The 1/14/19 OLC Wire Act Letter - Possible Impact on Sports Betting and Online Gaming

On Jan. 14, 2019, the Department of Justice’s Office of Legal Counsel issued an opinion reversing its 2011 position on the Wire Act and sports betting, contradicting not just itself but decisions by at least two District Courts and dicta by the U.S. Supreme Court by maintaining that the Wire Act prohibits all interstate wagering activity. This Opinion has not yet been implemented into an enforcement action, so worry about the legality of sports betting and online gaming may be premature. However, the Opinion seeks to push these questions to eventual litigation and clarification by the courts or action by Congress.

Background

In 2011, the Department of Justice (DOJ) was asked by two states poised to start state lotteries whether those operations could trigger federal prosecutions under 18 USC 1084 (“The Wire Act”). The Department obtained an opinion from the Office of Legal Counsel (“OLC”) which announced that the Wire Act’s prohibitions were limited to sports betting. Consequently, the two states began to run, and continue to run, lotteries that include intermediate routing. 

Relatedly, relying upon this DOJ pronouncement, states have engaged in interstate compacts to facilitate their gaming industries. While there have been some U.S. District Court opinions that challenged the logic behind the 2011 OLC Memo, the only appellate decisions to address the issue have reached the same conclusion regarding the Wire Act. See In re MasterCard Int’l Inc., Internet Gambling Litig., 132 F. Supp. 2d 468, 480 (E.D. La. 2001), aff’d, 313 F.3d 257 (5th Cir. 2002); see also United States v. Lyons, 740 F.3d 702 (1st Cir. 2014) (1st Circuit Court of Appeals noting with approval that district court instructed jury that the Wire Act applied only to sports betting). More recently, the Supreme Court’s opinion in Murphy v. NCAA, 138 U.S. 1641 (2018) included a reference to the Wire Act as prohibiting sporting events and contests (only).

The 1/14/19 Opinion

On Jan. 14, 2019, the DOJ posted a new OLC Opinion declaring that the Wire Act extends beyond sports betting to include online casino games and poker, activities which have been legalized in the states of New Jersey, Delaware, Nevada, and Pennsylvania.

The Opinion glosses over case law precedent and largely ignores the legislative history that accompanied the Wire Act, which supports the original 2011 Memo’s take on the Wire Act’s reach being limited to sports betting. 

Consistent with that lack of legal analysis, the Opinion cites, as one reason to support the Department’s change in position, the need for “clarification” through litigation. In other words, the new Opinion invites appellate or Supreme Court review of their view of the Wire Act’s application, while ignoring current case law on that very issue.

It is worth noting that OLC opinions are not binding precedent and have no immediate or discernible effect upon federal prosecutorial priorities. This change in position, then, does not mean that U.S. Attorney Offices or Department of Justice Criminal Division sections will suddenly seek out federal prosecutions of on-line gaming where some aspect of the betting touches jurisdictions where gambling is illegal under state law. Rather, this Opinion is merely a change in interpretation and it remains to be seen whether this will be a new enforcement policy for the Department of Justice.

Sports Betting Avoids Violating the Wire Act

Gaming operators and regulators will now be considering how this Opinion will impact the gaming industry.

As the Wire Act has always directly touched on sports book, the implications for this vertical are unchanged. Online sports books have always had to address the challenges and issues presented by the Wire Act and the landscape remains the same for this vertical.

However, this Opinion has a significant impact on the online casino, poker, and lottery verticals, and this development reverts the Department of Justice guidance to the pre-2011 Opinion days. State lawmakers and gaming operators will need to evaluate how to structure the online gaming environment to be fully intrastate – as they have for online sports betting. Further, this will also change the options for cross-state liquidity.

Is Online Gaming in New Jersey, Pennsylvania, Delaware, and Nevada Illegal Now?

Ultimately, it is critical to keep in mind that this Opinion is merely that – an opinion. It does not have the force of a law or court opinions, and it would require the Department of Justice to affirmatively act to enforce this new interpretation. While courts may look to this opinion in their analysis, it is not binding on their interpretation. In fact, other court opinions such as In re Mastercard, are likely be more persuasive to a court considering the issue in 2019 or beyond.

What’s Next?

As the new Opinion concedes, there are routes to challenge this interpretation. The first would be advocating directly to Congress to finally amend the Wire Act so that it properly addresses the technological landscape of the modern age.

The second would be court intervention to analyze whether the Wire Act is properly applied to all online wagering information.

In the meantime, Deputy Attorney General Rod Rosenstein is expected to make an additional announcement on this Opinion. This announcement may address if and when the new Opinion will take effect.

We will update you as soon as this information is publicly available.