What It Means for Internet Gaming
On Friday, December 23, 2011, the Department of Justice (DOJ) released for the first time that a memorandum signed by Virginia A. Seitz, the Assistant Attorney General for the Criminal Division, dated September 20, 2011, reacting to two distinct inquiries — one from 2 state lotteries and one from 2 U.S. Senators — about the applicability of the Wire Act (18 U.S.C. ?? 1084) to intrastate sales of lottery tickets online. In a 180-degree change, the DOJ Court takes the position that the Wire Act doesn’t apply to non-sports betting. This change in position has wideranging implications for the Internet gaming landscape in the U.S. Of specific interest, it usually means that DOJ will no longer contend that nations can’t license intrastate Internet gambling, provide lottery matches across the web or compact with one another to provide interstate gaming.
Much of the gaming sector had heard rumors that such a memo was in procedure, and few were surprised that DOJ chose to delay launch of the memo until the Friday before Christmas to minimize press coverage.
The Wire Act
The Wire Act was passed in 1961 as part of a Kennedy-era push against organized crime. It reads in part:
“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 to 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.”
Even the Justice Department had long maintained that, despite the reference to”sporting event or contest,” that the Act effectively prohibits any telecommunicated bet placed or obtained by a individual located in the United States.1 DOJ had also maintained that Internet wagers placed and approved over precisely the same condition violated the Wire Act, asserting that the publicly-switched phone network and the Internet are inherently interstate media.
From 1996-2006, Congress tried on many occasions to update and explain the Wire Act regarding what it did and did not prohibit; each of those efforts failed primarily due to internecine fights between different gaming businesses — i.e., commercial vs. tribal, horse vs. dog racing, lotteries vs. convenience shops. In 2006, Congress abandoned attempts to update the Wire Act, and instead passed the Unlawful Internet Gambling Enforcement Act (UIGEA, 31 U.S.C ?? 5361-67), which prohibited the acceptance or processing of a financial instrument for the purpose of”unlawful online gambling” but did not directly define that phrase, instead relying on other national and state laws in regard to what wagers were prohibited. UIGEA did include certain exceptions from its enforcement mechanism, such as wagers accepted with a state-licensed thing from individuals from the state where it was licensed, but UIGEA made apparent it did not intend to legalize those wagers.2
Back in 2002, the Fifth Circuit Court of Appeals upheld a lower court judgment in a civil case that found that the words”sporting event or contest” made clear that the Wire Act only applied to sports betting.3 no additional Circuit has ruled directly on the point. DOJ nevertheless had made clear that they didn’t agree with the Fifth Circuit’s findings.
Late in 2010, the District of Columbia enacted a law allowing its lottery to supply both lottery tickets and casino-type games to people in D.C., and also the D.C. lottery is currently preparing to start its Internet solutions. It was in reaction to the Senators Harry Reid (D-NV) and Jon Kyl wrote to Attorney General Holder asking him to describe DOJ’s position as to whether the Wire Act would prohibit this. In addition, two state lotteries had requested DOJ to clarify its position regarding Internet sale of lottery tickets. From the memo published on December 23, DOJ adopted much of this Fifth Circuit’s reasoning in stating that, since the Wire Act only prohibits sports gambling, there is no national impediment to states in selling lottery tickets on the Internet.