January 20, 2021, was a big day for the country.
Beside the obvious, it is the day the First Circuit of Appeals ruled in favor of the New Hampshire Lottery Commission and several other plaintiffs. The decision held that the federal Wire Act applies only to betting on sporting events and contests, and not to all forms of gambling.
The decision, which coincides with the Biden administration taking over, likely brings to an end a saga that began in 2018 with an opinion from the Office of Legal Counsel reversing a 2011 opinion from the same office that concluded that the Wire Act applied only to sporting events and not online lottery sales.
It’s a win for the US sports betting industry for numerous reasons.
A tale of two opinions in Wire Act case
In 2011, the Department of Justice’s OLC authored an opinion in response to inquiries from New York and Illinois about whether the Wire Act applied to online lottery sales.
Assistant Attorney General Virginia Seitz concluded that the Wire Act only applied to interstate transmissions and information relating to bets and wagers on sporting events and contests.
Notably, other activities like online lottery sales were outside the scope of the Wire Act. Though not mentioned explicitly, we have extended the opinion to include things like interstate online poker, as it is neither a sporting event nor a contest.
That’s just like, your opinion, man
In 2018, the Trump Justice Department effectively reversed the 2011 opinion.
Despite a widely held belief amongst experts, the Fifth Circuit Court of Appeals, and the 2011 opinion that the Wire Act was only intended to apply to sporting events, Assistant Attorney General Steven Engel reversed the opinion arguing that the 2011 guidance was incorrect and the Wire Act should apply broadly to internet gambling activities beyond sports betting.
The New Hampshire Lottery Commission case
In response to the Justice Department’s revised opinion, the New Hampshire Lottery Commission and lottery suppliers filed suit against the Department of Justice to prevent enforcement of the 2018 opinion.
In June 2019, Judge Paul Barbadoro of the New Hampshire District Court issued a 60-page opinion in favor of the New Hampshire Lottery and the other plaintiffs.
Barbadoro’s opinion was a sweeping victory for the plaintiffs. However, the judge noted that his opinion was limited to the plaintiffs in the case, which left something of a chill over the rest of the online gambling industry.
The appeal
Nearly a year after the District Court decision was handed down, a three-judge panel in the First Circuit Court of Appeals heard oral arguments in the government’s appeal. The appeal which took place virtually because of the COVID-19 pandemic was heard by Judges Torruella, Lynch, and Kayatta.
The oral arguments revealed that the judges appeared skeptical about some of the Department of Justice’s arguments about the intended scope of the statute.
The Wire Act decision
The opinion is authored by Judge Kayatta and joined by Judge Lynch. The decision is a 2-0 decision as sadly, Judge Torruella passed away several months after oral argument and was not part of the decision.
After running through the background of the Wire Act and the background of how this case ended up before the First Circuit Court of Appeals, Judge Kayatta begins to address the issues beginning with the question of justiciability, or in other words, whether the case was even appropriate for a court to decide on the matter before it.
Justiciability
The Court of Appeals found that even though the Department of Justice had not taken any action to enforce the new opinion, the Lottery and other plaintiffs had standing. The basis for the finding is that the 2018 memo, by its language and the Department of Justice’s past enforcement efforts, posed a sufficiently imminent threat to the lottery’s operations.
The First Circuit also rejected the government’s other justiciability arguments that the case was not ripe (ready to be heard) or that the case was moot based on a subsequent 2019 Department of Justice memorandum that established a forbearance period for enforcing the Engel memo. The Court held that even with the subsequent memo:
“The government refuses to disavow prosecuting state lotteries and their vendors for the conduct they currently engage in.”
The Administrative Procedures Act
The biggest ‘legal’ question that most non-gambling followers were watching in this case centered on the Administrative Procedures Act (“APA”) and whether an Office of Legal Counsel memorandum was a “final agency action.”
Simply put, if it is a final act, then it is subject to review by a court. If it is not, it probably is not subject to review by a court under most circumstances.
But the First Circuit ducks the issue by finding that the case can be reviewed under the Declaratory Judgment Act leaving the Administrative Procedures Act for another day and another case.
The sports betting part
The important piece of the case for the gambling community is the First Circuit’s conclusion that:
we find that the plaintiffs’ claims are justiciable and that the Wire Act applies only to interstate wire communications related to sporting events or contests. Therefore, we affirm the district court’s grant of the plaintiffs’ motions for summary judgment and its denial of the government’s motion to dismiss and motion for summary judgment.
As a cherry on top of sorts, the government was also ordered to pay the New Hampshire Lottery’s costs associated with the appeal.
What to make of the Wire Act decision
This is a day many in the gambling world have been waiting for, and it really could not have been a bigger win. The decision lifts a dark cloud of uncertainty that hung over the non-sports online gambling industry since 2018.
For sports betting, this means that the status quo remains. But there is some reason to believe that the Biden administration will be more friendly to sports betting than the Trump administration, perhaps even pushing forward in the future to modify the Wire Act to allow for interstate sports betting compacts like those that exist for poker.
Is this it for this case? Likely yes, given past statements from Biden administration officials and the fact that the 2011 opinion came when Biden was Vice President, many believe that the new administration will not appeal this case to the Supreme Court.
It is certainly an interesting coincidence that the case came out the day that a new administration takes office.
