U.S. First Circuit Court finds against DoJ Wire Act Opinion

In a U.S. case that we have previously termed “the mystery of the missing comma”New Hampshire Lottery et al. v. Rosen – the First Circuit Court of Appeals has today (20 January 2021) upheld a June 2019 New Hampshire District Court ruling (previously reported by us here), finding that the 1961 Wire Act applies solely to sports events.

In so doing, it rejected a November 2018 U.S. Department of Justice (“DoJ”) Opinion that the Wire Act also prohibits other forms of inter-state gambling.

In its Decision, the First Circuit Court criticises the DoJ’s Opinion, stating:

Under the government’s reading, anyone can transmit over the wires information assisting someone in placing a bet or wager over the wires on a non-sporting event, but the person receiving the assistance commits a crime if he then places the bet or wager. In short, there is no congruity between the two prohibitions in Clause One under the government’s reading. Conversely, if we read “on any sporting event or contest” as qualifying both antecedents, harmony is restored: You cannot use the wires to place a bet or wager on a sporting event, and you cannot use the wires to send information assisting in placing that bet or wager.

Interpretation of section 1084(a) of the Wire Act was the subject-matter of the DoJ’s Opinion. It reads as follows (with the crucial words marked in red):

“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 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.”

The First Circuit Court judges have described as “the sensible result” the following interpretation of the above section:

“No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet.”

The DoJ may yet seek to appeal further to the U.S. Supreme Court but in the meantime Jeff Ifrah, attorney for iDEA Growth (an association of operators, payment processors and ancillary service providers that joined in the litigation) has been quoted as saying:

This landmark decision is a victory for states’ rights; for clear reading of federal statutes, and for the gaming industry and its customers. Uncertainty surrounding the ambit of the Wire Act has been a cloud over the internet gaming industry since 2018.

Today’s decision will hopefully put to rest the question of whether federal law prohibits states from licensing internet gaming within their borders and compacting with each other to allow such gaming on an interstate basis.

Today’s landmark ruling brings us closer to long-overdue clarity as to the legality of state-licensed internet gaming. Like nearly every other industry, the gaming industry must embrace the internet to engage today’s customers and to thrive in the economy of the future.

UPDATE: Tony Cabot, Distinguished Fellow in Gaming Law at UNLV’s William S. Boyd School of Law, has now expressed the view that the DoJ will not appeal this latest court ruling, being quoted by CDC Gaming Reports as saying: “The Department of Justice has no motivation, either politically or on a policy basis, to continue to pursue this case. Moreover, even if the DoJ had a reason to pursue it, the likelihood that the Supreme Court would hear the case is extremely low. In either case, this appears to be the end of the road for the opposition to state-authorized Internet gaming”.