First Circuit Court of Appeals Rejects Trump Administration Reading of Wire Act

In the U.S. Department of Justice’s toolbox for combating organized crime, one of the oldest (and least used) tools is the federal criminal offense known as the Wire Act.  The Act makes it a felony for anyone,

being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers . . . .

Originally intended to attack organized crime’s involvement in interstate bookmaking and sports betting, the Wire Act became a subject of interest to some Members of Congress who perceived it as a potential vehicle to address Internet gambling.  A 2011 opinion by the U.S. Department of Justice’s Office of Legal Counsel (OLC) sought to put that broad construction to rest. It concluded that the Wire Act did not apply to Internet and out-of-state sales of lottery tickets because those sales did not involve sporting events or contests.

In 2018, however, the OLC effectively overruled its 2011 opinion with a new opinion that concluded, based on a crabbed reading of the Act’s text, that the Act’s prohibitions “are not uniformly limited to gambling on sporting events or contests.”  This opinion immediately called into question the legality of state lotteries operating online.  Even as the Justice Department twice extended the forbearance period for enforcement of the Wire Act, in 2019 the U.S. District Court for the District of New Hampshire held, in a legal challenge by the New Hampshire Lottery Commission and one of its vendors, that the Wire Act’s ambit was limited to sports gambling.

On January 20, a panel of the U.S. Court of Appeals for the First Circuit affirmed the District Court’s ruling, holding that the Act’s prohibitions “apply only to the interstate transmission of wire communications related to any ‘sporting event or contest.’”  After determining that the Commission had standing to bring the lawsuit and that the issue was ripe for judicial resolution, the Court stated that “the text of section 1084 [is] not entirely clear on the matter at hand,” and found “that the government’s resolution of the Wire Act’s ambiguity would lead to odd and seemingly inexplicable results.”  It further noted that “the legislative history contains strong indications that Congress did indeed train its efforts solely on sports gambling.”

Although the First Circuit’s decision does not bind other circuits, its analysis of the Act and its legislative history appears sound and therefore would carry substantial weight in other federal courts.  Moreover, the Justice Department in the Biden Administration is unlikely to petition for certiorari to the U.S. Supreme Court, thereby bringing the litigation to an end.  At some later date, the Department is also likely to have OLC revisit the issue, which could lead to withdrawal of the 2018 OLC opinion and reinstatement of the 2011 opinion as the official guidance for federal departments.

For those reasons, the First Circuit opinion should provide substantial comfort for state lotteries conducting online sales.

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