Making Their Case: Justice Department Files Wire Act Reply Brief In First Circuit

Gambling news hasn’t stopped during the coronavirus outbreak, nor has the Wire Act case proceeding before the First Circuit Court of Appeals.

On May 22, the US Department of Justice filed its reply brief with the court.

The brief focuses on three principal arguments, two of which involve constitutional and procedural issues. The third is a more substantive, Act-specific argument against District Court Judge Paul Barbadoro and his narrow reading of the statute.

The case stems from a 2018 memorandum opinion in which the DOJ reversed its interpretation of the antiquated federal gambling law. While its previous guidance restricted the Wire Act’s scope to sports betting, the Department now seeks to apply the law to all forms of interstate gambling.

Appellate Judge Juan R. Torruella will hear arguments via teleconference on June 18 at 10 a.m.

Read the reply brief here.

A Wire Act refresher

Gambling companies were initially allowed a 90-day grace period to bring themselves into compliance with the updated guidance.

Before that window closed, the New Hampshire Lottery and gaming supplier Neopollard filed suit in Federal District Court. The duo argued that the opinion “cast a pallor of criminality” over their legal online lottery operations, which were created in line with previous guidance from 2011.

The District Court judge ruled in favor of the New Hampshire Lottery, though he issued an ominous prediction about the case being destined to end up before the US Supreme Court.

The government appealed the ruling to the First Circuit Court of Appeals, filing its opening brief just before the deadline in December. The plaintiffs responded in late February, joined by a number of Amicus briefs in support of their cause.

That’s just your opinion, man

The government’s primary argument is that it has not yet begun enforcing the 2018 memorandum, asserting that the District Court’s decision is tantamount to an advisory opinion. Article III courts (those created by Article III of the Constitution) are not permitted to issue advisory opinions.

Of course, it’s a bit more complicated than that.

The District Court found that the NH Lottery and Neopollard face a credible threat of enforcement, a factor that moves an opinion from the prohibited advisory category to permissible under the Constitution’s justiciability standards.

DOJ counsel contends that the litigants “have failed to make that showing” of a credible threat:

“They have not established that they were subject to past enforcement, that they have been threatened with future enforcement or that similarly situated parties have been prosecuted for analogous conduct. Instead, plaintiffs cite only their fear that their conduct could be viewed as unlawful. That is not enough.”

Sports betting, and more?

The government’s second argument is that the Wire Act is broader in scope than the predominant view that it only applies to sports betting.

It once again argues that the Act contains four offenses, a statutory reading Barbadoro rejected during arguments.

Under the DOJ’s reading, the partial discussion of sports indicates that only certain offenses require sports betting to be the subject. It believes that the other clauses apply more broadly to other types of gambling.

While the First Circuit has mentioned that the Wire Act narrowly applies to sports betting, it was not the question before the court at the time. Its decision in Lyons is therefore non-binding dicta.

We’ll just put this over there

Lastly, the DOJ argues that the lower court erred in “purporting to set aside” the 2018 opinion. The government believes that the Office of Legal Counsel memorandum, which was issued in November 2018, does not constitute a “final agency action.”

Under the Administrative Procedure Act, only final agency decisions are subject to judicial review. If the government’s argument holds, it would effectively mean that this memorandum can not be challenged because it was not a reflection of final action.

The government couches OLC opinions as “advice” that “carry no legal force for regulated parties.”

The brief additionally argues that the 2018 opinion did not address state lotteries, “even as a matter of predecisional OLC advice.” Despite reinterpreting the scope of the Wire Act to apply beyond sports betting, the Department says it was not contemplating its application to state lotteries.

About the Author

John Holden

John Holden

John Holden is a writer at Bonus, focused on legal and regulatory issues in the gambling industry. He is a full-time academic but has been writing for a number of gaming publications since 2018. He is the author of more than 50 academic publications and hundreds of mainstream articles on the regulation of the gaming industry.
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