The Department of Justice (DoJ) has finally confirmed its intention to appeal the New Hampshire court ruling that set aside its revised opinion on the 1961 Wire Act.
The Department has filed a notice to appeal with the US Court of Appeals for the First Circuit, seeking to overturn the verdict issued by New Hampshire District Court Judge Paul Barbadoro in June.
Following a legal challenge by New Hampshire Lottery against the DoJ’s revised stance on the Act, Barbadoro ultimately ruled that the Wire Act only applied to sports betting.
The 1961 Act prohibits the use of wire communication facilities to transmit “bets or wagers” across state lines, and has been the subject of much scrutiny and dispute over the scope of these prohibitions.
A 2011 interpretation from the DoJ concluded that the Act only applied to sports betting – a move which paved the way for the launch of online gaming and lottery products in a number of states. However, the Office of Legal Counsel (OLC) took a different view in January.
An opinion written by Assistant Attorney General Stephen Engel stated that while the Wire act was “not a model of artful drafting”, “all but one of its prohibitions sweep beyond sports gambling”.
While seen as a major victory for opponents of online gaming, the interpretation created huge uncertainty for state governments, licensed operators and state lotteries. This prompted a challenge from the New Hampshire Lottery, backed by a number of other states, and industry trade association iDEA Growth.
The New Jersey, Pennsylvania and the Michigan Bureaux of State Lottery filed amicus briefs in support of the plaintiffs.
Michigan’s amicus brief was co-signed by a number of state lotteries: Kentucky Lottery, the Tennessee Education Lottery, the Virginia Lottery, the Rhode Island Lottery, the Colorado State Lottery Division, the North Carolina Education Lottery. The states of Delaware, Idaho, Vermont, Mississippi and Alaska, and the District of Columbia, were also co-signatories.
In its filing, the New Hampshire Lottery warned that around a quarter of its sales would be wiped out by a ban on internet communications. Should the DoJ’s interpretation lead to multi-state lottery games such as Powerball being shut down, revenue could fall by up to $80m per year, and funding for good causes by $40m, it added.
The DoJ claimed lotteries were exempt from prosecution under the Wire Act in its response, saying it had no plans to prosecute any state entities for non-compliance. Barbadoro rejected this, pointing out that the DoJ had only made this argument following the challenge, and not when asked by state lotteries for legal guidance.
In his ruling Barbadoro set aside the revised interpretation in favour of the 2011 stance. The DoJ then instructed law enforcement staff that it would extend the forbearance period for the revised opinion.
It told staff that its revised opinion was not to be enforced before December 31, 2019, or 60 days after the final judgement in New Hampshire’s legal challenge against the new opinion, whichever was later.
iDEA Growth founder Jeff Ifrah said the Department’s decision to appeal, while hardly unexpected, “was certainly unwarranted”.
“[The] DOJ generally files appeals of adverse district court decisions as a matter of course,” he explained.
“We hope that, rather than engaging in a protracted, expensive and ultimately unsuccessful legal fight, the Department will take this opportunity to negotiate a settlement which will focus the Wire Act and DOJ’s enforcement resources on the right targets – the unlicensed illegal offshore Internet gambling operators who do not create jobs or tax revenue in the U.S. and do not appropriately protect consumers.”