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First Circuit Court rejects DOJ Wire Act appeal


The First District Court of Appeals has ruled that the 1961 Wire Act applies only to sports events, rejecting the Department of Justice’s contention that it also prohibits other forms of inter-state gambling.

The case concerned a letter from the Department of Justice’s Office of Legal Counsel (OLC), titled “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling”.

The letter examined the Interstate Wire Act of 1961, which states that using “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” is illegal.

In 2011, the OLC had issued an opinion clarifying that this only applied to sports bets and not to other forms of gambling such as online lottery sales, multi-state lotteries such as Powerball and Mega Millions or inter-state shared liquidity poker.

However, in 2018, the OLC issued its new letter, which said that the Act was “not uniformly limited to gambling on sporting events or contests”. Instead, it said only the portion referring to “assisting in the placing of bets or wagers” was limited just to sports.

However, the New Hampshire Lottery Commission and its supplier NeoPollard – concerned that the interpretation would make online lottery sales illegal – both challenged this in the state’s district court.

This saw Justice Paul J. Barbadoro consolidate the cases and supported the lottery’s view that the Act does indeed only apply to sports bets. He then “set aside” the “erroneous” 2018 opinion.

The OLC appealed Barbadoro’s ruling in the First Circuit court of appeals, where Sandra Lynch and William J. Kayatta Jr. heard the case.

Each party presented its interpretation of the wording of the same portion of the Wire Act. The New Hampshire Lottery Commission urged that the “plain meaning” of a phrase must be considered when interpreting the law.

In the case of the Wire Act, it said, the plain meaning was that all of its prohibitions apply only to bets on sport.

The OLC also argued that the second section of the line in question of the Wire Act – which refers to “sporting events and contests – and the first section – which refers to transmission of bets – were “grammatically independent”.

However, the Court ruled that this was not the case. It pointed to the wording of the second section, which never actually mentions “interstate or foreign commerce”.

If the clauses were truly grammatically independent, the court said, the Act would ban all “information assisting in the placing of bets or wagers on any sporting event or contest”, even inside the same state.

The OLC also  cited the “rule of the last antecedent”, which says that “a limiting clause or phrase . . . should ordinarily be read as modifying only the noun or phrase that it immediately follows.”

As “on any sporting event or contest” immediately follows “ information assisting in the placing of bets or wagers”, it argued that only the ban on transmission of information applied to sport.

Lynch and Kayatta said the OLC’s interpretation was “certainly a plausible proposition in the abstract”, but cited precedent showing it was not absolute.

It said the rule typically did not apply “when the modifier directly follows a concise and ‘integrated’ clause” rather than a list, or when it would produce an interpretation “contrary to the natural or common sense meaning of the statute”.

The judges added that the “rule of last antecedent”, if fully applied, would also mean the preceding line applied to all “bets”, plus “wagers on a sporting event”. It noted the OLC appeared to reject this interpretation, however.

In addition, the OLC argued that the New Hampshire Lottery and NeoPollard had no standing as the interpretation would not actually cause any damages to their operations.

It said that it had issued a forbearance period in an April 2019 memo, allowing lottery operators to continue online sales until 90 days after it “publicly announces its position on the applicability of the Wire Act to them”.

As it had not announced this position, New Hampshire and other lotteries would not be subject to any criminal proceedings.

However, the Lottery Commission said it was concerned that financial institutions would become “unwilling” to process these transactions if the OLC’s 2018 interpretation applied.

The Lottery Commission added that the state earns $40m per year for educational funding through multi-jurisdictional lotteries such as Powerball.

The court agreed with the Lottery on this ground, arguing that the perpetual risk of losing significant amounts of future business at 90 days’ notice clearly constituted damages.

“New Hampshire and its vendors should not have to operate under a dangling sword of indictment while DOJ purports to deliberate without end the purely legal question it had apparently already answered,” it said.

“Given the unequivocal position in the 2018 Opinion, and the pre-2011 response given by DOJ to inquiring states, we cannot see why the plaintiffs should be forced to sit like Damocles while the government draws out its reconsideration.

“A state-wide operation integrating over a thousand retailers and multi-state relationships to produce almost 100 million dollars in net revenue does not strike us as an operation that can be easily wound-up in ninety days.”

Lynch and Kayatta added that the Department made clear in the the memo that the memo did not constitute a position on prosecuting state lotteries, so it could not argue that any lottery had been granted relief.

The OLC may still appeal the First Circuit judgement in the Supreme Court.

In 2019, the Coalition to Stop Internet Gambling suggested that the case may ultimately end up before the highest court in the country.