Reversing its prior stance, the Department of Justice (DOJ) released a new opinion stating that the Wire Act applies to all forms of gambling—not just sports gambling—adding another layer of oversight to the online gambling industry.
During the Obama administration, the DOJ was asked whether the Wire Act prohibited the states of Illinois and New York from using the Internet and out-of-state transaction processors to sell lottery tickets to in-state adults. In a 2011 opinion, the DOJ answered that the prohibitions of the Wire Act are limited to sports gambling and thus did not apply to state lotteries.
But when recently asked to reconsider, the DOJ’s Office of Legal Counsel reached the opposite conclusion in a new opinion, “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling.”
“We do not lightly depart from our precedents, and we have given the views expressed in our prior opinion careful and respectful consideration,” Steven A. Engel wrote. “Based upon the plain language of the statute, however, we reach a different result. While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling.”
The statute prohibits persons involved in the gambling business from transmitting several types of wagering-related communications over the wires. Section 1084(a) consists of two general clauses, each of which prohibits two kinds of wire transmissions, creating four prohibitions in total. But interpretive difficulties arise with the inclusion of the phrase “on any sporting event or contest” after the second prohibition in the first clause.
The 2011 opinion determined that the text was ambiguous and concluded that the most logical result was to read the phrase into all four prohibitions, limiting application of the Wire Act to sports gambling.
However, this reading represented “a marked shift” in how the DOJ had interpreted the statute, Engel wrote, noting that between fiscal years 2005 and 2011, the DOJ secured at least 17 Wire Act convictions that involved non-sports betting.
“[T]he linguistic maneuvers that are necessary to conclude that the sports-gambling modifier sweeps both backwards and forwards to reach all four of section 1084(a)’s prohibitions are too much for the statutory text to bear,” Engel wrote.
A more logical read of the statute rejects the finding of ambiguity and simply applies the “sporting event or contest” phrase to the single prohibition it modifies, the new opinion explained, leaving the other three prohibitions to apply in full force to all forms of online gambling.
Further, the 2006 enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) did nothing to modify the scope of the Wire Act, the DOJ added. The language of the UIGEA does not affect what activities are lawful under the Wire Act, and in no way “alter[s], limit[s], or extend[s]” the existing prohibitions under the Wire Act.
While the DOJ recognized that many in the industry have relied on the views expressed in the 2011 opinion about what federal law permits (with several states selling lottery tickets via the Internet in the ensuing years), the agency reversed its stance on the Wire Act.
“[I]n light of our conclusion about the plain language of the statute, we do not believe that such reliance interests are sufficient to justify continued adherence to the 2011 opinion,” Engel wrote. “Moreover, if Congress finds it appropriate to protect those interests, it retains ultimate authority over the scope of the statute and may amend the statute at any time, either to broaden or narrow its prohibitions.”
To read the DOJ opinion, click here.
Why it matters: While online gambling already faces multiple other forms of regulation—from the UIGEA and other federal and state laws—the addition of the Wire Act to the layers of oversight could dampen the industry. However, even the DOJ acknowledged that its new opinion will likely be challenged in the courts.