Federal Judge To DOJ: Wire Act Only Applies To Sports Betting

Photo by Online Poker Report

New Hampshire has won its lawsuit against the US Department of Justice clarifying the scope of a 1961 federal gambling law.

In a 60-page ruling issued Monday, US District Court Judge Paul Barbadoro rejected a 2018 opinion from the Office of Legal Counsel which expanded the Wire Act to broadly cover interstate online gambling. The previous interpretation from 2011 applies narrowly to sports betting.

The judge handed the DOJ a substantial defeat in granting plaintiffs the summary judgment they sought.

“I hereby declare that § 1084(a) of the Wire Act… applies only to transmissions related to bets or wagers on a sporting event or contest,” Barbadoro wrote to conclude his decision. “The 2018 OLC Opinion is set aside.”

The ruling is a shared victory for the small group of states with regulated online gambling, including Nevada and New Jersey. It is not, however, a nationwide injunction. The DOJ may still enforce its new opinion beginning in less than two weeks, with consequences for other parties still unknown.

Judge sets aside 2018 Wire Act opinion

The suit originated with the New Hampshire Lottery Commission over concerns that the new opinion could jeopardize online ticket sales — and potentially even multi-state retail games such as Powerball and Mega Millions.

On standing

The DOJ sought a dismissal on the grounds that it has not yet decided if state lotteries are subject to enforcement under the new opinion. The plaintiffs, however, argued that the lack of clarity gives the department the power to criminalize its operation at any point.

The judge sided with the state. Barbadoro opined that the NH Lottery faces a sufficiently imminent threat to secure its standing in the case, using that as the primary basis to deny the motion to dismiss.

Here’s an especially pointed quote from the decision:

“The Government challenges this conclusion by arguing that the likelihood that the plaintiffs will face prosecution under the Wire Act is low, because the 2018 OLC Opinion does not explicitly conclude that state agencies, state employees, and state vendors are subject to prosecution under the Act. I reject this argument because the record tells a different story.”

There is no directive from the DOJ that clearly indicates it won’t prosecute lotteries. To the contrary, the 2018 opinion specifically cites online lottery sales. Here’s more from the judge:

“Had the OLC believed that states were excluded from the Act’s coverage, it could have responded to the states’ request by simply informing them that they were not subject to the Act…

“Nothing the Department of Justice said or did before the plaintiffs filed their complaints gave states like New Hampshire any reason to believe that state actors would not be prosecuted under the OLC’s new interpretation of the Wire Act.”

More on standing

This is getting a bit tedious for a layperson, but this issue is crucial to this case and potentially others like it. The judge was adamant about the plaintiffs’ standing, stopping just shy of scolding the DOJ’s tactics.

This quote from Barbadoro is too good not to cite in full:

“The plaintiffs in this case easily satisfy the imminence requirement. First, they have openly engaged for many years in conduct that the 2018 OLC Opinion now brands as criminal, and they intend to continue their activities unless they are forced to stop because of a reasonable fear that prosecutions will otherwise ensue. Second, the risk of prosecution is substantial. After operating for years in reliance on OLC guidance that their conduct was not subject to the Wire Act, the plaintiffs have had to confront a sudden about-face by the Department of Justice. Even worse, they face a directive from the Deputy Attorney General to his prosecutors that they should begin enforcing the OLC’s new interpretation of the Act after the expiration of a specified grace period. Given these unusual circumstances, the plaintiffs have met their burden to establish their standing to sue.”

On grammar

Unfortunately, the original statute is both grossly outdated and poorly written, making its language somewhat vague. Much of the arguments (and a good portion of Barbadoro’s decision) centered around the use of grammatical tools to aid interpretation.

The government prefers the “rule of the last antecedent” to argue that prohibitions against “bets and wagers” and “bets and wagers on any sporting event” are separate. The plaintiffs, on the other hand, believe the “series-qualifier cannon” forces all provisions to retain the “on any sporting event” modifier.

As the judge put it, “Each side maintains that its interpretation is compelled by the plain language.” And as he lamented during oral arguments, the statute does not contain ideal language to support either side.

In cases like this, it is up the court to “undertake a nuanced and comprehensive review of all relevant evidence in an attempt to give the statute as a whole a fair reading.” And in the judge’s opinion, the plaintiffs have it right:

“While the syntax employed by the Wire Act’s drafters does not suffice to answer whether § 1084(a) is limited to sports gambling, a careful contextual reading of the Wire Act as a whole reveals that the narrower construction proposed by the 2011 OLC Opinion represents the better reading. The Act’s legislative history, if anything, confirms this conclusion. Accordingly, I construe all four prohibitions in § 1084(a) to apply only to bets or wagers on a sporting event or contest.”

Nationwide or narrow relief?

Legal minds are not unanimous in their interpretation of the judge’s decision.

The question is whether Barbadoro’s setting-aside of the opinion extends nationwide or just to the plaintiffs in this case. Are stakeholders elsewhere still bound by the 2018 opinion? Even the parties involved disagree in quotes obtained by the Associated Press.

Here’s Matthew McGill, counsel for the plaintiffs:

“Because the court ‘set aside’ the Justice Department’s incorrect re-interpretation of the Wire Act, this ruling has nationwide impact. Throughout the country, state lotteries and others in the gaming industry once again can rely on the Justice Department’s 2011 opinion that the Wire Act is limited to sports betting.”

And here is the Coalition to Stop Internet Gambling, which joined the case as an amicus of the defendants:

“While we disagree with many of the views expressed in Judge Barbadoro’s ruling, we are happy that the scope of the opinion was confined to the parties involved. We are confident that other jurisdictions will see this issue very differently and our resolve to protect at-risk populations has only been strengthened by today’s decision.”

Our legal experts tend to agree with the latter. “We are likely at the beginning of what could be a drawn-out process for what happens to the 2018 Wire Act memorandum,” wrote John Holden.

What does it mean for online gambling?

In the short term, not much changes with the status quo. The lack of a nationwide injunction appears to limit the judgment to the plaintiffs in this case, but it sets the strongest precedent yet in the First Circuit.

Online gambling is still as legal as it’s ever been in the US, sports betting laws are unaffected, and it’s presumably business as usual for state lotteries. Online lottery programs in six states seem to be in far less jeopardy than the terms of the 2018 interpretation indicated.

Assuming this opinion holds water in the long term, it could help shake off the “chilling effect” brought about by the uncertainty of enforcement. Pennsylvania and West Virginia could move forward with their new industries, and states considering legalization would have one less hurdle to consider.

This could be especially good news for online poker players if it serves to affirm the legality of multi-state poker compacts. Such a system allows, for example, players in New Jersey to compete in WSOP online bracelet events remotely.

Interstate compacts are fundamental to a successful online poker industry.

What’s next for DOJ?

During arguments in April, the judge could already foresee a series of appeals following his decision. Here’s Barbadoro:

“I have a strong feeling that however I resolve the case, or however the First Circuit resolves the case, it is likely going to be resolved by the US Supreme Court either way.”

DOJ counsel Steven Myers did little to dispel the prediction during the ensuing discussion. Here’s an amusing exchange with the judge near the end of the proceedings:

Barbadoro: “If I were to grant declaratory relief to the plaintiffs in this case that the Wire Act is limited to sports betting… would the government follow that order or appeal? Or does the government feel that it is free to disregard that order?”

Myers: “It would depend on how the order is written.”

The First Circuit Court of Appeals is the next rung on the ladder, a court in which the plaintiffs have more precedent working in their favor. Though not binding like Barbadoro’s decision, the appellate judges previously applied a narrow interpretation of the Wire Act in deciding Lyons.

If the case does ultimately end up before SCOTUS, it could be several years before a complete resolution is reached.