A federal judge has ruled against a revised opinion from the U.S. Department of Justice on the 1961 federal Wire Act that called into question the legality of online gambling and online lotteries saying that the act applies only to sports wagering.
The DOJ issued an opinion late last year—reversing an earlier 2011 DOJ opinion—that said 1961 act applied to all forms of online gambling where information crosses state lines, essentially calling into question the legality of online lotteries such as PowerBall and Mega Millions as well as online casino gambling and online poker where information crossed state lines through the internet.
The New Hampshire lottery was the first to challenge the new opinion in court, though several state lotteries filed briefs in support of the state and state’s such as New Jersey and Pennsylvania—which allow online casinos and poker—also supported the challenge and threatened to file suits as well.
The ruling from Judge Paul Barbadoro came in the New Hampshire case. The state lottery charged that the DOJ’s new opinion subjects its employees to prosecution and created uncertainty about whether it should continue lotteries that cross state lines.
Barbadoro ruled that New Hampshire has standing to challenge the opinion and that the wire act applied only to sports betting, essentially reaching the same conclusion the DOJ’s 2011 opinion.
“Today’s ruling is a historic victory for the State of New Hampshire and we are proud to have led this effort,” New Hampshire Governor Chris Sununu said in a statement. “New Hampshire stood up, took action, and won—all to protect public education in our state.”
A study by the Associated Press found that states would have been at risk of losing $220 million in net profits annually if the Justice Department had targeted single tickets sold online or more than $23 billion under the broadest interpretation that would have prohibited all lottery-related activities that use the internet.
A spokesman for the Justice Department told the wire service it “is reviewing the decision and declines to comment further at this time.”
Matthew D. McGill, who represented the NeoPollard, Interactive, which operates New Hampshire’s online lottery, said the ruling will benefit other states besides New Hampshire such as Michigan, New Jersey and Pennsylvania which all filed friend-of-the court briefs in this case.
“Because the court ‘set aside’ the Justice Department’s incorrect re-interpretation of the Wire Act, this ruling has nationwide impact,” McGill said in a statement. “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.”
Barbadoro’s decision, however, was limited to plaintiffs involved in the case.
The Coalition to Stop Internet Gambling—a Sheldon Adelson-backed group that has been lobbying to outlaw all forms of online gambling—said since the court ruling was limited, it would likely be appealed.
“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,” the group said in a statement. “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.”
But that could change, according to Samantha L. Haggerty of Duane Morris.
“The court does address an argument made by an amicus brief, which advocates for an extension of the declaratory judgment to non-parties on behalf of the Lottery Commission,” she writes. “Although the court concludes that this argument is insufficiently developed on the record, the court invites the plaintiffs to pursue such relief in a footnote, within 14 days of the issuance of the court’s order. Thus, although the court’s current declaratory judgment binds only the parties to the case, the plaintiffs have the option to pursue more extensive relief.”
At the center of the case is the 1961 act, which was passed by Congress to target sports betting operations run by organized crime that used telephone lines to convey results. In the early 2000s, New York and Illinois asked the DOJ if the act would apply to selling lottery tickets online.
The 2011 opinion found that the act applied only to sports wagering and that online gambling could be allowed within a state’s boarders. That allowed for the rise of online lotteries. Also, Nevada, New Jersey and Delaware—and recently Pennsylvania—legalized online gaming within their borders.
Barbadoro ruled agreed with the 2011 opinion that the law was meant for sports betting even though one clause only mentioned bets and wagers. The DOJ has argued that the clause meant the law could be interpreted more broadly. Much of the case—and the ruling—revolved around grammatical points in the original act.
The judge also ruled that New Hampshire’s lottery was at risk of potential prosecution. The DOJ had sought to dismiss the case saying the new opinion had not addressed lotteries and the state did not face prosecution for violating the act.
The states “faced the choice between risking criminal prosecution, winding down their operations, or taking significant and costly compliance measures that may not even eliminate the threat,” Barbadoro’s decision said.
The DOJ had set June 14 to begin enforcement of the new opinion, but will now have to wait until all potential appeals of the case are completed.
One immediate impact of the ruling is that the World Series of Poker will be able to continue a player sharing agreement with New Jersey for online events. The WSOP originally said it would only share players in events scheduled before June 14.
