On Friday, Feb. 15, the New Hampshire Lottery Commission filed suit against U.S. Attorney General William Barr, seeking a reversal of the Department of Justice’s (DoJ) reinterpretation of the Wire Act. This January document expressed the belief that all interstate gambling was covered by the Wire Act, including online poker, lottery sales through the internet, and virtual casino gaming. The previous DoJ memorandum regarding the Wire Act, from 2011, held that it only applied to sports betting.
The memorandum opinion from the DoJ was dated Nov. 2, 2018 although it was only released to the public on Jan. 14, 2019, in the midst of the government shutdown. The author of the text was Assistant Attorney General Steven A. Engel.
The DoJ stated that the previous guidance it gave on the Wire Act was incorrect. Back in 2011, this Federal department laid out the view that all four of the prohibitions contained in the Wire Act applied solely to sports betting, leaving other forms of interstate gambling in the clear. Now, the DoJ is claiming that the restriction to sports betting alone is only valid in the first clause of the legislation whereas the other three ban other interstate real money gaming as well as sports betting that crosses state borders.
The Justice Department has suspended any enforcement actions under the new interpretation for 90 days until mid-April. This gives affected businesses and individuals time to ensure that they’re in compliance.
The guidelines set down by the DoJ’s Office of Legal Counsel are merely advisory opinions for the use of Executive branch employees. They have no binding, judicial value as precedents. Thus, it’s possible that the courts will come to a different interpretation of the Wire Act than the DoJ.
The suit against the DoJ was filed Friday, Feb. 15. It asks for “declaratory and injunctive relief” – that is, the New Hampshire Lottery is seeking to prevent the DoJ from prosecuting anyone under the new interpretation and is trying to get the new opinion declared invalid by the court.
The N.H. Lottery, while it does not allow residents of other states to purchase tickets online, may route certain information pertaining to gambling through out-of-state networks and IT infrastructure. Due to the diffuse nature of the internet and the flexibility with which data packets are redirected around the world, it’s practically impossible for the N.H. authorities to guarantee that all their lottery online traffic remains entirely within the one state. New Hampshire is worried that, under the current DoJ position on the Wire Act, this difficult-to-counter reality might cause its lottery operations to fall afoul of the law.
The Granite State also participates in several multi-jurisdictional lottery games, like Powerball and Mega Millions. The entire rationale behind these offerings is to generate massive prizes by pooling customers from many states together, and under some readings of the DoJ’s January Wire Act opinion, this type of activity is illegal.
New Jersey has been vocal in its opposition to Justice Department plans almost from the moment the new interpretation became publicly available. As one of the four licensed internet gaming states – and the newest entrant to the multi-state gaming compact – New Jersey certainly stands to lose out if the current DoJ thinking on the Wire Act comes into force. With millions of dollars in annual revenue on the line, the Garden State isn’t sitting on its hands.
On Feb. 13, Steve Sweeney (D), the N.J. State Senate majority leader, fired off a letter to the DoJ. He demanded that the new opinion be tossed aside and the old one, which permitted online casino and poker across state boundaries, be reinstated. Should his entreaty be ignored, Sweeney says that the state will initiate a lawsuit with the help of former State Senator Raymond Lesniak.
Lesniak is no stranger to the world of online poker. Indeed, he was a sponsor of the bill (A2578) that set up legalized online gaming within his state back in 2013. Since then, he has championed a program to make New Jersey an international online gambling hub although these plans have not yet borne fruit.
Speaking with the Press of Atlantic City, Lesniak explained his view of the January revisiting of the Wire Act by the DoJ:
It looks like I will have to go to court again to straighten out the Justice Department’s overreaching on states’ rights, just as I did with sports betting. This opinion is outrageous. If Congress won’t fix it, I will through the judicial process.
His remarks about “sports betting” refer to the role Lesniak played in the Murphy v. NCAA case brought by New Jersey before the Supreme Court of the United States. In May 2018, the Murphy case was decided, which resulted in the overturning of the federal ban on state-approved sportsbook operations.
New Hampshire and New Jersey are by no means the only states that take issue with the DoJ’s course reversal. Pennsylvania Attorney General Josh Shapiro signed a letter together with New Jersey AG Gurbir Grewal, claiming that there was “no good reason” for the Justice Department to act as it did and citing the numerous state-approved gaming enterprises whose future is now in question.
Even Representative Doug Collins (R) of Georgia, not exactly a traditional hotbed of gambling, questioned why the federal government was interfering with the right of states to regulate gambling.
Given the wide array of legislators, attorneys general, and other state leaders who hold a significant stake in the success of online gambling, it may seem surprising that the first state to litigate against the DoJ in this matter is the relatively lightweight New Hampshire. The answer may lie in jurisdictional concerns.
You see, New Hampshire lies within the purview of the First Circuit Court of Appeals. This court has already ruled in favor of a limited scope for the Wire Act. A notable case in which the First Circuit decided in this direction was United States v. Lyons in 2014. The decision by others to hold back and let New Hampshire test the new DoJ interpretation in court is probably an instance of “shopping” for the best court to render a verdict in line with what the plaintiffs are looking for.
If the government leaders in states that host or potentially will host regulated i-gaming are up in arms about the DoJ memorandum, then it’s not a surprise that they’re joined by their counterparts in the private sector. The gambling field, in particular, is seriously affected by any changes in the enforcement protocols for gaming-related laws.
The North American Association of State and Provincial Lotteries counts 52 lottery-governing authorities among its membership, and a few software providers are associate members too. This group wrote a statement on Feb. 4 arguing that “...reinterpretation of the Wire Act of 1961 creates a substantially detrimental impact on the lottery industry” especially in light of the fact that many operators relied upon the earlier 2011 opinion when making their investments and crafting their long-term plans.
Jim Murren, the CEO of MGM Resorts International, is also not a big fan of the DoJ buttressing the Wire Act to cover things that weren’t even envisioned when it was voted on and passed into law in 1961. During an earnings conference call on Feb. 13, he elaborated:
This latest missive from the DoJ is perplexing...is an understatement. And if read as words, it would mean that Powerball, as it exists in 44 states in the United States, isn’t legal anymore. And so it’s just, we think, an absurdly poorly written and unenforceable opinion. And I don’t think anyone in the industry – the gaming industry, the sports betting industry – feels any differently.
The displeasure with which the revamped DoJ Wire Act guidelines were viewed in many quarters was entirely predictable. This raises the question as to why the government would revisit its 2011 opinion on the subject, which had been in place for more than seven years.
Though there’s no conclusive evidence, a lot of signs point toward Sheldon Adelson as being the motive force behind the adjustment. He’s the billionaire chairman of the Las Vegas Sands group: a concern with global brick-and-mortar gaming businesses but virtually no presence in the online ecosystem. Adelson has been both a dedicated foe of internet gambling and a prominent political donor for many years.
On Friday, Feb. 8, then-Acting US Attorney General Matthew Whitaker testified before a hearing of the House Judiciary Committee. He was grilled pretty seriously by Rep. Jamie Raskin (D – Md). When Raskin asked about Whitaker’s involvement with the altered Wire Act instructions, Whitaker said that he had been recused from involvement with that matter. He also stated that he had never met Sheldon Adelson.
As Raskin continued the questioning regarding the possible involvement of Adelson in the DoJ’s modified opinion, Whitaker seemed to take offense. “Your inference that somehow that process was corrupted or corrupt is absolutely wrong and the premise of your question I reject,” he said.
Others meanwhile had the same idea in mind as Rep. Raskin. Early in February, New Jersey AG Grewal filed a request under the Freedom of Information Act for info pertaining to communications between federal officials and Sheldon Adelson and his lobbyists.
We may never find a smoking gun pointing directly to Sheldon Adelson, but the smart money in on the near-certainty that he was heavily involved in the crafting of the new Wire Act interpretation.
Regardless of how the Wire Act controversy ultimately works out, there are some gaming providers who aren’t really concerned either way. You see, offshore betting, casino, and poker sites are in violation anyway however the Wire Act is interpreted. They’re safe from being targeted by the U.S. authorities, unless their employees foolishly set foot on U.S. soil, because they’re based in foreign jurisdictions outside the remit of American law.
You, as an individual bettor, have nothing to fear either. The Wire Act and other applicable federal statutes do not criminalize ordinary users of these proscribed services. They instead penalize those offering these gray market products.
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