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As 2019 winds down, a key carryover issue for online gambling in 2020 surrounds the Wire Act case being fought by the New Hampshire Lottery Commission (NHLC).
Back in June the New Hampshire District Court ruled that the Wire Act only applies to sports betting — and not to online gambling more broadly.
The decision threw a wrench in the federal government’s plans to broaden the scope of the antiquated statute via a 2018 memorandum, which overruled a prior administration’s opinion.
Undeterred by the District Court ruling, the Department of Justice filed an appeal to the First Circuit Court of Appeals over the summer. Just 47 minutes before last Friday’s deadline, the government finally filed its opening brief.
In 2011, the DOJ’s Office of Legal Counsel (OLC) issued a memorandum in response to a question from lotteries in New York and Illinois seeking to sell tickets online. The opinion clarified that the Wire Act only applied to wagering on sporting events or contests.
Online lottery retailers, therefore, did not need to worry about implicating that statute.
Congress worked in the years that followed to pass legislation dubbed the Restoration of America’s Wire Act (RAWA), which would have expanded the scope to include additional online gaming activities. Despite some bipartisan support, RAWA never found much traction and eventually slipped out of the spotlight.
The current administration, however, managed to meet the objective of RAWA via executive action in the form of a 2018 OLC memorandum. It effectively accomplished what Congress could not, reversing the 2011 memorandum and the position affirmed by one appellate court and endorsed by another.
The threat of government intervention prompted the NHLC and other affected parties to file a lawsuit seeking declaratory judgment that the Wire Act only applies to sports betting. They won.
Unsatisfied with the loss it took in District Court — and apparently determined to press forward with its new interpretation of the Wire Act — the government appealed.
The appellants advance three main arguments as to why the previous decision should be reversed:
Let’s entertain them one by one.
The government’s first claim is that the case is not “justiciable” — that is, it is not ready for a court to resolve it.
Here the DOJ argues that the case is not “ripe” because the Deputy Attorney General “publicly confirmed that the Department has no position on whether plaintiffs’ particular conduct is unlawful, and has instructed officials not to pursue charges against them.”
The government contends that while it has reinterpreted the Wire Act to cover online gambling and the 2011 memo (which was written at the behest of lotteries) was wrong, there is still no direct threat to the NHLC. Until such a threat exists, they cannot bring a lawsuit.
If the government wins on the first pillar, the other two are superfluous.
In the event the First Circuit does not buy what it’s selling on the question of justiciability, however, the government asks the Court to find that only the second of the four Wire Act offenses (DOJ’s math) applies to sports betting alone. The others, it argues, also apply to other forms of online gambling.
To illustrate, this is how the DOJ suggests the Wire Act language should be broken down:
Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility…
- [Clause 1] for the transmission in interstate or foreign commerce of
- [Offense 1] bets or wagers or
- [Offense 2] information assisting in the placing of bets or wagers on any sporting event or contest
– or –
- [Clause 2] for the transmission of a wire communication which entitles the recipient to receive money or credit
- [Offense 3] as a result of bets or wagers, or
- [Offense 4] 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.
The history of interpretation of the statute overwhelmingly supports the position that it applies narrowly to sports betting. Still, the government is advancing the argument that Offense 2 is the only one that is limited to sports wagering.
The government’s final pillar could draw some interest from folks outside the gambling world.
The DOJ argues that an OLC memorandum is not a final agency action. Instead, it says, such an opinion is only a piece of “internal advice to another Department component.”
The appellants contend that because the order is not final, it is not reviewable by a court. The Administrative Procedures Act only allows courts to review final agency actions.
This seems to be a different position than the government has advocated with respect to other OLC memorandums, where it has argued that they are binding on the Department.
The government continues to advance the arguments it made in District Court. It is not unusual for a party to narrow their arguments on appeal, but that does not appear to be the case here.
Next we will expect a brief from the plaintiffs — the NHLC and lottery providers represented by Ted Olson. This brief is due 30 days from Dec. 20, 2019. After that, the appellants will again have the opportunity to respond.
This is only the beginning of a case that is likely to take us through the first part of 2020, with a potential that we see a petition to the Supreme Court regardless of what the First Circuit says.
Through its brief, the Department of Justice suggests that it will not back down from this fight over the scope of the Wire Act.
Here’s the brief in full:Wire Act - Opening Brief - Appellants (12:20:19)