Congress is looking to get involved in US sports betting policy

Legislative Sausage Making: How We Got The Wire Act, Part One

Wire act part one

This is the first article in the Legislative Sausage Making series for Legal Sports Report. In this series, we will break down how federal gaming statutes evolved.

As there have been continued calls for the federal government to step in and establish some uniformity out of the ashes of PASPA, we have produced this series to take a look at just how difficult and time consuming it has been historically to pass gaming legislation in Congress.

While federal hearings are often regarded as exciting for those of us who follow the industry, excitement should be tempered. Hearings, especially initial hearings, frequently never result in any additional action. For instance, the May 2016 House Subcommittee on Commerce, Manufacturing, and Trade hearing has resulted in next to no new movement from DC legislators.

Here, we examine the process for passing the Wire Act, which deals with interstate sports betting.

The impetus for the Wire Act

In the years immediately following World War II, gaming activity began to increase across the country. That brought about by a new sense of prosperity at the end of the depression.

According to gaming expert David Schwartz, perhaps the most knowledgeable expert on the history of the Wire Act, estimates on the size of the sports betting market ranged from $2 to $8 billion in the early 1950s.

Concerns over the rise in gaming activities, as well as concern regarding the apathy of local law enforcement, culminated at the 1950 Attorney General’s Conference. According to Schwartz, the main results of the conference resulted in a variety of items to be forwarded to the group’s legislative committee for further study. “They included:

  1. Federal legislation to prohibit the interstate shipment of gambling devices, as well as federal registration of the devices where they were legal
  2. A uniform firearms licensing law requiring all sellers and users of guns to register them, and the creation of a national central bureau where all firearms registration information would be maintained
  3. Mandatory fingerprinting for all applicants for Social Security numbers, and compulsory cooperation with the Social Security Agency and all law enforcement officers in providing fingerprint records on request
  4. A federal law outlawing the interstate use of the telegraph, telephone, or radio to disseminate horse race results for illegal gambling purposes
  5. Broadening the fugitive felon law to include all felonies
  6. Cooperation with any and all congressional committees (particularly Kefauver’s embryonic crime committee) investigating crime and gaming.”

The launch of the Kefauver Committee would begin an ongoing 70-year battle between the Federal government and illegal gaming.

The Kefauver Committee

On May 3, 1950, the US Senate authorized a five-member “Special Committee to Investigate Organized Crime in Interstate Commerce.” Joining Sen. Estes Kefauver of Tennessee on the committee were:

  • Herbert O’Conor of Maryland
  • Charles W. Tobey of New Hampshire
  • Lester Hunt of Wyoming
  • Alexander Wiley of Wisconsin
  • Two lawyers and an administrative assistant

The hearings were a major event at the time:

“The committee visited 14 major cities in 15 months, just as increasing numbers of Americans were purchasing their first television sets. When the panel reached New Orleans in January 1951, a local television station requested permission to televise an hour of testimony, perhaps to compete with a radio station that was carrying the entire proceedings. As the committee moved on to Detroit, a television station in that city preempted the popular children’s show, Howdy Doody, to broadcast senators grilling mobsters.”

The hearings were the first time that many Americans were able to see mob figures like Frank Costello testify. The hearings produced four reports, three interim and one final.

The Kefauver Committee’s findings would go on to influence much of the gaming legislation for the next two decades.

The Kefauver final report

The report, which was printed on Aug. 31, 1951, began with general observations about the hearings and tour:

“This committee has served as a powerful searchlight, exposing widespread national and local crime conditions to public gaze. Its activities have had a tremendous effect upon the whole field of law enforcement. Everywhere throughout the country citizens, made suddenly aware of the character and ramifications of organized crime, have risen up to demand greater vigilance in stamping out crime and corruption.”

The wide-ranging focus of the bill centered on the expansive grasp of organized crime, from narcotics to gambling.

The final report contained a sub-section of the Baltimore hearings in its summary titled, Wire Service, which connected the wire services to organized crime:

“Howard Sports Daily, the racing wire service satellite in Baltimore, for years has occupied a key position in the scheme to furnish book-makers with the vital instantaneous racing news, odds, conditions, results, and prices which are the sine qua non of their multi-million-dollar empire.

Testimony of Harry Bilson, boss of Howard Sports, and Leonard Matusky, of the World Wide News & Music Co., an associated organization, served further to debunk and explode the feeble claims that the vast wire service network is not in fact controlled and guided by Continental Press and its Capone gang counterparts in Chicago.”

The wire operation worked as follows:

“From Bilson the committee learned that his company, which has been described as a dummy, performs the function of gathering the racing news from the tracks in Maryland, New Jersey, and Florida which is sold to Continental.

In turn, Howard Sports buys the news from Continental and sells it to east coast subscribers invariably found to be engaged in the bookmaking business. While it is true that some of the news is sent to newspapers, this excuse for existence was found to be but a sham when it was learned that the papers receive the news free or pay a comparative pittance.”

And then came the Wire Act…

The Baltimore hearing appears to have been the clearest of Kefauver’s recited testimony to directly lay the foundation for the introduction of the legislation that would become the Wire Act, more than a decade after the committee was first established with Congressional ascent.

Th ecommittee’s report would go on to endorse two bills, which before passage would effectively merge into one and would have tasked the Federal Communications Commission with the authority to enforce the statute. This would have been a massive shift from the passed bill that placed enforcement with Department of Justice, an executive agency designed with the enforcement of federal criminal law in mind.

When we look at the origins of the Wire Act in part two of this series, we look at the legislative hearings surrounding the bills that would become the Wire Act and how they evolved to the statute that has become one of the most talked about in the world of sports betting.

John Holden
- John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.