Back in February, patron-saint lawyer of sports betting Ted Olson, as well as a few gambling pundits on Twitter, advanced a proposition. They said the First Circuit Court of Appeals had held that the Wire Act only applies to sports betting.
We explained that while the First Circuit did make a statement to this effect, it was dicta, which is not binding even on courts within the circuit. That was borne out to a degree in the recent New Hampshire decision from Judge Paul Barbardoro.
The Lyons case is, however, a very important sports betting case — even an important Wire Act case — but for different reasons.
A little bit of background
According to the government’s trial brief, the case involved “an extremely large illegal gambling business operating in Massachusetts,” as well as a few other states throughout the country.
In addition to the business elements operating in the U.S., the defendants maintained an office in Antigua, which operated the internet site Sports Off Shore (SOS). The business also used toll-free numbers.
The principle was Robert Eremian, a Lynnfield, Mass. native, who transplanted himself to Antigua after a law-enforcement investigation in the late 1990s.
Then things got interesting …
Moving to Antigua allowed Eremian to obtain a casino license from the government of Antigua. But seeking to expand his customer base, Eremian accepted bets via a network of agents in the United States.
Enter Lyons:
Todd Lyons was the primary collector for SOS in Massachusetts. He routinely met with and collected from agents who worked for SOS. Generally, these meetings occurred weekly, but sometimes occurred less often depending upon the amount of money due.
For example, the investigation has revealed that balances less than $5,000 were sometimes carried for weeks depending upon the creditworthiness of the debtor. Lyons also acted as an agent for SOS earning commission for his own group of gambling customers.
In 2006, the government began surveilling Lyons and Eremian. Eremian was employing about 50 runners across the country, managing hundreds of customers. The feds alleged that Lyons himself had individually collected $22 million between 1998 and 2006.
Here come the charges
Various members of the Lyons and Eremian consortium, including many of Eremian’s extended family, faced a long list of charges.
The charges included:
- Racketeering
- Aiding and abetting
- Operating an illegal gambling business
- Violations of the Wire Act
- Violations of the Travel Act
- Illegal money laundering
- Filing false tax returns
- Violation of the Unlawful Internet Gambling Enforcement Act (UIGEA)
Lyons and Eremian were convicted of five counts:
- Two racketeering conspiracy charges
- One count of operating an illegal gambling business
- Two counts of violating the Wire Act
They were, however, found not guilty on more than a dozen other counts. The pair was sentenced to 36 months in a federal prison camp in Florida.
Then came the appeal …
Both men appealed their convictions and argued they should be overturned for any one of 16 reasons, or some combination thereof.
The men argued:
(1) the district court improperly denied them a safe harbor instruction on the government’s charges that they violated the Wire Act;
(2) the Wire Act does not apply to the internet;
(3) the government did not prove they had the necessary mens rea to violate the Wire Act;
(4) their convictions involved an inappropriate extraterritorial application of the Wire Act;
(5) their Wire Act convictions should be overturned because the government was required but failed to prove that all relevant bets were on sporting events;
(6) the district court improperly admitted into evidence a directory of SOS agents.
Lyons separately argued that: (7) the district court should have suppressed evidence derived from wiretaps of his phone conversations;
(8) the district court should have suppressed evidence obtained pursuant to search warrants for his home, car, and person;
(9) there was insufficient evidence to convict him of money laundering because the government’s evidence did not distinguish between “proceeds” and “profits” of illegal gambling;
(10) there was insufficient evidence to convict him of violating the Travel Act, 18 U.S.C. § 1952, for the same reason;
(11) the absence of final implementing regulations precluded his convictions for violating the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”), 31 U.S.C. §§ 5361-67; and
(12) the prosecution referred at trial to his decision not to testify, violating his Fifth Amendment right against self-incrimination.
Eremian separately argued that: (13) venue did not lie in Massachusetts;
(14) there was insufficient evidence to convict him of racketeering; and
(15) instructing the jury on Florida law constituted a constructive amendment of the indictment.
Finally, Lyons and Eremian each challenges his punishment, arguing that (16) his prison sentence and the forfeiture judgment were unreasonable and violated the Eighth Amendment.
Let’s focus on the Wire Act
Lyons and Eremian launched a “kitchen-sink” appeal, but for our purposes, the Wire Act discussion is quite relevant to our current situation.
Lyons and Eremian argued that the trial court had erred in not instructing the jury about the safe harbor of the Wire Act that allows for bets where the transmission begins and ends where betting is legal.
The First Circuit found there was no error in not giving the jury instructions about the safe harbor because even though the bets were legal in Antigua, there was no evidence presented that any of the originating bets were legal. They were primarily from Massachusetts and Florida.
Fun with no. 2
The second claim made by Lyons and Eremian is a fun one: they argued that the Wire Act does not apply to the internet. This is a very significant holding from this case.
The defendants argued that the Internet is not “a wire communication facility.” This argument had come up roughly a decade earlier, in United States v. Cohen, but the First Circuit found the language of the text clearly incorporates the internet.
It even remarked how incredible the definition penned decades before widespread knowledge of the internet accurately describes the nature of it. Like the first claim, the second Wire Act claim was also a loser at the First Circuit.
An all-time great legal claim
The third claim regarding the Wire Act is a personal favorite. The defendants argued that the government failed to prove they had the intent to violate the Wire Act.
The First Circuit stated:
Reading their pleading generously, they appear to argue that even if the internet is a wire communication facility as a matter of law, the government was required to prove that they knew the law. While there are certainly good reasons why Congress might not wish to punish as criminals persons who do not know their conduct may be unlawful, as a general matter ignorance of the law is no defense.
When dealing with intent to commit crimes, it typically only matters that the defendant intended to do the act of which they are accused, not that the defendant intended to break the law. The defendant’s knowledge of the law is generally immaterial to their ability to form intent.
Eremian and Lyons then move on with their fourth argument to claim that the government was trying to apply the Wire Act extraterritorially. This, of course, is problematic because the communications were originating from Massachusetts and Florida, both of which happen to remain part of the United States.
A question not asked
The final claim that the defendants made regarding the Wire Act involves “Proof of Sports Betting under the Wire Act.” This is where the court says:
“The Wire Act applies only to ‘wagers on any sporting event or contest,’ that is, sports betting. 18 U.S.C. 1084(a); see also In re MasterCard Int’l Inc., 313 F.3d 257, 263 (5th Cir.2002).”
But that was not the question asked, which the court explains, stating:
“Therefore, Lyons and Eremian say, there was insufficient evidence to convict them because some evidence at trial showed that SOS also accepted bets on casino games and other forms of gambling not covered by the Wire Act. But nothing in the statute limits its reach to entities devoted exclusively to sports betting any more than a bank robber gets off if he also withdraws money properly from an ATM.”
The issue was not whether the Wire Act applied to sports betting because Eremian and Lyons accepted sports bets. The pair essentially argued the Wire Act should not apply because they did not only take sports bets. The First Circuit summarily rejected this argument.
So, what did Lyons tell us?
Lyons tells us a fair bit. We get confirmation that the Wire Act applies to the internet, and that Massachusetts and Florida are parts of the United States. We also learn that sports betting is covered by the Wire Act; that is a holding of the case.
We do not have a holding stating that casino games are excluded from the Wire Act. We have a citation to the Fifth Circuit and a suggestion that the First Circuit might adopt that view, but courts do not answer questions they are not asked.
