Does The New Wire Act Memo On Online Gambling Have A Legal Leg To Stand On?

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Wire Act memo

Looking at Monday’s news on a new federal Wire Act memo from the Office of Legal Counsel (OLC) requires a brief history lesson.

The original Wire Act memo was written in 2011 by then-Assistant Attorney General Virginia Seitz. The quick summary of the 2011 Wire Act memo was that it was the Department of Justice’s position that the Wire Act of 1961 only applies to sports betting.

While the decision opened up the doors for online gambling, the opinion followed an earlier ruling from the 5th Circuit Court of Appeals. That found that in the early 2000s, the Wire Act was only intended to apply to sports betting in the case In Re Mastercard.

In the period between In Re Mastercard and the 2011 Seitz memo at least one District Court (in Utah) determined that the Wire Act was intended to apply more broadly than to sports betting.

Looking behind the scenes on the Wire Act

This new Wire Act opinion had been rumored to be circulating in the weeks before Christmas. Indeed, the new memo is dated Nov. 2, 2018, days before Attorney General Jeff Sessions exited the Justice Department.

(Interesting Wire Act fact: the original Wire Act memo was written in September 2011, but not released until Dec. 23, 2011. It came to be known as the White Christmas memo.)

Like the original memo, the new memorandum comes from an Assistant Attorney General (AAG), Steven A. Engel. Engel is a highly successful attorney who clerked for Alex Kozinski on the 9th Circuit Court of Appeals and for Justice Anthony Kennedy on the Supreme Court. He has a bachelor’s degree from Harvard, a master’s degree from Cambridge, and a law degree from Yale.

Engel’s academic pedigree was not the key issue at his confirmation hearing to the OLC. Sen. John McCain (R-Ariz.) opposed Engel because of his involvement in reviewing one of the memos that provided for enhanced interrogation techniques to be used on enemy combatants.

Which moves us to Monday’s big news …

The memo is divided into multiple parts. The impetus for the new memorandum came from a request from the Criminal Division to reconsider the “2011 Opinion’s conclusion that the Wire Act is limited to sports gambling.”

(Footnote one of the memo interestingly notes that the memo is addressed to John Cronan and not Assistant Attorney General Brian Benczkowski, who is recused for reasons not made clear.)

Part I of the memo begins by laying out the structure of the Wire Act’s language noting that Section 1084 (a) contains two clauses, each with two prohibitions:

The first clause bars anyone in the gambling business from knowingly using a wire communication facility to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.”

The second clause bars any such person from transmitting wire communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.”

Where to look closer

The focus is on the phrase regarding “any sporting event or contest.” The opinion puts weight behind the fact that the phrase is only mentioned once as an argument in favor of the Wire Act applying more broadly than to sporting events and contests, with the exception of the one clause.

The opinion does cite In Re Mastercard, and then cites a number of lower-court decisions in favor of the finding that the Wire Act has broader scope. Some of the cases cited appear to be unreported as well (not all court cases end up being reported, which is essentially the same as being published).

This seemingly further wounds the argument that the Wire Act applies beyond sports. They stated that the 1st Circuit Court of Appeals noted (in dicta, which is not binding) that the Wire Act appears limited to sports wagering.

Part I concludes by noting that there has been a history of questions regarding the Wire Act’s scope.

Deeper into Part II

In Part II of the opinion, the AAG breaks down the semantics of Section 1084 (a). He leans on canons of statutory interpretation articulated through case law and in late Justice Antonin Scalia’s book with Bryan A. Garner, Reading Law: The Interpretation of Legal Texts.

The second section contains what appear to be tormented efforts to find a means of interpreting the statute that renders a meaning distinct from the plain text of the statute. The AAG continues by reaching the conclusion that the second clause is unimpacted by the sporting event or contest contained in the first clause, despite the fact that the language is mirrored except for the words “sporting event or contest.”

Learning from the past, or not

One intriguing feature of the opinion: it appears as though the author knows a fact and could easily resort to the legislative history contained in associated hearings or congressional reports, but chooses not to do so. Take for instance the statement:

Moreover, Congress might have been worried that an unfocused prohibition on transmitting any information that “assisted” in any sort of gambling whatsoever would criminalize a range of speech-related conduct—concerns that Congress evidently had in mind when it narrowed section 1084(a)’s prohibitions by excepting transmissions made “for use in news reporting of sporting events or contests.”

This is true quite, obviously, and can be easily verified. The author of the opinion chose to accept such a statement:

“It is sufficient that Congress targeted the transmission of information assisting in sports gambling in the text, and that applying the Wire Act as written does not produce an obviously absurd result.”

But he has chosen to apply a totally different level of analysis to the other seemingly plain statement contained in 1084 (a). The effort to overcomplicate this, while accepting Section b as unambiguous, seems like a conclusion looking for a question.

What the Wire Act really targeted

The opinion continues by choosing to ignore the legislative history of the statute that repeatedly concludes, the target of the statute was sports betting. He instead favors a reading that a later draft version of the bill that removed commas acted to erase the nearly decade of legislative history that led to the passage of the Wire Act.

Footnote 12 continues the selective citing of legislative history noting that Sen. Estes Kefauver once asked about why the draft Wire Act did not incorporate more activities. Indeed, it was intentionally limited.

The bill also evolved extensively in a decade. At one point, a draft bill would have only applied to dog and horse racing, but Congress eventually moved forward with the decision that it should only apply to sports betting.

Follow this conversation to learn more

For more context on the scope of the Wire Act, the following was an on-the-record conversation between Kefauver and AAG Herbert Miller in 1961:

Senator Kefauver: I can see that telephones would be used in sporting contests, and it is used quite substantially in the numbers games, too. How about laying off bets by the use of telephones and laying off bets in big time gambling? Does that not happen sometimes?

Mr. Miller: We can see that this statute will cover it. Oh, you mean gambling on other than a sporting event of contest?

Senator Kefauver: Yes.

Mr. Miller: This bill, of course, would not cover that because it is limited to sporting events or contests.

Senator Kefauver: Do you consider a boxing match a contest?

Mr. Miller: That is a sporting event or contest, yes, sir, normally.

Senator Kefauver: How about a wrestling match?

Mr. Miller: Yes, sir.

Senator Kefauver: I would think that would be more of a performance than a contest.

Mr. Miller: I do not watch them on television, but I understand that is a fact, more actor than wrestler.

Moving on to Part III

In Part III, the DOJ answers a new question whether the Unlawful Internet Gambling Enforcement Act (UIGEA) modifies the scope of the Wire Act. This should immediately give pause to readers, as UIGEA contains the following rule of construction:

“No provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.”

While the memorandum notes this rule of construction and reaches an accurate conclusion, this seemingly basic exercise in reading comprehension is an odd inclusion in the opinion. It is unclear why this was deemed to require interpretation in the first place.

Part IV explains the decision

In Part IV, the AAG explains the decision to reverse the 2011 memorandum:

“… we believe that the 2011 Opinion devoted insufficient attention to the statutory text and applicable canons of construction, which we believe compel the conclusion that the prohibitions of the Wire Act are not uniformly limited to sports gambling.”

The opinion goes on to state:

“We acknowledge that some may have relied on the views expressed in our 2011 Opinion about what federal law permits. Some States, for example, began selling lottery tickets via the Internet after the issuance of our 2011 Opinion.”

With the Justice Department now deferring to Congress to clarify the scope of the statute, this is terrible news for online gambling. For now, it appears to now be within the scope of the Wire Act in the view of the Justice Department.

In summary

This memo concludes with a summary explaining that in the DOJ’s view, one of the Wire Act’s clauses only applies to sports betting and that UIGEA did not modify the Wire Act. The big takeaway is that this is a dark day for online gambling.

The bright spot is that courts are not bound by Justice Department memos (it would appear Justice Department memos are not always swayed by courts either — the 5th Circuit says hi.) They could be influential, and the scope of the Wire Act is subject to a court’s interpretation, independent of what the OLC says.