All Aboard The Wire Act Case: NJ, PA, Michigan Lead Challenge To DOJ In Federal Court

New Jersey and Michigan have joined the legal challenge against the Department of Justice‘s latest interpretation of the Wire Act.

We’ve confirmed that New Jersey filed an amicus brief on Friday in the case started by New Hampshire in federal court.

You can read the filing here.

Later on Friday, the Michigan Lottery also filed an amicus brief, including 11 other states and the District of Columbia. Pennsylvania sought to intervene and join the case formally as well, but the court has denied that motion.

All of those states argue that the DOJ is breaking with both the legislative intent of the Wire Act and findings in at least two federal circuit courts, all of which point to the idea the Wire Act only deals with sports wagering.

Why now for New Jersey and the Wire Act?

The reinterpretation of the Wire Act has thrown a cloud of uncertainty over much of the gaming industry. While the DOJ previously said the Wire Act only applied to interstate sports betting, it now says that it applies to all forms of gaming.

That could possibly capture all sorts of gaming activity, from interstate lottery products like Powerball to online lottery, online casino and online poker, in addition to sports wagering. The nature of online gambling brings with it some amount of transmission of information across state lines, even if it is only legal on an intrastate basis.

The impact to New Jersey, if the DOJ strictly enforces the Wire Act under the interpretation, could be massive. The state has legalized NJ online casinos, poker and sports betting. The impact to the state if it were all shut down — admittedly that doesn’t seem like a likely outcome in the short term — would be sizable for casinos and racetracks as well as the state government in terms of tax dollars. From the filing:

Absent judicial intervention, this iGaming industry may be forced to shut down and those revenues will disappear.

The DOJ has also said that it is holding off on enforcement of its opinion until June. The case could be wrapped by then, as it’s on an expedited schedule.

What New Jersey wants on the Wire Act

New Jersey asks the court, quite simply to find on the side of NH and get rid of the new DOJ opinion:

Furthermore, this Court can and should grant relief that reaches beyond the parties and the District of New Hampshire, and that protects the interests of third-parties like New Jersey nationwide. Under the Declaratory Judgment Act, the Court should declare that the Wire Act does not cover non-sports-related gambling in any jurisdiction, and under the Administrative Procedure Act, the Court should vacate the DOJ’s 2018 reinterpretation of the Wire Act as null and void.

NJ mentions the fear that all forms of online gaming, including its own, take place somewhat on interstate basis even if it can only be conducted by people located in the state:

If allowed to stand, the 2018 Reinterpretation, and the DOJ Memo which adopts it for enforcement of the Wire Act nationwide, may end New Jersey’s iGaming industry. Some aspects of the industry are specifically designed to operate in multiple states. For example, New Jersey, Delaware and Nevada have entered into a multi-state agreement to provide for and regulate Internet poker among people in each State. This now may be unlawful under the 2018 Reinterpretation.

In addition, other aspects of New Jersey’s iGaming industry involve interstate use of the wires, notwithstanding the best efforts of the regulators, operators, and participants. It is simply the nature of the Internet that even purely intrastate transactions may travel through channels that cross state lines.

Michigan lottery plus a lot of other lotteries

The Michigan Lottery is also filing an amicus brief siding with New Hampshire, perhaps:

Read Michigan’s brief here.

The lottery is also representing a number of other state lotteries in the amicus brief. Here are other signatories:

  • Kentucky Lottery Corporation
  • Tennessee Education Lottery Corporation
  • Virginia Lottery
  • Rhode Island Lottery
  • Colorado State Lottery Division
  • North Carolina Education Lottery
  • State of Delaware
  • State of Idaho
  • State of Vermont
  • State of Mississippi
  • State of Alaska
  • District of Columbia

From the filing:

The proposed amicus brief is useful and relevant to the Court’s review for two primary reasons: it emphasizes the erroneous nature of the 2018 Opinion’s legal conclusions and it demonstrates the need for nationwide equitable relief to combat the 2018 Opinion’s nationwide consequences.

The brief will explain that the DOJ’s 2018 Opinion is inconsistent with the statute’s language and legislative history and contradicts decisions by the First and Fifth Circuit Courts of Appeals interpreting the Wire Act to apply only to sports gambling.

It also will highlight that failing to harmonize the Wire Act with the Unlawful Internet Gambling Enforcement Act (UIGEA), 31 U.S.C. §§ 5361-5367, creates a confusing and inconsistent body of federal antigambling laws.

Pennsylvania tries to join the party

Late on Friday, Pennsylvania also made its case to join the NH case. Here are all the documents filed, including its motion to be added as a plaintiff:

Read Pennsylvania’s filing here.

The fact that PA online lottery and Michigan online lottery exist is probably a clue as to why both states are interested in the case. PA has also legalized online casino and sports gambling, and Michigan online casinos may be on the way too.

PA, like the above, believes the DOJ is out of bounds on the Wire Act:

The Pennsylvania Lottery agrees with Plaintiffs that the Office of Legal Counsel’s (“OLC’s”) reversal of its 2011 Opinion regarding the scope of the Wire Act, 18 U.S.C. § 1084, is arbitrary, contrary to the plain meaning of the Wire Act, and inconsistent with directly applicable precedent.

The state also makes clear what it sees at stake:

Given the use of wire transmissions for Pennsylvania Lottery games as described above, the broadest interpretation of the 2018 Opinion could result in the suspension of all state lottery sales, resulting in an immediate annual loss of over $1 billion in Lottery proceeds that benefit older Pennsylvanians.

On Monday, however the court denied Pennsylvania’s motion to intervene. Judge Paul J. Barbadoro ruled that the matter does not involve Pennsylvania law and is therefore outside of his jurisdiction.

The Commonwealth will, instead, file an amicus brief of its own.

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