The Wire Act of 1961

Do you play poker online? Blackjack? Bet on football? Then chances are you’ve heard of the Wire Act. It’s a 50+ year old law that’s been in the news recently because the US Department of Justice changed their minds on how it applied to online gambling. Now they claim that it only applies to online sports betting.

The result? We now have legal, regulated online poker and casino games in 3 states. Another half dozen states are expected to pass legislation over the next couple of years. But let’s start at the beginning.

What is the Wire Act?

The Wire Act prohibits “interstate transmissions of wire communications” used for sports betting. You might also see it called the:

  • Interstate Wire Act of 1961
  • Wire Act of 1961
  • Federal Wire Act

It was signed into law on September 13th, 1961 by John F. Kennedy. The goal was to target “the bankrollers and kingpins of the rackets,” who “live luxurious, apparently respectable, lives in one state but return periodically to another state to collect from the rackets they run by remote control.”

The part of the act you need to pay attention to is this:

Whoever 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, shall be fined under this title or imprisoned not more than two years, or both.

In English: According to I. Nelson Rose the Wire Act “was designed to cut the ‘wire,’ which was a telegraph wire that bookies used so that they could get the results before the bettors.”

It was NOT meant to prohibit other forms of gambling, such as online casino games or poker. The US Government and Department of Justice made it clear they understood that.

Expansion Attempts

In fact – not only did they understand the Wire Act, but chances are they knew it didn’t apply to internet gambling …at least anything outside of sports betting. Yet …they still charged people with violating it and fined them millions of dollars. (More on that in a second.)

How the Government made it clear they understood the act is by all their attempts to expand or add to it. For example:

  • 1995 – Senator Jon Kyl introduced the Crime Prevention Act. This included an amendment to the Wire Act that would broaden its scope to include the internet.
  • 1996 – Representative Tim Johnson tried to tweak the act with his Computer Gambling Prevention Act.
  • 1997 – Jon Kyl introduced the Internet Gambling Prohibition Act which made contests, sports and games of chance a ‘bet or wager.’
  • 1999 – Jon Kyle reintroduced the Internet Gambling Prohibition Act.
  • 2002 – Bob Goodlatte introduced the Combating Illegal Gambling Reform and Modernization Act. Bets and wagers within this act included all gambling activities and games of chance.

Obvious they knew, right? But it didn’t stop both the Clinton and Bush Administration from taking the position that the Wire Act applied to ALL forms of online gambling – well before the Department of Justice ever did. It didn’t stop them from charging individuals with violating the Wire Act and fining them millions of dollars, either.

Casualties of the Federal Wire Act

There are at least a handful of Federal Wire Act cases. The one I want to tell you about now has to do with Anurag Dikshit – an original shareholder and board member of Party Gaming (aka Party Poker). Party Gaming launched Party Poker in 2001. From the get-go they operated in the US iGaming market.

That came to an abrupt halt in 2006 when the US passed the UIGEA. Just a couple days later Party Gaming announced they would “suspend all real money gaming business with US customers.” Their stock dropped nearly 60% in 24 hours.

But that wasn’t the only problem. Anurag Dikshit was also charged with one count of violating the Federal Wire Act. With that he agreed to 1 year probation and to forfeit $300 million.

I came to believe there was a high probability it was in violation of U.S. laws. – Anurag Dikshit

The funny thing, though – he actually did nothing wrong. The Department of Justice reversed their position on what the Wire Act applies to – it has nothing to do with online poker. It never did. 

So, does that mean he’ll get his money back? NOPE. According to I. Nelson Rose, since this was a final judgment and Dikshit already paid his dues, he has/had no basis for an appeal. He’s out $300 million bucks. I guess it’s a good thing he’s #207 on the World’s Richest People list.

Sources

http://connecticutlawreview.org/files/2013/01/RoseBolin.GameOnforInternetGambling.45Conn.L.Rev_.653.pdf

http://www.cozen.com/admin/files/publications/glre%202012%20Wire%20Act%20panel.pdf

http://gaming.unlv.edu/papers/cgr_op29_minton.pdf

http://en.wikipedia.org/wiki/Anurag_Dikshit

http://en.wikipedia.org/wiki/Bwin.Party_Digital_Entertainment

http://www.forbes.com/lists/2006/10/7XUE.html