Wire Act open for another reinterpretation?

Here’s Why DOJ Should Keep Its Mitts Off Wire Act, Online Gambling

Mitts off Wire Act

The US Department of Justice might be putting a lump of coal in the stockings of legal online gambling advocates this holiday season.

First reported Monday by Online Poker Report, the DOJ’s Office of Legal Counsel is preparing a new opinion concerning the 1961 Wire Act and its application to online gaming. The OLC apparently intends to undercut the existing interpretation, last updated in 2011.

If the effort comes to fruition, there’s some fear that it could bring about sweeping changes to the online gambling industries sprouting up across the country. As PlayNJ subsequently reported, however, those concerns are largely overstated.

Understanding the full context requires a deep dive into the history of the Wire Act and online gambling as a whole.

Genesis of 2011 OLC opinion

The 2011 OLC opinion wasn’t just issued on a whim.

It was the direct result of DOJ inquiries out of New York and Illinois in the years prior. Officials in those two states were seeking clarification on whether their plans for online lottery sales — plans that included the transmission of data across several states — violated federal gambling laws like the Wire Act and UIGEA.

Dating back to 2002, the DOJ policy at the time was that such transmissions did violate the Wire Act, even if they originated and terminated in the same jurisdiction. Like many other matters, however, that policy wasn’t without issue.

As the OLC explained:

“The Criminal Division further notes, however, that reading the Wire Act in this manner creates tension with UIGEA, which appears to permit out-of-state routing of data associated with in-state lottery transactions.

[…]

“UIGEA specifies that “unlawful Internet 2 Whether Use of the Internet and Out-of-State Processors to Sell Lottery Tickets Violates the Wire Act gambling” does not include bets “initiated and received or otherwise made exclusively within a single State… and expressly provides that “[t]he intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made,”

With the DOJ’s existing interpretation of the Wire Act standing in conflict to UIGEA, it asked counsel to explore further. The result was an OLC opinion dated Sept. 20, 2011 which concludes:

“… interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.”

That opinion didn’t authorize states to legalize online gambling. It didn’t need to. It was more of a blessing/confirmation that the federal government wouldn’t challenge related laws at the state level.

You can’t have it both ways…

The argument against the 2011 OLC opinion has always been that it is exactly that: an opinion. It is not legally binding. Yet somehow, if the OLC produces a new opinion that online gambling opponents favor, it should be respected and followed.

As attorney Thomas A. Decker told the Pennsylvania legislature in a 2017 letter from the Coalition for a Safe and Regulated Internet:

“The CSIG Memo focuses on the unremarkable conclusion that an opinion distributed by OLC does not bind federal courts or receive more than the type of legal deference that might be afforded a law journal article or position paper. This is true and remains true in the event of any future OLC Opinion that disagrees with the currently stated OLC position.”

According to Decker, a new, negative opinion wouldn’t be a death sentence for online gambling. The 2011 interpretation simply told states what they already knew. Federal law did (and still does) allow states to legalize intrastate internet gambling.

Michelle Minton, who authored the definitive paper on the original intent of the Wire Act, currently works as a senior fellow in consumer policy studies for Competitive Enterprise Institute. Agreeing with Decker, Minton told PlayNJ that a reversal of the current opinion would be, “so obviously and universally horrible that it will unite lawmakers on both sides of the aisle in opposition.”

Effectively, a new and negative opinion would be challenged. And in all likelihood, it would lose.

UIGEA: safe harbor for intrastate online gambling

The 2011 DOJ itself acknowledged that UIGEA provides safe harbor for bets that begin and end in the same state — even if they cross state lines along the way. Here’s more from the OLC opinion:

“the Division acknowledges that state-run intrastate lotteries are lawful and that UIGEA specifically provides that the kind of “intermediate routing” of lottery transaction data contemplated by New York and Illinois cannot in itself render a lottery transaction interstate.”

UIGEA is quite explicit about the difference between legal and illegal internet gambling:

“The term “unlawful Internet gambling” means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.

“The term “unlawful Internet gambling” does not include placing, receiving, or otherwise transmitting a bet or wager where the bet or wager is initiated and received or otherwise made exclusively within a single State;”

The law clearly permits states to legalize internet gambling within their borders if the following criteria are met:

  • Expressly legal in the state
  • Proper data security and age and location verification checks are in place
  • Activity doesn’t run afoul of Interstate Horseracing Act, PASPA, Gambling Devices Transportation Act, or Indian Gaming Regulatory Act

Notably missing from the above list? The Wire Act.

  • CASINO
  • BONUS
  • DETAILS
  • PLAY

What does Wire Act say about online gambling?

The Wire Act also contains a safe harbor clause. Section 1084(b) reads like so (emphasis added):

“Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.

Some debate over the scope of that clause still exists. Does safe harbor apply to all betting activity within legal jurisdictions or exclusively the transmission of data between them?

Most courts have sided with the latter, narrower interpretation. United States v. Cohen (2001), for example, provides a modern case study in which the First Circuit affirmed a lower court’s ruling:

“That subsection provides a safe harbor for transmissions that occur under both of the following two conditions:  (1) betting is legal in both the place of origin and the destination of the transmission;  and (2) the transmission is limited to mere information that assists in the placing of bets, as opposed to including the bets themselves.”

How have courts interpreted Wire Act?

Like its safe harbor clause, courts have issued conflicting rulings concerning the scope of the entire Wire Act. But as Decker notes in his letter to PA lawmakers:

“The most authoritative decisions on this issue, two federal appellate decisions, have independently concluded that the Wire Act only applies to sports betting. Both the First and Fifth Circuit have confronted the issue of whether this statute broadly prohibits interstate wires with regard to any act of gaming, gambling, or wagering, or rather only prohibits interstate wires with regard to “bets or wagers on any sporting event or contest.” Both have soundly concluded the latter, that the Wire Act only prohibits interstate sports betting activities.”

The cases he references are:

  • United States v. Lyons, 740 F.3d 702, 718 (1st Cir. 2014) — “The Wire Act applies only to ‘wagers on any sporting event or contest,’ that is, sports betting.”
  • Thompson v. MasterCard Int’l Inc., 313 F.3d 257, 263 (5th Cir. 2002)

A District Court in Utah issued a diverging opinion in the case of Utah v. Lombardo (2007). However, it presented that stance with an interesting caveat:

“the Court notes that even if § 1084(a) does not reach bets or wagers unrelated to sports, Counts 16-19 would not need to be dismissed in their entirety, but only insofar as the alleged wire communications relate to non-sports betting or wagering.”

In plain English: even if the court was wrong on this count, it wouldn’t change the outcome of the case.

What does it all mean for online gambling?

At the end of the day, the 2011 opinion stands on solid legal ground. Court cases, legal opinions, and the legislative record are largely in agreement:

  • The Wire Act only applies to sports betting
  • States can legalize intrastate online gambling

With online lottery available in 11 states and online casino gambling legal in four, a DOJ pivot would meet fierce opposition. These states have spent millions of dollars launching their online industries and are actively reaping the rewards of those efforts.

Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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