You are here

Department of Justice LOSES Another Wire Act Case: IGT Wins

Courtroom Gavel

On Thursday, Sept. 15, 2022, the U.S. District Court for the District of Rhode Island ruled in favor of IGT in its lawsuit against the Department of Justice. The case had to do with the scope of the Federal Wire Act. In concluding his decision, District Judge William E. Smith stated, “The Court declares that, as to the parties now before it, the Wire Act applies only to 'bets or wagers on any sporting event of contest,'” thus limiting the Wire Act to sports betting and not casino games, lotteries, or online poker sites.

The ruling in the case brought by IGT against the DoJ clarifies that the Wire Act applies only to sports betting

More About the Case

Information Icon

The plaintiff in this case is International Game Technologies, also known as IGT. It is based in the United Kingdom, but its U.S. headquarters is in Providence, Rhode Island. IGT does billions of dollars in revenue in each year. It's a technology provider to 37 different state lotteries, and IGT is also involved in the burgeoning licensed online casino scene.

In early 2019, the Office of Legal Counsel of the Department of Justice released a new opinion on the Wire Act (though the text was dated November 2018). This letter reversed earlier 2011 guidance from the DoJ, which had held that the Wire Act dealt only with sports betting. Under the new 2018 memo, the DoJ stated that the Wire Act prohibited all forms of real money interstate gaming, including lotteries, casino games, and poker.

Many aspects of IGT's lottery and casino businesses were developed in the belief that these activities were fully legal, relying on the 2011 Justice Department document. The government's reversal of its previous position put IGT's operations in legal jeopardy. In November 2021, therefore, IGT sued the Department of Justice to obtain a declaratory judgment that its lottery and casino internet endeavors are not breaking the provisions of the Wire Act.

William E. Smith has served on the United States District Court for the District of Rhode Island since 2002Federal District Court Judge William E. Smith Ruled in Favor of IGT

This is just what Judge Smith's decision has provided. The Department of Justice had filed a motion to dismiss, arguing that IGT lacked standing to sue, but Judge Smith disagreed. He declared that the Wire Act was restricted solely to sports betting-related gambling, leaving other forms of wagering unaffected by this law.

Previous New Hampshire Case

Map of New Hampshire

The case of International Game Technology PLC et al. v. Merrick B Garland & The United States Department of Justice echoes a very similar case: N.H. Lottery Comm'n v. Rosen, which was decided in June 2019. This case, in which the New Hampshire Lottery and its technology provider sued the DoJ, was filed in February 2019.

Just as in the IGT case, the New Hampshire Lottery was worried that the DoJ's new Wire Act philosophy meant that it could be prosecuted for selling lottery tickets to those in other states or even just for routing its internet traffic related to gambling across state lines. Therefore, it sought a declaration about the scope of the Wire Act. The judge in that case, Paul Barbadoro, rendered his verdict on June 3, 2019. He explained:

I hereby declare that § 1084(a) of the Wire Act, 18 U.S.C. § 1084(a), applies only to transmissions related to bets or wagers on a sporting event or contest. The 2018 OLC Opinion is set aside.

Thus, New Hampshire got the decision it wanted: a ruling that the Wire Act was concerned solely with sports betting and left other forms of wagering untouched. The Department of Justice did not appreciate this verdict, and after a series of delays, the government appealed to the First Circuit Court of Appeals. However, the original decision was upheld on appeal in January 2021, and the DoJ did not pursue the matter any further.

Paul Barbadoro earned his J.D. from Boston College Law School in 1980Paul Barbadoro, the Judge Who Issued the Initial Verdict in the New Hampshire Case

Was the IGT Lawsuit Redundant?

Green Question Mark

Given that the recent New Hampshire case involved similar issues and was decided against the Department of Justice, some may wonder why IGT thought it necessary to file a very similar suit so soon thereafter. Legal experts have raised doubts as to the extent of applicability of the New Hampshire ruling, claiming that it might be restricted to the geographic area of the First Circuit rather than taking effect throughout the country.

In his decision, Judge Smith explained that his judgment would be valid “everywhere [P]laintiffs operate or would be otherwise subject to prosecution.” This resolves most fears that other courts in different parts of the country might interpret the issues differently.

Something else that might have worried IGT is that in the wake of its loss to New Hampshire, the Department of Justice did not formally rescind its 2018 Wire Act memorandum, and in fact, the viewpoint laid out in this document remains the DoJ's official guidance on the subject to this day. Furthermore, the DoJ has not altered its position that it can begin taking enforcement action against lotteries for violating the Wire Act as long as it gives 90 days' notice that it intends to prosecute.

The hope is that by having not just one but two precedents on the books against the DoJ, the government will be dissuaded from again attempting to unilaterally change the law to the detriment of IGT and other gaming providers.

Prospective Impact

Pair of Binoculars

Although IGT is mainly focused on lottery sales and casino games, the world of online poker perhaps stands to benefit the most from the recent ruling. This is because of the potential multi-jurisdictional nature of poker traffic.

Lottery and casino data may sometimes travel across state borders, but they are inherently bilateral transactions. A lottery provider sells tickets to a single consumer at a time, and similarly, most casino games involve betting by a player against the house. Only in limited cases, like Live Dealer online casinos, do multiple individuals from different states have the chance to interact with each other and a dealer at the same time.

Thus, these activities lose only very little by the stipulation that they cannot take place across state lines. Should a lottery or casino company want to extend its online services to customers in other states, it can simply open up a new division in whatever states it is allowed to do so rather than doing business across state lines.

However, poker is, by its very nature, a multi-player endeavor. By allowing multiple players from different states to sit at the same virtual tables, the overall player pool grows. This leads to more and bigger games along with increased revenue.

Multi-State Compacts Now More Viable

The positive networking effects of internet poker aren't just theory; they are established fact. Prior to the implementation of a cross-border gaming compact between Nevada, Delaware, and New Jersey, single-state segregated player pools had low levels of traffic.

Three states currently share their online poker traffic, and Michigan is expected to join in shortlyThese Three States Pool Their Licensed Online Poker Traffic

After New Jersey's poker pool was joined to the two other states in May 2018, a noticeable and permanent boost in poker player numbers was observed. This process is expected to accelerate because Michigan was approved to join the compact in April, and its poker traffic is planned to join with the other members of the agreement shortly.

Now that we have further clarification from the courts that such arrangements do not violate the Wire Act, we can look forward to other states entering into these kinds of agreements. Certain technical standards must be worked out and online gaming licensees approved for multi-jurisdictional transactions. States are loath to embark on such projects without some assurance that their efforts will not be found to be against the law. They now have such security.

Further Closure Sought

Though the verdict in the IGT case seems to cement the precedent set by the similar New Hampshire litigation, there are still a few loose ends. Judge Smith's ruling encompasses all areas in which IGT does business, which includes 37 states, but there's still the theoretical possibility of further legal issues pertaining to the other states.

Such legal troubles are unlikely to transpire at least while Joe Biden is in office. The president has previously indicated that he thinks the Trump-era reinterpretation of the Wire Act is mistaken, so it's unlikely that any of his Justice Department appointees will vigorously attempt to enforce it.

Still, there's always the possibility that future administrations might feel differently. This is why a coalition of attorneys general from 25 states and the District of Columbia sent a letter to the Department of Justice requesting that it formally rescind the 2018 Wire Act memorandum. Only then would the gaming industry really achieve the finality it seeks on this matter.

Offshore Poker Still Available

Black Checkmark

Mostly unaffected by all this legal wrangling is the world of offshore poker. There are international poker sites that do business in all states even those without regulated instate internet cardrooms.

These online poker rooms are perfectly legal to play at as you'll discover if you read this piece on online poker legality. For a rundown of the various poker sites available and the advantages of signing up with them, read this guide to online poker in the USA.