What We Can Learn From Ted Olson’s History With The Wire Act?

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Wire Act

Ted Olson‘s history with the Wire Act goes back a lot further than you think.

Olson played a role advocating in favor of a broad interpretation of the Wire Act long before he stepped to the plate as leader-by-proxy representing Neopollard as part of New Hampshire‘s successful effort to have the new Justice Department opinion on the scope of the Wire Act changed.

It even predates Olson becoming the patron saint of New Jersey sports betting, championing the cause to victory at the Supreme Court. The New Hampshire case remains far from resolved finally, and we can learn from history in the meantime.

Flash all the way back to 2002 …

Back then, Olson represented the government in opposing Jay Cohen’s petition to have the Supreme Court hear his appeal regarding whether the operator of World Sports Exchange had “knowingly” transmitted information assisting in placing bets or wagers in violation of the Wire Act.

The Supreme Court chose not to hear the case that would have seen future Solicitor General Donald Verrilli (and celebrity lawyer Ben Brafman) face off against Olson. But the case is important, as it contributes to understanding the scope of the statute.

Who was Jay Cohen?

Cohen was an internet entrepreneur, who relocated in 1996 from San Francisco to Antigua, in the Caribbean. Looking to capitalize on the growing accessibility of the internet to Americans, Cohen set up “World Sports Exchange” or WSE.

That was a bookmaking website designed to feel like New York’s off-track betting sites. WSE advertised to Americans via radio, newspaper, and television. By late 1998, WSE attracted more than 1,600 customers and fielded more than 60,000 phone calls from U.S.-based phone numbers.

Cohen was so prominent a figure in the sports betting world that in 1997, he testified before Congress about internet wagering. But Cohen’s fortunes would turn when he was arrested in March 1998 on an eight-count indictment charging him with both conspiracy and substantive violations of the Wire Act.

Following a 10-day jury trial, he was convicted and sentenced to 21 months in prison. But Cohen was not done in his efforts.

What did Cohen ask the Supreme Court to review?

Cohen sought Supreme Court review of two issues. First, he argued that the government failed to prove that he had a “corrupt motive,” a common law doctrine that requires a general knowledge of the illegality of an activity for conspiracy prosecutions.

In essence, Cohen argued that he did not know what he was doing was illegal, so it was not possible to form a criminal conspiracy because knowledge of the criminality was lacking.

The second argument Cohen advanced was that the Second Circuit Court of Appeals erred in interpreting the words “legal,” “knowingly,” and “bets or wagers” in the Wire Act, and subsequently convicted Cohen for conduct that was not criminal.

So what did Olson say?

In an interesting statement — remember Olson is speaking here as Solicitor General representing the United States — Olson said:

Section 1084(a) makes it unlawful “knowingly” to transmit in interstate and foreign commerce (1) “bets or wagers” on sporting events; (2) “information assisting in the placing” of any such bets or wagers; or (3) a communication “which entitles the recipient to receive money or credit as a result of bets or wagers.”

The statute contains a “safe harbor” provision, 18 U.S.C. 1084(b), which exempts from its coverage transmissions of “information” (but not of bets or of “communications” of the type prohibited by the third clause of subsection (a)) between States or countries where betting on the particular sporting event at issue is “legal.”

Wait, what is this about horse racing?

Olson also brings up the scope of the Wire Act later in his opposition to Cohen’s petition. He does this in regard to a First Circuit Court of Appeals case involving an off-track-betting parlor in Rhode Island accepting bets on races in Massachusetts without permission of the track owner.

That’s something that is required under the Interstate Horseracing Act. Olson wrote (internal citations omitted):

The plaintiff sought an injunction against the off-track betting facility under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that the facility was engaged in a pattern of racketeering activity by violating Section 1084(a) through its noncompliance with the IHA. The court of appeals denied the RICO injunction.

In so doing, it noted that because the off-track betting facility’s business was legal under the laws of all interested States, it fell under the “safe harbor” provision of Section 1084(b). The court further noted that, in enacting the IHA, Congress had only created a private cause of action for damages on the part of certain parties and did not intend that there be government enforcement.

Consequently, the court concluded that the plaintiff could not use the IHA to avoid the applicability of the “safe harbor” provision-that is, “to transform an otherwise legal OTB business into a criminal racketeering enterprise.” The court was not confronted with and did not consider the question whether, for purposes of Section 1084(b), placing a bet is “legal” in a State that specifically prohibits it by statute but does not attach criminal penalties to the prohibition.

Antigua? Not quite

Olson further noted that Cohen’s argument that the account wagering (versus credit wagering) was legal because all the money was located within Antigua did not escape the reach of the Wire Act’s section 1084(b).

Olson argued (and the Supreme Court endorsed through denying certiorari) that the holding that Cohen needed only to intentionally knowingly engage in the conduct, not that he had to knowingly understand it to be illegal, was the scope required for a Wire Act conviction.

Now we fast-forward two decades

The lawsuit filed on behalf of Neopollard argued that the new Wire Act interpretation expands the scope of the statute beyond that intended by the statute’s congressional authors. Namely, the Wire Act was only ever intended to apply to sports betting and the NH court agreed.

There is not a great deal of overlap in Olson’s arguments in the Cohen case and the Neopollard filing. Olson does reference repeatedly — even back in 2001 — that the scope of the Wire Act requiring the underlying betting activity involves sporting events.

Interestingly, the May 2002 filing even pre-dates the Fifth Circuit’s holding that the Wire Act only applies to sporting events and contests. While these prior statements do not bind the federal government, they are informative.

They suggest the 2011 Virginia Seitz Wire Act opinion was long-held as the government’s view of the scope of the Wire Act, and the 2018 opinion is, in fact, a rogue interpretation of the statute.