Appeals Court Rejects DOJ Wire Act Interpretation

The move clears the path for online lotteries.

January 21, 2021

WASHINGTON—The First Circuit Court of Appeals yesterday issued its long-awaited opinion in the case of New Hampshire Lottery Commission, et al v. Rosen, et al, rejecting the 2018 Office of Legal Counsel opinion that held the Wire Act barred all forms of internet gaming. 

In effect, the court sustained an opinion issued in 2011 by that same office interpreting the act as applying to sports betting only, and upon which the lotteries of a number of states commenced offering online lotteries, games and virtual scratch-offs. It is now up to the Department of Justice to decide whether to seek review by the United States Supreme Court.

For 50 years, the 1961 Wire Act was interpreted by the courts and the Department of Justice as barring all forms of gaming conducted using interstate telecommunications. The department concluded the law covered internet transactions, and in 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act to give DOJ additional tools to shut down online gaming sites. 

In 2009, the Illinois and New York lotteries requested that the Justice Department review the scope of  the Wire Act. In response, the department issued in 2011 its opinion that the act applied to sports betting alone and not to online lotteries or casino gaming. NACS opposed that decision on legal grounds and on the basis that verification for age-restricted products and activities is most effectively done in face-to-face transactions as opposed to online. 

Following the inauguration of President Trump, the Justice Department initiated a review of the 2011 opinion, and in 2018, issued the new opinion, reversing the 2011 opinion and restoring the traditional interpretation of the Wire Act. The New Hampshire Lottery and its provider, NeoPollard, responded by filing a suit against the DOJ seeking to invalidate the new opinion.

NACS joined with the Coalition to Stop Internet Gambling in filing an amicus curiae brief supporting the Department of Justice position. The Federal District Court of New Hampshire disagreed, and on June 3, 2019, issued its opinion holding that “the text, context, and structure of the Wire Act” limit its applicability to sports gambling, and not to other types of gambling.

The Justice Department appealed to the First Circuit Court of Appeals, which heard arguments on June 18, 2020. DOJ argued that an Office of Legal Counsel opinion was not subject to judicial review and that the lower court was incorrect in its conclusion that the Wire Act does not cover non-sports gambling.  NACS again joined with the Coalition to Stop Internet Gambling in filing an amicus curiae brief supporting the DOJ position. 

In affirming the lower court’s opinion, the court said “[T]he text of the Wire Act is not so clear as to dictate in favor of either party’s view,” but that “[t]he government’s reading of the statute, however, would most certainly create an odd and unharmonious piece of criminal legislation. Neither common sense nor the legislative history suggests that Congress likely intended such a result."

  • What happens next? The Department of Justice will decide whether to seek review by the Supreme Court of the First Circuit opinion.
  • What will the Justice Department do? Inasmuch as the Obama Justice Department interpreted the Wire Act as not applying to internet lotteries, there is a question as to whether President Biden’s Justice Department will contest the ruling on this point. It is possible the DOJ will seek review on the procedural issue as to whether its opinions are reviewable by the courts.  
  • What does this mean? This means state lotteries are free to offer online lotteries, scratch-offs and casino games, unless the Supreme Court takes up the case and concludes otherwise, which seems unlikely at this point.
  • What does this mean for sports betting? The First Circuit confirmed the Wire Act covers sports betting. It did not opine on whether sports wagers that originate and are received in the same state are considered “interstate” transmissions and thus banned by the act, leaving this an open legal question.