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Murky motivations

Insight | Analysis

There is little evidence that the Department of Justice’s appeal to uphold its reinterpretation of the Wire Act is driven by social responsibility concerns, writes Anthony Cabot. So what is motivating its seemingly doomed crusade? 

The scope of the Federal Wire Act continues to cast a and submitted its notice of appeal shadow over the igaming industry. 

Because the law was so poorly written, various misinterpretations as to whether it applied to gambling activities other than sports have been espoused based on the leanings of the reader. Most lawyers thought that both court cases and a definitive memo from the US Department of Justice (DoJ) ended the debate when it concluded that the Wire Act only applied to sports wagering. 

On January 14, 2019, however, the DoJ, in a rebuke of its previous position, claimed that all forms of state-authorized internet and interactive wagering were illegal. 

The 2018 DoJ opinion strained logic to reinterpret the meaning of the Wire Act’s limitation in applying to “bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” On June 3, 2019, Judge Paul Barbadoro of the US District Court for the District of New Hampshire ruled that “while the syntax employed by the Wire Act’s drafters does not suffice to answer whether § 1084(a) is limited to sports gambling, a careful contextual reading of the Wire Act as a whole reveals that the narrower construction proposed by the 2011 OLC Opinion represents the better reading. The Act’s legislative history, if anything, confirms this conclusion. Accordingly, I construe all four prohibitions in § 1084(a) to apply only to bets or wagers on a sporting event or contest.” 

Moreover, other court decisions and the legislative history of the Wire Act is equally strong in proving the 1961 Congress was looking to address only sports wagering. 

Not everyone was pleased with the New Hampshire decision. The Coalition to Stop Internet Gambling (CSIG), an advocacy group funded by casino mogul and Republican donor Sheldon Adelson, noted that its “resolve to protect at-risk populations has only been strengthened by today’s decision.” In late August, the DoJ agreed and submitted its notice of appeal and submitted its notice of appeal over Judge Barbadoro’s ruling. 

The real question is why the DoJ decided to do so. The idea that it subscribes to the CSIG tagline to protect vulnerable youth is doubtful. Furthermore, CSIG has a problem. Its primary benefactor owns a casino that has had frequent matters involving underage gambling. In April 2019, the Pennsylvania Gaming Control Board assessed a $120,000 fine for 12 separate instances of underage gambling against Sands Bethlehem. This was in addition to fines levied in 2017, 2016, 2014, 2013 and 2012. 

Moreover, CSIG has not funded, nor can cite, a single evidence-based research paper that supports that underage gambling is more prevalent in legal online gambling than legal land-based gambling. 

Other plausible explanations for the appeal are equally without merit. The appeal is not to maintain the status quo and assure the business community. The 2011 DoJ opinion was relied on by numerous states and companies to implement interactive wagering. These businesses have been put at risk. 

Neither was the appeal to address pressing social problems. There is little anecdotal evidence that such legal interactive wagering has caused any societal issues including youth gambling. 

Furthermore, under a Republican administration, the concept of wanting to usurp state’s rights and oversight is wanting. A safe venture is that most Americans do not want Mitch McConnell (25% favorable rating) determining what should govern their rights within their states or communities. Nor is there public outcry to terminate paying online lottery tickets. So why the DoJ’s persistence? 

Trying to get to the bottom of the real motivation for the government’s sudden renewed interest in the Wire Act is complicated. The DoJ decided to question its interpretation at the cost of its credibility and at taxpayer’s expense to address a standing situation that has had societal impact and no public outcry.

After suffering defeat at the district court, it continues this misplaced crusade by appealing the decision. The DoJ may believe it can prevail, despite the weakness of its position and the overwhelming precedent. Even with a conservative Supreme Court, absent blatant partisanship, the DoJ will almost certainly lose. 

Appealing, however, does have one advantage to those interests that oppose interactive gambling. If the case is in court, it continues to cast a shadow over the legal interactive industry. Companies are less likely to invest in new technology; lenders less likely to provide capital and states less willing to legalize it.  

But if commercial interests are driving DoJ policy and enforcement, this is a big problem. 

The government has, at best, slow-tracked requests to get to the bottom of the motivation for the sudden renewed interest in the Wire Act. NJ Attorney General Gurbir Grewal used the Freedom of Information Act to seek any records hat show a relationship between private casino interests who oppose internet gaming and the new DoJ opinion. AG Grewal cited press reports suggesting that then-US AG Jeff Sessions agreed to look into the issue after Adelson-backed lobbyists failed to convince Congress to address the matter of online gaming. 

Sessions was the attorney general when the 2018 opinion was written, although it was hidden until William Barr was installed. 

The future is not hard to predict. The DoJ will lose again on appeal and seek an ultimate decision from the Supreme Court. Ultimately, the DoJ will fail because it has a horrible case. In the interim, the case will cast a shadow over the industry—and that will have some impact. 

States are sensing the futility of the DoJ’s efforts and are moving, albeit more cautiously with interactive wagering. This needless waste of government resources and the attendant market uncertainly are an unfortunate consequence of the legal system. Hopefully, someday we will find out why the DoJ went down this rabbit hole. 

Before joining the Boyd School of Law in March 2018, Anthony Cabot practiced gaming law for 37 years and was a former chair of the gaming law practice and executive committee member at Lewis Roca Rothgerber Christie LLP. While in private practice, Chambers Global as Leading Lawyers for Business, for Gaming Regulation selected Cabot as the highest tier (star) gaming attorney for 10 consecutive years.