Confusion still reigns in application of Wire Act to online casino, sports betting and lottery

Rosenstein Memo On Wire Act Surfaces From DOJ: Businesses Have ’90-Day Window’ To Comply With Changes

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US Deputy Attorney General Rod Rosenstein has issued a memo regarding the recent reinterpretation of the federal Wire Act to include all forms of interstate gaming, not just sports betting. According to Rosenstein, the new Department of Justice opinion will not take effect for 90 days as it creates prosecutorial guidelines.

The DOJ made the document public on Wednesday.

The impact of that 90-day period does not include any type of safe harbor for violations that may have occurred after 2011, when a DOJ opinion said that the Wire Act applied only to sports betting.

Getting up to speed on the Wire Act changes

Earlier this week, the DOJ released an opinion stating it believes the Wire Act applies to all forms of interstate gaming — not just sports betting — and makes it illegal if conducted across state lines.

That stance could potentially affect all forms of legalized online gambling.

Online sports betting, casino games and lottery exist legally in a number of states — as does daily fantasy sports. Transactional data can sometimes route across state lines, however, even if the actual gaming takes place on an intrastate basis. Under the revised interpretation, even the payment system that underpins legal online gambling is in some jeopardy.

Mark Hichar, a Wire Act expert and a shareholder at Greenberg Traurig LLP, explained it more to Online Poker Report:

“The opinion will affect not only iLottery and iGaming (and the interstate poker compact among Delaware, Nevada and New Jersey), but it will also affect traditional lottery purchases via brick-and-mortar retailers,” Hichar said.

“Language in the opinion supports the position that such intermediately routed transmissions are sent in ‘interstate commerce.’ Thus, lottery purchases — whether via traditional retailers or via PCs or mobile devices — and iGaming wagers, that originate in a state and are processed in the same state, but are routed intermediately out of the state (or, according to some court cases, are merely sent via the internet without regard to their travel route) could violate the Wire Act.”

A 2011 DOJ opinion had concluded that the Wire Act applied narrowly to sports betting, a finding that two federal circuit courts also reached. The new opinion does not carry the force of law, but it does attempt to roll back how the Wire Act is enforced.

Rosenstein on the Wire Act

Rosenstein did not get into any specifics on which gaming transactions the new DOJ opinion covers:

As an exercise of discretion, Department of Justice attorneys should refrain from applying Section 1084(a) in criminal or civil actions to persons who engaged in conduct violating the Wire Act in reliance on the 2011 OLC opinion prior to the date of this memorandum, and for 90 days thereafter. A 90-day window will give businesses that relied on the 2011 OLC opinion time to bring their operations into compliance with federal law. This is an internal exercise of prosecutorial discretion; it is not a safe harbor for violations of the Wire Act.

I am designating the Criminal Division’s Organized Crime and Gang Section (OCGS) to review and approve proposed Wire Act charges. The Justice Manual will include a new review and approval process for prosecutions pursuant to the Wire Act. Any Department attorney who has questions regarding implementation of the Wire Act should contact OCGS Deputy Chief Douglas Crow for further guidance.

It’s still not clear what the DOJ will actually be enforcing or going after.

Most forms of online gaming are intrastate, in that only people located in the state can take part in the gaming — other than data possibly crossing state lines intermediately via the internet or mobile devices.

How is everyone reacting?

So far, there’s been a lot of confusion and wringing of hands about the DOJ opinion but little in the way of concrete action.

Hichar believes this will end up in court sooner rather than later.

“I expect that there will be litigation within that 90-day period,” he said, “as states sue the federal government seeking a declaratory judgment that the Wire Act applies only to sports betting.”

No state with online lottery sales or online casino gaming or sports betting has closed up shop as of Wednesday. In fact, everything in the sports betting space seems like it is full steam ahead, including a new bill in Rhode Island that would legalize sports betting apps in the state.

If anything, the DOJ’s reinterpretation only obscures whatever clarity remained regarding the legality of online gambling. In a scathing Wednesday op-ed, consumer policy expert Michelle Minton admonished the agency for exactly that:

“The more likely outcome is a “chilling effect” which, if I had to guess, was probably the purpose of the memo. Instead of legalizing online gambling, as legislatures in New York, California, and others have been debating for years, the states will likely sit back and wait for clarity from the Department of Justice or the courts before wasting energy developing rules for a market that may never be legal.”

- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner. He has played poker recreationally for his entire adult life and has written about poker since 2008.
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