of Appeals ruled in favor of the plaintiff. It thus upholds the decision of a lower court, reaffirming that the DOJ’s new interpretation of the law is invalid.
Ifrah serves as council for IDEA Growth, an association of operators, payment processors and other companies related to online gambling. Subsequent to our publication of this article, IDEA released its own statement including commentary from Ifrah.
“This landmark decision is a victory for states’ rights; for clear reading of federal statutes, and for the gaming industry and its customers,” he said. “Uncertainty surrounding the ambit of the Wire Act has been a cloud over the internet gaming industry since 2018. Today’s decision will hopefully put to rest the question of whether federal law prohibits states from licensing internet gaming within their borders and compacting with each other to allow such gaming on an interstate basis.”
“DOJ doesn’t often lose litigation over the meaning of federal statutes. However, the OLC’s 2018 opinion was so misguided that the court resoundingly rejected it.”
What is the Wire Act?
The Wire Act was originally meant to prevent the use of the phone or other wire-based communication to place sports bets between states. In recent years, it has been interpreted to apply to the internet as much as the phone system.
In a nutshell, the DOJ’s 2018 opinion was that the language pertaining to sports betting only applied to certain clauses. It claimed that the overall Act applied equally to other forms of gambling. The opinion was clearly intended to enact the same policies originally proposed in the Restoration of America’s Wire Act (RAWA) bill of 2014, which failed to pass.
The NH Lottery’s case was based on the fear that the new opinion would prohibit interstate lottery jackpots. From the decision:
Suffice it to say, the more expansive construction of the Wire Act adopted in 2018 caused great consternation among the many states and their vendors who, as the 2018 Opinion acknowledged, had “beg[u]n selling lottery tickets via the Internet after the issuance of [the] 2011 Opinion.” Not eager to scrap or shrink its lottery, the New Hampshire Lottery Commission and one of its vendors, NeoPollard, commenced this action in February 2019[…]
In fighting for its own interests, however, the NHLC was indirectly fighting for the online poker industry as well. Poker sites require a critical mass of players to be viable. For small states, this is much easier to accomplish when operators can establish a multi-state poker network.
One such network currently exists in the form of WSOP.com, which spans Nevada, New Jersey and Delaware. Other operators hope to follow suit, linking their poker rooms in Pennsylvania and soon Michigan with those in New Jersey. This would have been impossible if the DOJ’s opinion had held.
A matter of grammar
As was the case at the District Court level, much of the appellate decision concerns the ambiguous linguistic construction of the original statute as passed by Congress in 1961.
Here’s the portion of the Wire Act text in question:
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.
In a nutshell, the question before the court was “whether the phrase ‘on any sporting event or contest’ (the “sports-gambling qualifier”) qualifies the term “bets or wagers” as used throughout [the Act].” And like Judge Paul Barbadoro in the lower court, the appellate judges found that the defendants’ proposed interpretation creates what they refer to as “unharmonious oddities.”
From the decision:
Under the government’s reading, anyone can transmit over the wires information assisting someone in placing a bet or wager over the wires on a non-sporting event, but the person receiving the assistance commits a crime if he then places the bet or wager. In short, there is no congruity between the two prohibitions in Clause One under the government’s reading. Conversely, if we read “on any sporting event or contest” as qualifying both antecedents, harmony is restored: You cannot use the wires to place a bet or wager on a sporting event, and you cannot use the wires to send information assisting in placing that bet or wager.
The appellate court therefore upholds this “series-qualifier” reading of the statute. In fact, the judges go so far as to transcribe a plain-language interpretation of the Act as they read it:
No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet.
Judge Torruella’s death proves no impediment
We initially expected a ruling on the case in November. However, one of the three judges hearing the case, Juan R. Torruella, sadly passed away in October. There were fears that this would require a rehearing.
However, the other two judges, Sandra Lynch and William Kyatta ended up ruling in agreement with each other. Thus, Judge Torruella’s opinion would have been at worst a dissenting vote. With two votes out of three, the verdict holds even in his absence.
Is this the end?
The DOJ can now appeal the case to the Supreme Court of the United States. However, there’s no guarantee that it will do this, or that the Supreme Court would agree to hear it.
First of all, the change in leadership in the US will help matters. Incoming President Joe Biden has indicated that he does not support federal overreach and considers the Wire Act opinion to be an example of that. He may direct the Department not to pursue the case further. Most resistance to interstate online gambling can also be traced back to Sheldon Adelson, who has also recently passed away. Between these factors, it’s unlikely the DOJ even tries to press on.
If it does, it’s worth noting that the First Circuit is actually the second appellate court to hold that the Wire Act applies only to sports betting. The other was the Fifth Circuit Court of Appeals way back in 2002. Even if the DOJ were to try one last appeal, it is unlikely that the Supreme Court would grant it.
The First Circuit Court’s decision
If you would like to read the decision for yourself, it is embedded in full below.