WHAT: According to the U.S. Court of Appeals for the First Circuit (First Circuit), the Federal Wire Act’s criminal prohibitions are limited to sports wagering activity only.
WHEN: On January 20, 2020, in New Hampshire Lottery Commission v. Rosen, No. 19-1835, 2021 WL 191771 (1st Cir. Jan. 20, 2021), the First Circuit disagreed with the U.S. Department of Justice (DOJ) Office of Legal Counsel's (OLC) most recent interpretation of the Wire Act and declared that the Wire Act does not apply to non-sports wagering.
WHAT DOES IT MEAN FOR THE INDUSTRY: The First Circuit’s decision comes on the heels of years of uncertainty surrounding the scope of the Wire Act and means that state lotteries and online gambling companies in Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island can offer non-sports wagering (e.g. casino-style games) on the internet without fear of facing criminal liability under the Wire Act. State lotteries and online gambling companies in other states may also take heart in this decision as it lays the groundwork for similar decisions in other jurisdictions.
Last week, in New Hampshire Lottery Commission v. Rosen, No. 19-1835, 2021 WL 191771 (1st Cir. Jan. 20, 2021), the First Circuit announced that, contrary to a 2018 DOJ OLC opinion, the Wire Act is limited to sports wagering only. After nearly twenty years of conflicting opinions on the scope of the Wire Act’s application, the First Circuit’s decision provides greater clarity for states that rely on lottery profits to fund critical state programs.
The Wire Act & the DOJ’s Shifting Application
The Wire Act, 18 U.S.C § 1084, was enacted in 1961 as part of then-Attorney General Robert F. Kennedy’s campaign against organized crime.[1] Section 1084(a) specifies what conduct the Wire Act criminalizes. Its language has been dissected into two prohibition clauses. It reads:
[Clause 1] 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, [Clause 2] 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.[2]
By the early 2000s, the scope of Section 1084(a) was unclear. Did the Wire Act prohibit all interstate “bets or wagers” or sports wagering only? The DOJ and courts reached conflicting conclusions.
- In 2002, the DOJ signaled that it believed the Wire Act criminalized all interstate “bets or wagers” – not just “bets or wagers on any sporting event or contest.”[3] In a letter to the Nevada Gaming Control Board, the DOJ said that “the Department of Justice believes that federal law prohibits gambling over the Internet, including casino-style games.”[4]
- Three months later, the U.S. Court of Appeals for the Fifth Circuit reached the opposite conclusion. It opined in a private civil suit that “[a] plain reading of the statutory language [of the Wire Act] clearly requires that the object of the gambling be a sporting event or contest.”[5]
- In 2005, the DOJ reiterated its understanding of the Wire Act by warning the Illinois Lottery that the purchase of lottery tickets over the internet was illegal.[6]
- In 2007, the DOJ tripled down. In a hearing before the House Judiciary Committee, then-U.S. Attorney for the Eastern District of Missouri Catherine Hanaway stated: “It is the Department’s view, and that of at least one federal court (the E.D. Mo.), that [the Wire Act] applies to both sporting events and other forms of gambling.”[7]
In 2011, after being asked by the New York and Illinois lotteries to clarify the scope of Section 1084(a), the DOJ OLC reversed its prior position and issued an opinion (2011 OLC Opinion) concluding that the Wire Act applied to sports wagering only.[8] To reach this conclusion, the DOJ OLC determined that the phrase “on any sporting event or contest” modified the “bets or wagers” in Section 1084(a)’s first and second clauses.[9] The DOJ OLC concluded that this interpretation best comported with the “natural” and “logical” reading of the statute and provided for a cohesive legislative scheme supported by the...
