US District Court Judge Paul Barbadoro has heard all parties involved in the 2018 Wire Act case. The 2018 Wire Act case was sparked by the Department of Justice’s 2018 opinion, which interpreted the Interstate Wire Act as applying to all forms of gambling. Judge Paul Barbadoro’s verdict is that the Wire Act strictly applies to sports betting only. However, the DOJ still has the option to appeal this decision.
Judge Paul Barbadoro’s 60-page ruling also paves way for gamblers and gaming operators the economic benefit of shared liquidity. This will in turn help reduce the cost and risks associated with sports betting.
Since its inception in 1961 through to 2018, the Wire Act has been understood to apply exclusively to sports wagering. However, this changed in November of 2018, when the DOJ’s Office of Legal Counsel (OLC) “reinterpreted” the law to bar all interstate gambling activity.
As mentioned in our prior articles, this case was then taken to court by the New Hampshire Lottery Commission (“Commission”) and later consolidated with a suit brought by its technology provider, NeoPollard Interactive LLC. The 2018 Wire Act Reinterpretation was an about-face to the 2011 Interpretation that stated the Wire Act applied only to sports betting.
With this new interpretation, which was published in January 2019, the online gaming industry entered a state of anxiety as the 2018 Reinterpretation would have effectively wiped out all forms of gambling utilizing wire communications, including online state lotteries and state-authorized online casino gaming.
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The Litigation
During the 2018 Wire Act case litigation, the Department of Justice (“DOJ”) argued the plaintiffs lacked jurisdiction on standing grounds and refused to clarify whether the Wire Act applies to online lotteries. Judge Barbadoro found the plaintiffs indeed had standing and dismissed the DOJ’s motion to dismiss. In the Opinion, the 2018 Office of Legal Counsel Opinion was set aside and the order declared “that 1084(a) of the Wire Act, 18 U.S.C. 1084(a), applies only to transmissions related to bets or wagers on a sporting event or contest.” Judge Barbadoro came to this conclusion “based on the text, context, and structure of the Wire Act.”
A look into legislative history also supported the conclusion that the Wire Act only applies to sports betting. When the Wire Act was passed by Congress on August 31, 1961, another gambling act was passed the same day, the Interstate Transportation of Wagering Paraphernalia Act, 18 U.S.C. 1953 (“Paraphernalia Act”).
The Paraphernalia Act prohibited the interstate transportation of paraphernalia used in bookmaking, sports wagering pools, or numbers, policy, bolita, or other similar games. Judge Barbadoro pointed out that “Congress passed the Wire Act with no such reference to lottery-style games.” He went on to state, “the Paraphernalia Act demonstrates that when Congress intended to target non-sports gambling it used clear and specific language to accomplish its goal.”
The Opinion was made in the U.S. District Court for the District of New Hampshire, so although the verdict is limited to the parties in the suit Judge Barbadoro noted, “it is clear, however, that the judgment binds the parties beyond the geographic boundaries of my district. And such an effect is necessary here.” The order provides protection for NeoPollard in Michigan where its iLottery system is used as well as in Virginia where its system will soon launch.
Additionally
Additionally, the Opinion provided an opportunity for the Commission to pursue relief under a claim offered by Michigan which would allow the Court to extend the declaratory judgment to non-parties on behalf of the Commission. The argument would be that New Hampshire, as a member of the Multi-State Lottery Association “(MSLA)”, would suffer adverse financial effects if other MSLA members were shut down because the overall revenues of multi-state lottery games would decline. Accordingly, nationwide equitable relief should be extended.
A footnote in the Opinion provides, “should the Lottery Commission wish to pursue such relief; however, I am willing to entertain its claim. Accordingly, I grant it 14 days from the issuance of this order to file an appropriate motion and supplement the record with adequate factual and legal support.” Furthermore, as noted by Judge Barbadoro and other legal commentators, this will likely be appealed and should be monitored.
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