What’s All This Wire Act Business? A Guide for the Average Joe

Posted By Bart Shirley on June 11, 2019 - Last Updated on March 18, 2021

For those who follow gambling news, there has been a near-constant rumble about the US Department of Justice (DOJ) since January. But what’s the deal?

Basically, gambling operators and regulators have been in a fight with the federal law enforcement agency this whole time. The entire beef stems from a single opinion the DOJ issued about the Wire Act on Jan. 21.

In that opinion, Assistant Attorney General Steven A. Engel wrote that the Interstate Wire Act of 1961 affected more than just sports betting online. In fact, according to the government, the law’s scope extends to all forms of online gambling.

The opinion carried numerous problems for multiple parties, not just the likeliest target, real money casino operators. Lotteries and horse betting sites now found themselves in the crosshairs, too.

Worse yet, the interpretation could cause shutdowns on purely intrastate operations. How? Even though the start and end points of a transaction might occur in the same state, it’s possible that the signal between the two crosses state lines.

Therefore, communication between two people in the same room could potentially be classified as an interstate interaction. Hence, the expansion of scope had disastrous implications for a wide range of parties.

The DOJ established a 90-day grace period from the date of the memo to allow companies to bring themselves into compliance. That deadline extended to June 14 a short time later.

Needless to say, June 14 is coming up quickly. We simply do not know what the DOJ’s actions or prosecutorial guidelines for this new opinion will bring.

The skinny on the Wire Act

Perhaps we’re getting ahead of ourselves. What is this Wire Act, anyway?

Simply put, the Interstate Wire Act is a 1961 law that prohibits transmission of gambling information and money using electronic wires. As with all federal laws, the transmissions must cross state lines to be subject to the Act.

Here is the relevant language of the bill:

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 not more than $10,000 or imprisoned not more than two years, or both.

Now, since this law arose during the Kennedy administration, it obviously existed prior to the rise of the internet or the potential for online gambling. However, to the best of our knowledge, neither side of the debate has ever denied that internet transmissions fall under the category of a “wire communication.”

As is the case with many laws, its intended purpose was far different from its current usage. At the time, Attorney General Robert Kennedy wanted a tool to fight against organized crime that relied on bookmaking as one of its primary businesses.

However, the law has remained on the books, and its language governs behavior to this day. So, the current incarnation of the DOJ wants to use the law differently.

So, what’s the problem with the Wire Act opinion from January?

Needless to say, the January 2019 memo created a problem for a wide range of stakeholders. Engel’s opinion threatened a source of income for both gambling operators and state lawmakers, the latter of whom saw a needed source of income go up in smoke.

The opinion immediately came under fire for how unexpectedly hard it slammed the door on the expansion of online gambling. Even if legal battles against it were to prevail, it would have and has had a chilling effect on that momentum.

Worse yet, the opinion appears to be steeped not in any sort of legal jurisprudence, but as a conciliatory move to an influential donor. As even mainstream media noted, the opinion closely mirrored language in an anti-gambling lobbying firm memo.

This lobbying firm, the Coalition to Stop Internet Gambling (CSIG), is widely rumored to receive financial backing from Sands owner Sheldon Adelson. Needless to say, the whole affair reeks of corruption and cronyism.

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New Hampshire wins a battle, but not the war

A few weeks after the opinion dropped, the first lawsuit against it popped up. The plaintiffs in this action were the New Hampshire Lottery Commission (NHLC) and its technology partner, NeoPollard.

Basically, the lawsuit sought an injunction against the Justice Department memo, arguing against the new interpretation itself. The NHLC had concerns about its ability to offer both its homegrown and multi-state products, like the popular Mega Millions and Powerball drawings.

In the end, the federal court found in favor of the plaintiffs. Judge Paul Barbadoro threw out the opinion as it relates to the litigants in the suit.

The NHLC’s win in court was celebrated as a win for all, but it’s not exactly that. Barbadoro was quite specific in his pronouncement that the decision affected only the parties in the suit.

Other states and operators will have to file their own lawsuits to find a similar result. However, for those other groups’ attorneys, it will be helpful to have this initial decision as a reference for precedent going forward.

The other reason to temper our excitement about the decision in New Hampshire is that the DOJ is quite likely to appeal the decision to the 1st Circuit Court of Appeals. So, it’s still possible that Barbadoro’s decision could end up as a moot point.

Assuming the DOJ appeals the decision, though, it will likely seek a stay of Barbadoro’s judgment in the meantime. A stay would mean that the agency could proceed with its enforcement and prosecution after the June 14 deadline passes.

So, the long and short of it is that the war with the DOJ over the Wire Act is far from over. Gambling advocates and interested parties should knuckle down for a long and contentious fight.

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Bart Shirley

Bart Shirley is a senior evergreen content writer for PlayUSA. He’s been writing and reporting on the gambling industry since 2013. Shirley is a graduate of the MBA program at Texas Christian University’s Neeley School of Business and has a degree in English from Texas A&M University.

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