Earlier this month, half a dozen amicus briefs were filed in the Wire Act case pitting the New Hampshire Lottery Commission and gaming company Neopollard against the US Department of Justice.
The litigation arose in response to a November 2018 memo issued by Assistant Attorney General Steven Engel. The DOJ’s Office of Legal Counsel via that memo rescinded its own 2011 guidance, which posited that the Wire Act applies only to interstate sports betting.
Under that interpretation, states were free to engage in non-sports interstate gambling. A number of them have legalized online gambling in various forms in the time since — be it iLottery, multi-state poker, or casino games like slots and blackjack.
The 2018 memo, if enforced, would put all regulated US online gambling operations in jeopardy.
Shortly before the 2018 memorandum was to take effect, the NH Lottery and Neopollard filed suit in federal court. Together, they sought declaratory judgment that the Wire Act does not apply beyond sports wagering.
District Court Judge Paul Barbadoro did just that.
His decision in June 2019 held that the Wire Act applies only to sporting events. The lottery could therefore continue to sell tickets online without fear of implicating the statute.
The judge, however, also acknowledged early on that the case was rife with issues that seemed to make it destined for the Supreme Court.
The DOJ promptly took the case one step closer to fulfilling that prophecy, lodging an appeal with the First Circuit Court of Appeals. After both sides filed their initial briefs, a handful of amicus curiae (friends of the court) briefs came rolling in.
The Commonwealth of Pennsylvania filed in support, as did the states of Michigan and New Jersey. Two of the three have full-fledged online gambling industries up and running, with Michigan hoping to launch its own within the next year. An adverse decision could mean millions of tax dollars delayed or even lost in each.
Also bringing support for the state and Neopollard were International Game Technology (IGT), the iDevelopment and Economic Association (iDEA), and the Association of Gaming Equipment Manufacturers (AGEM).
The Pennsylvania brief makes two substantive arguments regarding the impact on PA online gambling.
From the filing:
“Here, although the USDOJ paid lip service to reliance interests in the 2018 Opinion, it failed to recognize the extent to which its change in policy would affect not only state governments but also the vendors and retailers that contract with those governments and the citizens who benefit from governmental programs that are supported by lottery revenues.”
New Jersey followed its neighbor’s lead. It similarly argued that the Justice Department’s about-face threatens the livelihood of gaming companies that operate in the state.
The brief contends that the DOJ did not weigh the its reliance on revenue from NJ online gambling — both in terms of the employment that the industry provides and for the tax dollars it generates for state and local development.
The brief from the Michigan Attorney General took a somewhat different tone.
First, it pushed back on the DOJ’s argument that the government already indicated it would not seek to punish lotteries under the new Wire Act interpretation. It has made no such unambiguous disclaimer, according to the brief, and the case is thus ripe for a court to decide.
Michigan’s second substantive argument echoed others’ points that a DOJ reading of the Wire Act that extends its scope beyond sports betting is incorrect.
Finally, Michigan repeats the NH Lottery argument that the 2018 memo constitutes final agency action under the Administrative Procedures Act.
This is perhaps one of the most important points of the case, with implications far beyond the Wire Act memorandum. If the Office of Legal Counsel’s memorandums are not final agency actions, they are generally not subject to a court review.
The IGT brief makes an interesting argument, though it is important not to read too much into it: “Even If the Wire Act Applied to Some Non-Sports Betting, It Would Not Reach State Lotteries.”
The merits of that assertion hinge on the legal definition of the word “whoever” and its application to states as business operators.
IGT concludes its brief by arguing once again that the Engel memorandum constituted final agency action.
The iDEA brief raises two novel arguments.
The first is that the rule of lenity should be applied. If a court finds that a law is ambiguous, lenity requires it to apply an interpretation that is less punitive (or more permissible).
That would necessitate a narrow reading of the Wire Act’s scope — that the statute applies only to wagering on sporting events.
The brief also argues that the Act, if interpreted as the government wants, would raise constitutional concerns under the Tenth Amendment. The court would seek to avoid such issues where possible.
The final amicus brief in support of New Hampshire and Neopollard comes from another trade group.
AGEM argued, like the others, that states have strong reliance interests based around existing gaming operations.
It points out that the 2018 opinion upsets long-standing federal deference to state policy choices surrounding the gaming industry.
The next step in the Wire Act case is for the government defendants to file their reply brief.
That might take a little longer than anticipated, however. US Attorney General William Barr already filed for an extension, which the court will grant in all likelihood.
Following that, there is a good chance that the First Circuit will schedule oral arguments in the case.
If Judge Barbadoro is correct, however, the inevitable appellate decision will only set the stage for a subsequent petition to the Supreme Court.