This guest post is brought to you by Richard Newman. He is an attorney at Hinch Newman LLP focusing on the U.S. advertising and digital media matters. 

Previously: Online Gambling Industry Takes Political Hit

Last month, a federal court halted the efforts of the U.S. Justice Department’s (DOJ) to expand a prohibition on online gambling.  The ruling is a victory for operators of online gambling websites that feared all online interstate wagering was in jeopardy and came amid FTC attorneys holding workshops into online gaming and related consumer protection concerns.

What Was Happening

The case involves the New Hampshire Lottery Commission, which uses a vendor with servers in Vermont and Ohio.  The Commission filed suit, seeking to preclude an expansive interpretation of the U.S. Wire Act.  A number of other states supported the lawsuit.

What were the risks for affiliates?

  • It could outlaw poker, casino games, and lotteries conducted online.
  • Gambling business would no longer be able to use wire communication facilities to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.”
  •  Wire communications that can allow to “receive money or credit,” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers” could have been banned.

In January 2019, the U.S. Justice Department’s disseminated a statement that a dated opinion that the 1961 Wire Act only banned sports gambling was a misinterpretation of the statute.

During the process, the DoJ stated that it would not prosecute state lotteries and their employees while the review of the Wire Act continues.  In doing so, the DoJ argued that the New Hampshire Lottery Commission’s lawsuit should have been dismissed.

The Decision

“The court lacks jurisdiction to resolve at this time not only whether the Wire Act reaches beyond sports gambling generally, but also whether the Wire Act could ever be applied to state lotteries and their vendors or employees, as there is no present credible threat of prosecution,” the DoJ stated.

US Sports Betting Affiliates: What’s Going to Change?

Most of the DOJ’s brief doubles down on the argument that employees and vendors of lotteries can be prosecuted even if they are carrying out their official duties. “Absolute immunity has been extended to only a very limited class of officials — the President, legislators, carrying out legislative functions and judges carrying out judicial functions,” the DOJ brief said.

The DOJ was responding to another 12-page brief submitted on April 18 by the New Hampshire Lottery Commission, which argued that state employees and vendors are immune from prosecution.

“So long as the [New Hampshire Lottery Commission’s] officials and employees are acting in their official capacities pursuant to valid state law, and are not acting unconstitutionally, they enjoy the state’s sovereign status, act as the state, and are not subject to [the Wire Act’s] prohibitions,” attorneys for the New Hampshire Lottery Commission argued in their brief.

In response to the DoJ’s refusal to decide whether the Wire Act applies to state lotteries and their vendors, the New Hampshire Lottery Commission and its vendor disputed the DoJ’s claim that lotteries, as well as their vendors and employees, can be prosecuted under the Wire Act.

They argued that to prohibit states and their agencies “from using the wires to operate state lotteries [would be] a result Congress did not intend, and that is not consistent with the text, structure, purpose, and legislative history [of the Wire Act].

This matter is most likely destined for the U.S. Supreme Court.

Twitter DOJ wire act

To Sum Things Up

  • The Wire Act applies solely to sports gambling
  • “The DOJ’s interpretation of the Wire Act (and, perhaps, the Wire Act itself) may not survive constitutional scrutiny in front of the Supreme Court.”

Attorney advertising. Informational purposes only. Not legal advice.

Author

Richard B. Newman is an FTC investigation and defense attorney at Hinch Newman LLP. Following him on LinkedIn and Twitter @FTCLawDefense.