Department Of Justice Reverses Wire Act Opinion That Said Law Is Limited To Sports Betting

The Department of Justice Office of Legal Counsel has issued a replacement for its 2011 opinion which said that the Wire Act only applies to sports betting.

The new opinion now makes the Wire Act applicable to any form of
gambling that crosses state lines, including online gambling and online
lottery. Several states have legalized online gambling in the wake of
the 2011 opinion, including New Jersey, Nevada, Delaware and Pennsylvania.

Sports betting and online sports gambling have also
cropped up in many states in the past year in the wake of the strike
down of the federal ban in 2018. So in practice, the Wire Act — which
already applied to sports betting — could remain unaffected.

Given that environment, it’s not entirely clear that the new opinion
would at all affect legal online casinos and poker. Legal intrastate
online sports betting already appears to be fine under the Wire Act. But
there are some legal analysts who believe there are lots of potential
issues to consider.

You can see the opinion here:
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That such an opinion was being prepared was first reported by Online Poker Report late last year.

OLC opinions, for what it’s worth, do not carry the force of law. And
the opinion is being handed out in the middle of a government shutdown.

What’s in the Wire Act opinion?

First, here’s the crux of the Wire Act, which was enacted in 1961:
(a) 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 OLC issued the original opinion under the administration of President Barack Obama said the Wire Act only applied to sports betting.

But nine years later, the DOJ says it messed that opinion up under the administration of President Donald Trump. Here’s what the new opinion says:

Only the second prohibition of the first clause of section
1084(a), which criminalizes transmitting “information assisting in the
placing of bets or wagers on any sporting event or contest,” is so
limited. The other prohibitions apply to non-sports-related betting or
wagering that satisfy the other elements of section 1084(a).

The 2006 enactment of the Unlawful Internet Gambling Enforcement Act did not alter the scope of section 1084(a).

And then, in more plain language:

While the Wire Act is not a model of artful drafting, we
conclude that the words of the statute are sufficiently clear and that
all but one of its prohibitions sweep beyond sports gambling. We further
conclude that that the 2006 enactment of UIGEA did not alter the scope
of the Wire Act.

Anti-gambling group applauds opinion

The Coalition to Stop Internet Gambling had a press release ready to go about an hour after news of the opinion broke.

The group is widely believed to be backed by casino magnate Sheldon Adelson,
long an opponent of online gambling. He has also long advocated for
federal action against online gambling, either via Congress or the DOJ.

Here is some of its press release:

“CSIG is pleased to see today’s decision by the
Department of Justice to reverse an Office of Legal Counsel opinion that
was as problematic legally as it was morally.

“Today’s decision seamlessly aligns with the Department’s
longstanding position that federal law prohibits all forms of internet
gambling, as well as with Congress’s intent when it gave law enforcement
additional tools to shut down the activity through the
overwhelmingly-passed Unlawful Internet Gambling Enforcement Act in
2006.

“Today’s landmark action to rightfully restore the Wire Act is a win for parents, children and other vulnerable populations.”

The DOJ and some courts disagree

The DOJ is now in conflict with some federal courts.

Here’s Mark Hichar, a shareholder with Greenberg Traurig, talking on the possibility of a new Wire Act opinion last month:

“I think a short answer is that a reversal of the 2011
opinion likely would lead to litigation. There are decisions from the
Fifth Circuit and the First Circuit Courts of Appeals holding that the
Wire Act applies only to sports betting.

The opinion acknowledges that dissonance:

But under the conclusion we adopt today, such prosecutions
may proceed where appropriate, and courts may entertain challenges to
the government’s view of the statute’s scope in such proceedings.

While the possibility of judicial review cannot
sub-stitute for the Department’s independent obligation to interpret and
faith-fully execute the law, that possibility does provide a one-way
check on the correctness of today’s opinion, which weighs in favor of
our change in position.

There is not settled law in any of the other federal circuit courts on how widely the Wire Act can be applied.

What’s the impact of the opinion?

No one knows that beyond a shadow of a doubt. What it does do is
create a ton of uncertainty. The intermediate routing of data with
online gaming carries with it the potential to cross state lines, which
is why some people believe the impact could be wide.

“This could have huge implications for things I don’t think the DOJ intended to affect,” said Jennifer Roberts, Associate Director of UNLV’s International Center for Gaming Regulation. “Anything that crosses state lines through intermediate routing of data could possibly be impacted.”

There are all sorts of possible activities that the Wire Act could now interfere with, including, but not limited to:

  • Intrastate online casino
  • Intrastate online poker
  • Interstate online poker that takes place between Nevada, NJ and Delaware
  • Daily fantasy sports
  • Marketing that occurs across state lines for any type of gaming
  • Online lottery sales

But will anything happen?

Now, will any of those activities be impacted? That’s not at all
guaranteed. The DOJ may issue this opinion and not actually take any
enforcement action. That could leave us like a situation like we have
with marijuana, where states have legalized it and there is a negative
climate for it at the federal level.

Kate Lowenhar-Fisher, practice group chair for gaming for Dickinson Wright had this to say after reviewing the opinion:

“It is an extremely effortful reversal of the 2011
opinion that not only expands the application of the Wire Act to all
forms of wagering, but it has very concerning implications for
intrastate online wagering and information assisting in the placement of
bets or wagers.

“It can be no coincidence that such an opinion came down as soon as
online wagering is expanding across the United States. I expect lawsuits
will soon follow.”

And GeoComply CEO David Briggs, whose company does geolocation for forms of online gaming.

“It is too early to speculate what, if
anything, will come from the Department of Justice’s latest
interpretation of the Wire Act. Regardless of this new opinion from DoJ,
it remains true that, based on existing federal statutes, any state is
free to authorize online wagering, as long as they put in place the
appropriate safeguards to ensure compliance with an intra-state system.

“A core requirement is that the appropriate
geofencing tools are used such that online wagering only occurs within
the territory where the operator is approved. GeoComply, is already
enabling states and operators to comply with this requirement and we
stand ready to continue to provide the checks and balances that ensure
compliance with all applicable state and federal laws.”

Wait, daily fantasy sports?

The age-old question of whether daily fantasy sports runs afoul of
any federal laws reared its head at least slightly on Monday when the
opinion came down. Going back to the opinion:

We further conclude that that the 2006 enactment of UIGEA did not alter the scope of the Wire Act.

The Unlawful Internet Gambling Enforcement Act
famously carved out fantasy sports for money from its provisions.
Regardless, DFS takes place on an explicitly on an interstate basis. And
while DraftKings, FanDuel and others say they are games of skill, they
still operate in some states where the attorneys general have opined
that they constitute illegal gambling.

The bottom line: It’s definitely less than ideal for DFS operators.

Payment processing for online gambling?

Payment processing is perhaps the biggest worry for the immediate future of online gambling.

Banks and payments processors have been a nut to crack for the legal
US online gaming industry when the environment was favorable. Decline
rates for transactions were abysmal when sites first launched, and
they’ve finally gotten to the point where they are at least decent for
bettors.

With a more unfavorable landscape with the new OLC opinion, could
some banks and payment processors be spooked out of serving the market?
It’s at least feasible.

The timing is very interesting

All of this comes at an interesting time for the DOJ:

  • The opinion is dated Nov. 2.
  • Attorney General Jeff Sessions’ resignation (or firing) came Nov. 7.
  • It was snowing in Washington, DC, on Monday, a great day to bury news.
  • The federal government is in a shutdown, and some of the DOJ press office is furloughed.
  • Tuesday marks the start of confirmation hearings in the Senate for AG nominee William Barr.

What’s it all mean? Who knows, but it’s all interesting.