A federal appeals court has turned back the Trump administration’s attempt to outlaw gaming on the internet.
The U.S. First Circuit Court of Appeals ruled in favor of the New Hampshire Lottery and its technology provider, NeoPollard Interactive, in a January 20 decision that reverses a 2018 opinion by the Justice Department’s Office of Legal Counsel (OLC) that threatened the legality of all online games, including poker, state-run lotteries and possibly sports betting.
At issue was the Wire Act, a law passed by Congress in 1961 that targeted organized crime by outlawing the use of phone lines to transmit betting information.
The OLC sought to overturn a settled interpretation of the act dating back to the Obama Justice Department, which declared in 2011 that it applies only to sports betting. The OLC pushed a new, broader interpretation, saying the act covers any action where gaming information is transmitted via the internet. This could have rolled back online gaming in the six states where it’s legal and jeopardized as well the sale of state lottery tickets on the web. It might also have clashed with a 2016 U.S. Supreme Court ruling that scrapped an age-old federal ban on sports betting and allows states to regulate the industry, including in cyberspace.
“A change in ruling could have affected not only online gaming that currently operates in a handful of states, but most significantly lottery states, including nearly every state in the Union,” said Global Market Advisors, a leading gaming research and consulting firm, which issued a report on the case. “This could have affected significant revenue sources, either for states that have seen an increase in online gaming revenue through the SARS-CoV-2 pandemic with the loss of lottery revenue, or for major multi-state jackpots such as Mega Millions and Powerball that support education and other services in numerous states.”
Experts say it’s doubtful, in any event, that the incoming Justice Department, led by Merrick Garland, President Biden’s pick for attorney general, would have shared the revised view. It’s expected the department will rescind it and revert to the 2011 interpretation.
“Under a new administration, the DOJ will likely not pursue a rehearing of the First Circuit ruling or petition the Supreme Court to review the case,” Daniel Wallach, an attorney specializing in gaming and sports wagering law, told industry news site CDC Gaming Reports.
Still, the appeals court ruling, which found the Trump interpretation plagued by a “lack of coherence,” is significant.
The three-judge panel said Congress “did indeed train its efforts solely on sports gambling” and that the 2018 reinterpretation “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,” they said, concluding that “We find the plaintiffs’ claims are justiciable and that the Wire Act applies only to interstate wire communication related to sports events or contests.”
The ruling upholds an earlier decision by a federal District Court judge in New Hampshire that “set aside” the 2018 reinterpretation. It concurs also with a ruling previously issued by the Fifth Circuit.
In its arguments NeoPollard claimed the Trump Justice Department’s action had little to do with the law and a lot to do with political cronyism, citing a report in The Wall Street Journal that linked the reinterpretation to a lobbying campaign by the late casino magnate Sheldon Adelson, an inveterate foe of online gaming and the largest donor to Donald Trump’s 2016 presidential run. A senior department official denied this.
“We are very pleased with the First Circuit’s decision, which restores the Wire Act to its intended scope and makes clear that state-run lotteries are not criminal enterprises,” said Matthew McGill, an attorney who represented NeoPollard in the case.
GMA said it hopes all the back and forth will move Congress to finally decide where gaming in the 21st century properly fits in terms of the law and the Constitution.
“This issue should not be governed by executive order or interpretation through the various memos,” the firm maintained in its report. “Both the Obama and Trump administrations were flawed in using this method to govern through the Department of Justice. The issue would be best served by Congress moving to modernize the 60-year-old Wire Act to clarify the act’s policy and no longer leave this to either of the other two branches of government.”
