In an effort to stave off a federal lawsuit filed by the New Hampshire Lottery Commission (NHLC), the U.S. Department of Justice has issued a memo to clarify that its recently revised Wire Act opinion does not apply to online lotteries.
The memo – dated April 8 and signed by Deputy Attorney General Rod Rosenstein – was sent to all United States Attorneys, assistant Attorneys General, and the director of the Federal Bureau of Investigation.
Under the subject line “Notice Regarding the Applicability of the Wire Act, 18 U.S.C. Section 1084, to State Lotteries and their Vendors,” Rosenstein asserts that a January memo issued by the DOJ’s Office of Legal Counsel (OLC) regarding the Wire Act’s scope doesn’t impact online lottery ticket sales:
“The OLC opinion did not address whether the Wire Act applies to State lotteries and their vendors. 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.
If the Department determines that the Wire Act does apply to State lotteries or their vendors, then Department of Justice attorneys should extend the forbearance period for 90 days after the Department publicly announces this position. This would allow State lotteries and their vendors a reasonable time to conform their operations to federal law.”
The January memo reversed the DOJ’s official policy regarding the Wire Act of 1961, a federal law designed to ban sports betting business from being conducted via telephonic means.
Following the Wire Act’s initial passage through the dawn of the digital age, the law was applied widely to ban not only online sports betting, but all forms of online gambling including poker and casino games.
But under the guidance of then Attorney General Eric Holder, the DOJ and the OLC issued a memo in December of 2011 which stated the Wire Act applies exclusively to sports betting:
“We conclude that interstate transmissions of wire communications that do not relate to a ‘sporting event or contest,’ 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.”
As a result of the 2011 memo – which was prompted by attempts to legalize online lottery sales in Illinois and New York – individual states were subsequently permitted to establish their own iGaming laws and regulations. In the interim, Nevada, New Jersey, Delaware have implemented successful iGaming industries. Meanwhile, Pennsylvania is preparing to launch their own this year, and West Virginia recently voted to do so.
With statewide iGaming industries developing at a steady pace – and an interstate online poker player pool sharing compact forged between Delaware, New Jersey, and Nevada last year – the DOJ bowed to pressure from billionaire conservative donor Sheldon Adelson by reversing its 2011 opinion in January.
The latest move is ostensibly intended to eliminate interstate iGaming industries from taking root. However, state-run online lotteries have been caught in the crossfire.
In light of the January memo, the NHLC filed a civil suit against Attorney General William Barr and the DOJ within the U.S. District Court in New Hampshire. At the time, Governor Chris Sununu cited a potential loss in New Hampshire Lottery revenue resulting from the revised Wire Act opinion as justification for suing the DOJ:
“Today New Hampshire is taking action to protect public education in New Hampshire. The opinion issued by DOJ puts millions of dollars of funding at risk, and we have a responsibility to stand up for our students.”
The NHLC suit was quickly joined by 15 states with a vested interest in either iGaming or interstate lottery networks. This included the Kentucky Lottery Corporation (KLC), the Tennessee Education Lottery Corporation (TELC), the Virginia Lottery, and the Rhode Island Lottery.