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DOJ appeals iGaming decision
Gambling News
Jonathan ZaunJune 21, 2019
June 21, 2019

DOJ Backtracks on Wire Act; Congress Considering Action

After the agency’s arguments were roundly rejected in federal court, the U.S. Department of Justice (DOJ) is beating a hasty retreat on its revised Wire Act stance.

Only nine days after U.S. District Court Judge Paul Barbadoro ruled that the Wire Act of 1961 applies only to sports betting  – and thus cannot be used to ban online poker, casino games, or lottery sales – the DOJ issued a memo delaying enforcement of its erroneous policy until 2020.

Barbadoro’s decision was handed down on June 3. On June 12, the DOJ memo was then signed by Deputy Attorney General Jeffrey Rosen, who directed federal prosecutors to extend their non-enforcement window until the end of the year:

“On June 3, 2019, a federal district court in New Hampshire issued an opinion holding, inter alia, that Section 1084(a) applies exclusively to sports gambling. The Department is evaluating its options in response to this opinion. Accordingly, the forbearance period announced in the Deputy Attorney General’s February 28 memorandum is hereby extended from June 14, 2019 to December 31, 2019 or 60 days after entry of final judgment in the New Hampshire litigation, whichever is later.”

Background on the Revised Wire Act Imbroglio

The DOJ’s latest Wire Act maneuvering comes on the heels of a January memo from then Deputy Attorney General Rod Rosenstein titled “Applicability of the Wire Act, 18 U.S.C. § 1 84, to Non-Sports Gambling.”

In the memo – which was drafted in November and made public two months later – the DOJ’s Office of Legal Counsel (OLC) contended that the Wire Act constituted a federal ban over all forms of online gambling conducted across state lines.

That revised Wire Act memo was issued to effectively reverse the DOJ’s previous stance limiting the Wire Act’s scope exclusively to online sports wagering, a policy established in December of 2011 via an OLC opinion. The 2011 opinion paved the way for individual states to legalize and regulate online poker, casino, and lottery as they see fit.

The current DOJ administration bowed to pressure from anti-iGaming crusader and conservative political donor Sheldon Adelson – the billionaire casino mogul and owner of Las Vegas Sands Corporation – by essentially reversing the 2011 opinion.

But after the New Hampshire Lottery Commission (NHLC) – joined by over a dozen state lotteries and industry stakeholders – sued the DOJ and Attorney General William Barr in February, the issue was decided in Barbadoro’s federal district court.

In his ruling, Barbadoro didn’t mince words while rejecting the DOJ’s arguments in favor of an expanded Wire Act:

“I hereby declare that § 1084(a) of the Wire Act… applies only to transmissions related to bets or wagers on a sporting event or contest. The 2018 OLC Opinion is set aside.”

In its latest memo, the DOJ didn’t specifically mention potential appeals, but the inclusion of language referencing the “final judgment in the New Hampshire litigation” is telling. The next logical step for the agency would be to take their case to the First Circuit Court of Appeals.

Congress Explores Defunding Wire Act Enforcement

Even if that widely expected appeals process takes place, the DOJ’s revised Wire Act decision to expand enforcement to all forms of iGaming may already be dead on arrival.

With the power of the purse on their side, three members of the House of Representatives filed an amendment to an appropriations bill on June 18.

That amendment – filed by primary sponsor Representative Hank Johnson (D-GA), along with Representative Sanford Bishop (D-GA) and Representative Andy Barr (R-KY) – cuts straight to the point:

“None of the funds made available by this Act may be used to enforce the Department of Justice Office of Legal Counsel memorandum entitled ‘Reconsidering Whether the Wire Act Applies to Non-Sports Gambling’ (issued on November 2, 2018).”

The appropriations bill in question, House Resolution 3035, provides funding for DOJ enforcement and other operational expenses.

The trio of legislators proposing the amendment represent Georgia and Kentucky, two states where lucrative online lottery ticket sales were directly threatened by an expanded Wire Act.

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