Wire Act Lawsuit: Dozen States Join Fray
Less than a month after the New Hampshire Lottery Commission (NHLC) sued the U.S. Department of Justice (DOJ) over the latter’s revised policy banning all forms of online gambling, New Jersey and Michigan have joined the Wire Act lawsuit fray.
Last week, both states filed amicus curiae – or briefs submitted to the court by stakeholders who are not direct parties to a lawsuit – to the U.S. District Court of New Hampshire. The NHLC, along with its online lottery software provider NeoPollard Interactive, sued Attorney General William Barr and the DOJ in February seeking to prevent a comprehensive ban on internet gambling – which could prohibit state lotteries from selling tickets online – from going into effect.
In January, the DOJ’s Office of Legal Counsel (OLC) released a memo revising the agency’s stance on the Wire Act of 1961, a federal law prohibiting sports betting business from being conducted via telephonic means. That opinion reversed a 2011 memo from the OLC which limited the Wire Act exclusively to sports betting. Under the new DOJ policy, the Wire Act bans online gambling in any form, including poker rooms, casinos, and lotteries along with sports betting.
Following the 2011 OLC memo, four states – Delaware, Nevada, New Jersey, and Pennsylvania – moved to legalize and regulate their own iGaming industries.
Wire Act Lawsuit: New Jersey Defends Industry
The Garden State is home to the nation’s most lucrative iGaming industry, with a record-setting $31.7 million in monthly revenue collected throughout January alone. All told, iGaming in New Jersey has generated more than $1 billion in revenue since launching in December of 2013, while contributing over $184 million in taxes to state coffers.
Accordingly, the state government is up in arms over the DOJ’s latest about face. While state senate president Steve Sweeney has enlisted former state senator Ray Lesniak for potential litigation of their own, New Jersey hopped aboard the NHLC’s Wire Act lawsuit via last week’s amicus brief.
In the first paragraph of the brief, New Jersey explains that its iGaming industry was legalized based on the OLC’s 2011 opinion on the Wire Act. From there, the brief mentions “tens of millions of dollars to New Jersey’s economy in state taxes and fees,” before offering a stark warning as to how an expanded Wire Act would harm the state:
“Absent judicial intervention, this iGaming industry may be forced to shut down and those revenues will disappear.”
New Jersey’s brief goes on to outline how ostensibly intrastate iGaming industries can run afoul of the Wire Act’s interstate focus:
“If allowed to stand, the 2018 Reinterpretation, and the DOJ Memo which adopts it for enforcement of the Wire Act nationwide, may end New Jersey’s iGaming industry.
Some aspects of the industry are specifically designed to operate in multiple states. For example, New Jersey, Delaware and Nevada have entered into a multi-state agreement to provide for and regulate Internet poker among people in each State.
This now may be unlawful under the 2018 Reinterpretation.”
Wire Act Lawsuit: Michigan Brief Adds to Suit
Although the state has yet to legalize online poker, casinos, or sports betting, Michigan launched online lottery ticket sales in 2014.
Furthermore, the Michigan Lottery offers games such as Mega Millions and Powerball, both of which are sold across a multi-jurisdictional network comprised of 44 states, the District of Columbia, and the U.S. Virgin Islands.
Twelve states and/or lotteries with a vested interest in multi-jurisdictional lottery sales joined Michigan’s brief as signatories:
Kentucky Lottery Corporation
Tennessee Education Lottery Corporation
Rhode Island Lottery
Colorado State Lottery Division
North Carolina Education Lottery
State of Delaware
State of Idaho
State of Vermont
State of Mississippi
State of Alaska
District of Columbia
To begin its brief, Michigan explained how an expanded Wire Act scope would threaten the existence of multi-state lotteries:
“Each lottery and state supporting the Amicus … has entered into at least one multi-jurisdictional agreement with Plaintiff New Hampshire Lottery Commission.
Although each lottery employs geolocation and other technology to ensure that lottery wagers are placed only within the applicable jurisdiction, lottery communications covered by the Wire Act may cross state lines.”