Case Law Seems To Go Against New Opinion
Legal Sports Report

A Look Inside How Courts Have Applied The Wire Act To Gambling

Wire Act

The biggest news in the gaming industry over the past several months has undoubtedly been the Department of Justice’s updated opinion regarding its interpretation of the Wire Act.

Specifically, the DOJ now asserts the Wire Act prohibits, among other things, all forms of online wagering rather than solely online sports betting.

As explained by Legal Sports Report, the DOJ’s Wire Act opinion may not pass muster when examined by the courts. However, the thing many might not fully understand is why the DOJ cannot simply decide what the law is.

Who can say what the Wire Act means?

Federal courts have the responsibility of interpreting the meaning of federal statutes, including the Wire Act. But how do the federal courts determine what statutes mean?

While it might seem like common sense, “When interpreting a statute, a court first looks to the language of the statute.” Richardson v. United States (1999).

Courts applying criminal laws generally must follow the plain and unambiguous meaning of the statutory language. Salinas v. United States (1997). Only the most extraordinary showing of contrary intention in the legislative history of a statute justifies a departure from the statutory language. Salinas at 57.

What have courts said about the Wire Act?

There have been multiple court cases discussing the Wire Act, but there is certainly not a plethora of case law on the subject.

This makes each existing court opinion important, as explanations from previous judges can serve as “persuasive authority.” That means lawyers can use existing judicial explanations on a topic to explain why a current judge should decide things a certain way, even if that judge is not bound by the other court’s findings.

Generally, In Re Mastercard, a Fifth Circuit case from 2002, is considered the most pivotal case in interpreting the Wire Act’s application to sports gambling.

A deeper look at the Mastercard case

The facts in In Re Mastercard are fairly straightforward. A few people used credit cards to purchase chips on online gambling websites, and subsequently lost some of their money.

They attempted to say that the credit card companies violated multiple laws (including the Wire Act) by allowing persons with credit cards to gamble online.

The case was initially filed in the United States District Court for the Eastern District of Louisiana (the “District Court”) in 2001. The District Court ruled that the individuals failed to state a claim upon which relief could be granted, dismissing their claim after the credit card companies filed a “12(b)(6)” motion.

The District Court explained, “a plain reading of [18 U.S.C. § 1084] clearly requires that the object of the gambling be a sporting event or contest.”

Further, the court stated:

As the plain language of the statute and case law interpreting the statute are clear, there is no need to look to the legislative history of the [Wire] Act . . . . However, even a summary glance at the recent legislative history of internet gambling legislation reinforces the Court’s determination that internet gambling on a game of chance is not prohibited conduct under 18 U.S.C. § 1084.

What happened on appeal?

The case went to the Fifth Circuit Court of Appeals. The Fifth Circuit’s opinion is quite short, with the court summarily stating:

“Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling are not illegal.”

The court subsequently affirmed the District Court’s 12(b)(6) dismissal.

What about other Circuit Courts?

An additional case frequently brought up in Wire Act discussions is from the First Circuit: United State v. Lyons (2014). In Lyons, two individuals were convicted for violating the Wire Act by running a gambling operation in Antigua that accepted wagers on sporting events.

The First Circuit summarily stated, “The Wire Act applies only to ‘wagers on any sporting event or contest,’ that is, sports betting.” Id. at 719.

Are there any cases that disagree?

There are two cases that opponents frequently reference when attempting to extend the Wire Act to non-sports gambling.

The first is New York v. World Interactive Gaming Corporation (Sup.Ct. 1999), where the lowest-level trial court in New York (confusingly named the “New York Supreme Court”) ruled that individuals could be prosecuted under 18 U.S.C. § 1084 for operating virtual slots, blackjack, and roulette. The court did not specifically discuss the sports wagering requirement.

The second case is United States v. Lombardo (D. Utah 2007), in which the District Court of Utah specifically concluded “that § 1084(a) is not confined entirely to wire communications related to sports betting or wagering.”

It is worth noting that the World Interactive Gaming case is a low-level state court opinion, which is generally considered less persuasive to federal courts than federal case law.

Similarly, the Lombardo case is a federal district court opinion, which is frequently viewed as less persuasive than a federal circuit court opinion (such as those in In Re Mastercard and Lyons).

What comes next for new Wire Act opinion?

The DOJ’s recent actions leave us with more questions than answers. On Jan. 15, Deputy Attorney General Rod Rosenstein issued a follow-up memo urging the DOJ not to enforce the opinion for at least 90 days. That later was pushed back another 60 days.

This could be for a multitude of reasons, but preparing for litigation like the New Hampshire lawsuit certainly seems possible. If a suit is filed, one thing is certain: many of the cases discussed above will be cited in the attorneys’ briefs.

Joey Connor
- Joey Connor is an attorney at Bloomberg Tax in Washington, D.C., specializing in the taxation of gaming and sports gambling. Joey has presented to attorneys on the Supreme Court's opinion in Murphy v. NCAA and frequently writes articles discussing the tax and fiscal impacts of gaming. Prior to joining Bloomberg, Joey practiced law in Fairfax, Virginia. Joey received his J.D. from Washington & Lee University School of Law and his B.A. from the University of Virginia.
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