Happy birthday to you, happy birthday to you, happy birthday to the Wire Act.
Oh, wait, no: we do not wish the Wire Act a happy birthday.
The statute passed as part of the Kennedy administration’s war on organized crime turned 60 this year, and it is time for a new look.
How did we get here?
The Wire Act came to be after nearly 10 years of debate. It was a tool for the federal government to go after organized crime, who used interstate wire services to run their bookmaking operations around the country. The Wire Act was a powerful tool because it gave the federal government a tool to target organized crime in an era when the interstate nature of organized crime somewhat hamstrung local law enforcement.
At some point in the last 60 years, however, the Wire Act stopped being an enforcement priority for the Department of Justice and now serves primarily as an impediment to the efficient operation of legal businesses. As a result, many illegal operators appear to have stopped caring about the threat of the Wire Act.
But legal operators are still abiding by the Wire Act, and its primary effect now seems to be to require US sports betting operators to replicate operations in every state they enter.
What does the Wire Act do?
The text of the Wire Act says:
Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.
These three lines have created a lot of controversy in recent years, with the most recent pressing questions centering on whether the law applies to all gambling or whether it just applies to sports betting. Despite efforts from the Trump Justice Department to expand the scope of the law to all gambling, the First Circuit Court of Appeals rejected that view, joining the Fifth Circuit making it 2-0 for the Wire Act only applying to sports betting at the Circuit Courts of Appeals. This is widely viewed as being the original intent of the statute’s authors.
What are safe harbors?
In short, the Wire Act bans the transmission of wagering information across state lines unless the transmission qualifies for one of the statute’s safe harbors:
Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.
However, the Wire Act’s safe harbor only applies to the information, not the bets themselves. This means interstate sports betting compacts, as we see for poker, will require a change at the federal level before they come into existence.
The Florida compact case
The Wire Act has appeared in the Florida sports betting case, though it has largely been an afterthought. It was likely the weakest argument that the plaintiffs made as to why the new compact allowing Florida sports betting should be invalidated and was a nonfactor in the ruling.
But the argument is not weak because the Wire Act is totally irrelevant; it could be, but that’s a question for a different day. It is weak because we generally do not allow private parties to enforce criminal laws like the Wire Act, so the odds of a judge finding that as the basis to decide the case are incredibly long.
The claim that there is a Wire Act issue regarding mobile wagering that takes place off tribal lands is indeed interesting. Mobile sports wagering was not contemplated by the authors of the Wire Act or the Indian Gaming Regulatory Act (IGRA), and involves an interesting situation because it would involve a transmission originating in one state and going to a distinct sovereign territory.
The Commerce Clause
It is unclear and seems unlikely that the bet (assuming no intermediate routing issues, which is a rabbit hole for another day) would occur in either interstate or foreign commerce. Instead the transaction fall under the Commerce Clause’s third category.
The Constitution’s Commerce Clause enumerates three groups that where Congress can regulate commerce:
- foreign nations,
- among the several states, and
- with the Indian tribes
The Wire Act mentions what happens in regards to the first two groups but never contemplates the third despite its parallel listing in the Commerce Clause. A strict textual interpretation could find that the absence of mention of the tribes means that the statute does not apply.
Of course, it is ridiculous to think that the Wire Act should impede an agreement between a state and a tribe to allow mobile wagering (leaving aside any issues about whether IGRA permits this,) as at least theoretically no wager or information would transit another U.S. state.
Time for a change
The point is not whether the Wire Act applies to the Florida compact. The point is that the Wire Act presently serves as an impediment to the legal and regulated market
These rules that were designed to stop organized crime are stopping legal taxing paying businesses from operating efficiently. In addition, the uncertainty that still surrounds the Wire Act serves as an obstacle to progress, and harms the ability of states and tribes to achieve self-determination.
It is time for Congress to fix the Wire Act so that regulated businesses are not the only ones burdened, or to do away with the statute altogether if it is no longer an enforcement priority.