DOJ: Lotteries Not Part of Wire Act Opinion

Another memo from federal Deputy Attorney General Rod Rosenstein (l.) says that the DOJ’s new interpretation of the 1961 federal Wire Act did not address whether it applies to state lotteries. New Hampshire has filed a federal lawsuit challenging the DOJ opinion in an effort to protect its lottery, including inter-state lotteries such as Powerball and Mega Millions. The DOJ filed a motion after releasing the memo asking for the case to be dismissed since New Hampshire’s lottery is not under immediate threat of prosecution. A federal judge disagreed.

DOJ: Lotteries Not Part of Wire Act Opinion

In releasing an updated opinion that said the 1961 federal Wire Act bans all forms of inter-state gambling, the Department of Justice wasn’t talking about inter-state lotteries, according to a new memo from Deputy Attorney General Rod Rosenstein.

How the act applies to lotteries is still under review, the memo says and DOJ lawyers should refrain from applying the wire act to lotteries until the question is settled, Rosenstein says in the memo.

The memo comes as New Hampshire has filed a federal lawsuit challenging the DOJ’s new opinion in an effort to protect its lottery. The DOJ has filed a motion in the case saying that since the New Hampshire Lottery Commission is not in immediate threat of enforcement actions, the lawsuit is premature and the state lacks the legal standing to make the challenge.

However, the federal judge in the case, Paul Barbadoro, ruled during an opening hearing that the memo does not convince him that New Hampshire lacks standing to bring the suit or that the issue is moot. He ruled the case will continue and he will begin deliberations. He did allow the DOJ time to file further briefs in the case.

The DOJ memo, which has not yet moved to enforcement, said the 1961 act covered all forms of gambling where information is transmitted across state line, including online casinos. It reversed a 2011 DOJ opinion that the wire act applied only to sports betting.

The opinion, however, brought into serious doubt the legality of inter-state lotteries such as Powerball and Mega Millions. Several other states with online lotteries have filed briefs supporting New Hampshire’s suit.

Rosenstein’s memo seemed to be an effort to undercut New Hampshire’s lawsuit, even though interstate lotteries clearly fall under threat of prosecution from the opinion.

“The OLC opinion did not address whether the Wire Act applies to State lotteries and their vendors,’ the memo reads. “The Department is now reviewing that question. Department of Justice attorneys should refrain from applying Section I 084(a) to State lotteries and their vendors, if they are operating as authorized by State law, until the Department concludes its review.”

Should the DOJ find that lotteries are illegal under the Wire Act, Rosenstein said a 90-day grace period should be put into effect to allow lotteries to adjust to the new interpretation. Such a delay has already been put in place for the opinion as a whole.

Barbadoro said the DOJ would have been better served if the memo said New Hampshire’s lottery would never be challenged under the opinion when ruling against dismissing the case.

The judge concluded arguments in the case, but did allow for additional briefs to be filed.

During the hearing, the New Hampshire Lottery Commission asked for a declaratory ruling that the Wire Act does not apply to non-sports gambling or to state laws. The commission also wants the new opinion ruled invalid.

Attorneys for the DOJ argue that states do not have a statutory right to do business with each other and again that lotteries face no immediate threat of prosecution.

According to coverage by online poker report, the judge expressed concerns that other states besides New Hampshire involved with inter-state lotteries such as Powerball are not defendants in the case.

“Among the things that the New Hampshire lottery is concerned about is the ability to carry on its pact with these states,” he said. “If I just declare that the New Hampshire Lottery Commission is not in violation of the Wire Act, they don’t get accorded complete relief because they’re not able to conduct the lawful activity with their partners.”

Still, the judge also hedged at offering a ruling that would affect all U.S. jurisdictions.

“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 U.S. Supreme Court either way,” Barbadoro said early in the hearing according to the website’s live coverage.

Should the case be dismissed, it is likely that New Jersey—which allows online gambling—would move to challenge the opinion as several state officials have indicated that they are ready to do so regardless of the outcome of the New Hampshire suit.

New Jersey’s attorney general has also filed freedom of information act requests charging that the new opinion was issued to appease Republican donor Sheldon Adelson, who has personally been funding lobbying efforts to ban online gaming.