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First Circuit Ruling Limits Wire Act’s Control Over Lottery, Online Gaming

Court of Appeals Issues Legal Victory for States Challenge to Department of Justice

In New Hampshire Lottery Commission v. Rosen (issued on Jan. 20, 2021), the First Circuit Court of Appeals affirmed a lower court ruling that the Wire Act, a federal statute enacted in 1961, cannot be used to block all online gambling, and is instead restricted to sports gambling only. 

In 2018, the Department of Justice (“DOJ”) issued a legal opinion (the "2018 Opinion") that the Wire Act prohibited the use of “wire communications” in all forms of bets or wagers. This was significant because the term wire communications was written broadly enough in 1961 to cover the Internet. The 2018 Opinion reversed a 2011 Opinion concluding that the Wire Act was limited to sports gambling and extended the prohibition of using wire communications to lotteries and contests as well as sports gambling. This change proved very unpopular with state governments because it would have barred online accounts and multi-state lotteries like Powerball. According to the First Circuit’s ruling, “the more expansive construction of the Wire Act adopted in 2018 caused great consternation among many states and their vendors who had begun selling lottery tickets via the Internet after the issuance of the 2011 Opinion.”

Not wanting to shrink its lottery, the New Hampshire Lottery Commission filed suit in February 2019 claiming that if the 2018 Opinion took effect, states would have to withdraw from multi-jurisdictional games like Powerball and would lose many millions of dollars per year. The DOJ agreed to stay enforcement of the 2018 Opinion while the lawsuit was pending. In 2019, the District Court sided with the New Hampshire Lottery Commission, ruling that the Wire Act is limited to sports gambling, as initially opined by the DOJ in 2011.

The United States government appealed that ruling, but last week, the First Circuit upheld the District Court’s ruling, confirming that the Wire Act is limited to bets or wagers on sporting events or contests. The decision was issued by two judges (a third judge heard oral arguments but passed away without participating in the ruling) who wrote, “The government's reading of the statute would most certainly create an odd and unharmonious piece of criminal legislation. Neither common sense nor the legislative history suggests that Congress likely intended such a result […] we therefore hold that the prohibitions of [the Wire Act] apply only to the interstate transmission of wire communications related to any ‘sporting event or contest.’"

TAKEAWAY: Although an appeal to the Supreme Court is possible, it is more likely that the change in presidential administrations will effectively end this matter, and the Wire Act will not be interpreted in a manner that prevents otherwise legal lotteries, contests, poker and casino-style gaming.

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