DOJ Wire Act Court Case Likely to go to Supreme Court

The Judge presiding over a legal challenge to the DOJ´s revised Wire Act interpretation has admitted the case is likely to go all the way to the Supreme Court.

Last November, the Department of Justice´s Office of Legal Counsel reconsidered its opinion of whether the 1961 Wire Act should apply to all forms of gambling and not just sports betting. When its revised opinion was released in January, it was described as corrupt, unethical, and legally bankrupt by USA Today due to the influence of anti-online gambling billionaire Sheldon Adelson – a long-time benefactor to the Republican Party.

Soon after the opinion was released, New Hampshire´s Lottery Commission and Attorney General filed a complaint in the District Court claiming that, if the revised opinion was enforced, it would jeopardize the state´s online lottery and inter-state lotteries such as Powerball and Mega Millions. New Hampshire´s legal action was subsequently joined by ten other states and the District of Columbia who were fearful of the consequences for their own gambling activities.

What do the States Have to be Worried About?

A strict interpretation of the revised Wire Act opinion would mean all online gambling activity is illegal because there is no guarantee Internet communications remain intrastate (i.e. they do not cross state lines). Even if private networks were created to accommodate ring-fenced lotteries, there would still be the issue of how payments would be processed and how winners would get paid. Ultimately, every online lottery would have to go.

The revised interpretation of the Wire Act would also have a negative impact for states that have regulated online gambling. Pennsylvania has told licensees that gambling activity will have to take place within state lines – dashing hopes of a four-state online poker compact to boost liquidity in the regulated market – and the World Series of Poker has not yet decided whether players from New Jersey will be allowed to play in online bracelets events at this year´s WSOP.

The potential for enforcement action has also put the brakes on other states passing online gambling legislation. Most sports betting bills that have been passed since the repeal of PASPA last May require in-person betting, and where Internet gambling has been included in the language, there are concerns that ring-fenced markets will be unable to support online poker – if intra-state Internet gambling is subsequently allowed by the DOJ or judged legal by a court.

So, How is New Hampshire´s Court Action Going?

Before New Hampshire´s case could be heard, the DOJ tried to get the case dismissed by issuing a memo claiming the impact of the revised interpretation on state lotteries had not been fully considered, and while it was being fully considered, there would be no enforcement action taken. The judge hearing the case – Paul J. Barbadoro – ignored the memo and a hearing took place on April 11th, during which Judge Barbadoro questioned the DOJ´s interpretation of a missing comma in the text of the Wire Act.

The missing comma (see text below) would have separated “bets or wagers” and “or information assisting in the placing of bets and wagers” in Section (a) of U.S. Code Chapter 18 §1084. The DOJ claims the rule of the last antecedent applies (i.e. it´s where the next comma is placed that counts), and that the fact a comma has been deliberately omitted proves the correct interpretation of the Wire Act is that it applies to all gambling activities and not just sporting contests.

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 [comma should go here] 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.

Judge Barbadoro commented that, under this interpretation, the section following where the comma should go criminalizes the use of wires to receive money for doing something that is lawful according to the text preceding where the comma should go. He suggested New Hampshire´s interpretation – with a comma – made more sense, but warned that the statute was a mess and whichever way he found in this case, his verdict was likely to be appealed – first to the First Circuit, and then to the Supreme Court.

Originally it was hoped this case would be resolved by the end of May, and stakeholders would have some surety about the future of online gambling in the United States. However, following the comments by Judge Barbadoro, it could take years to resolve. While we wait for a final resolution, most US online poker players are suffering from a lack of regulated action, while those in regulated states are suffering from a lack of liquidity. Unfortunately it is a situation that looks like it´s going to carry on for a while.