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Impact of 1961 Federal Wire Act on Sports Betting

The 1961 Federal Wire Act and sports betting implications.

What is the Wire Act?

Many players starting out with sports betting typically want to know what the Federal Wire Act is. The Federal Wire Act has plenty to do with legal sports betting. The Wire Act is actually the reason sports betting used to be considered against the law in several states.

For the record, sports betting is now considered legal throughout the United States, but it still has an effect on sports wagering around the nation. At Odds Shark, we believe it’s imperative for you to understand how the Federal Wire Act affects you as an online sports bettor.

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Wire Act of 1961

The Interstate Wire Act of 1961 was passed by the US Congress with the intent to suppress organized crime. The Act hit the mob where it hurt those most - in their wallets. John F. Kennedy signed the Wire Act into law on September 13, 1961, and didn’t change for years.

The Wire Act’s initial goal of preventing the criminal use of America’s increasingly advanced communications infrastructure to place sports bets across state lines was for the most part a success over the next forty years or so.

1990 Betting Boom

But, the rise of betting on the internet in the 1990s complicated the Wire Act’s quality of being relevant or appropriate. During the Bill Clinton and George Bush administrations, the US Department of Justice (DOJ) tried to broaden the scope of the Wire Act so that it was applicable to not just sports betting, but all forms of online gambling.

2001 Declaration

It reached its highest point in a 2001 declaration that all gambling on the internet was covered by the bill. As originally written and understood by lawmakers and law enforcement for roughly four decades, the Wire Act only applied to Interstate sports betting specifically.

2011 Opinion

Nevertheless, the decision by the Department of Justice stood until 2011. That was until Barack Obama’s Department of Justice reversed the ruling, and the opinion was then established that the Wire Act only applied to betting on sports.

The Wire Act controversy continued to come up over the course of the next several years. There were contests that muddied the waters between sports betting, and games of skill.

2018 Reversal

Donald Trump’s Department of Justice reversed its opinion back in 2018, again claiming that the Wire Act applied to all forms of casino-style gambling and sports betting. With the state of New Hampshire then leading the charge, other states were suing Trump’s Department of Justice over their new interpretation of the Act.

To completely comprehend the impacts the Wire Act has for the sports betting future, let’s take a look at what it really does.

Wire Act and Sports Betting: What it Means

Spanning from 2009 to 2011, a landmark case that involved the New York and Illinois state lotteries dramatically turned the table yet again. Ultimately, this led to one of the latest understandings of the Act that it’s a law which barely deals with sports betting, and not all types of gambling.

Lottery Tickets Online

In 2009, the office of the governor of Illinois and New York’s lottery division, requested an opinion from the Department of Justice in regards to the legality of selling lottery tickets on the internet and whether these online sales would fail to comply with the Wire Act.

2006: Unlawful Internet Gambling Enforcement Act

Over the next couple of years, there was a lot of back-and-forth, at which point the Department of Justice’s criminal justice division determined that the 2001 interpretation of the Wire Act caused a conflict with the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).

The Unlawful Internet Gambling Enforcement Act did not include intrastate transactions from its list of illegal online gambling-related activities. What this meant was that if a purchase was initiated and finalized in a state where gambling was legal, even if electronic data temporarily crossed state lines, a violation has not occurred.

Despite the fact that the case related to purchasing lottery tickets and not betting on sports over the internet, the obvious conflict between the Wire Act and Unlawful Internet Gambling Enforcement Act in 2011 led the Department of Justice’s Office of Legal Counsel issuing its own opinion.

Groundbreaking Resolution

An administrative law principle required the court system to give way to government agencies assigned with enforcing statutes and the interpretation of ambiguous laws. This principle law made the Department of Justice’s decision possible.

The Department of Justice ruling in 2011 successfully eliminated any further questions around the scope of the Wire Act. The law would apply only to sports betting on the internet. States such as Delaware, New Jersey, and Nevada could legalize, regulate and tax other forms of online gambling, like the lottery.

Restoration of America’s Wire Act

But anti-gambling Congress groups tried to create a de facto federal prohibition on all forms of internet gambling via the Restoration of America’s Wire Act (RAWA). The RAWA amended the Wire Act to remove specific references to sports gambling.

Revisions to the Wire Act were proposed as an effort to prevent the Department of Justice from reinterpreting laws outside approval of Congress. This meant that betting on sports across state lines would be banned permanently.

RAWA was, however, never implemented into the books. The 2011 Department of Justice opinion is far closer to the Wire Act’s initial intent, and to the historical Congressional understanding of the Wire Act’s applicability.

Another Opinion

In 2018, we saw Trump’s Department of Justice abandon its original premise again, and it’s currently the opinion of the federal government that the Wire Act applies to not only sports betting, but all other kinds of common gaming.

Without implementing the Restoration of America’s Wire Act, the Donald Trump Department of Justice reversed Obama’s Department of Justice interpretation of the Wire Act, now banning all interstate gambling.

This of course, did not sit well with certain states. The New Hampshire lottery, New Jersey, and other states sued the Trump Department of Justice to reverse their interpretation of the Wire Act. New Hampshire was on the cusp of legalizing sports betting, so they aimed for complete removal of the Wire Act.

2019: Department of Justice Changes Opinion Again

The U.S. Fifth Circuit Court of Appeals ruled that the Wire Act prohibition on the transmission of wagers applied only to sports betting, and not to any other forms of online gambling. The Supreme Court had not ruled on the meaning of the Federal Wire Act, and how it pertained to online gambling. The Department of Justice indicated that the Federal Wire Act applied to all gambling, and not just sports betting in an opinion issued in November of 2018 and published in January of 2019.

On January 15, 2019, Rod Rosenstein, the Deputy Attorney General, announced that the Department of Justice would delay enforcement of the 2018 Office of Legal Counsel (OLC) opinion for 90 days in order to give businesses that relied on the 2011 Office of Legal Counsel opinion a chance to get their operations into compliance with federal law.

New Hampshire Lottery Sues: Department of Justice Appeals

The New Hampshire Lottery Commission filed a complaint in the US District Court for New Hampshire on February 15, 2019, naming Attorney General William Barr and the Department of Justice as defendants.

The suit asked the Court to vacate and set aside the Office of Legal Counsel’s newest opinion, which the Commission claimed would cut its annual profits by millions of dollars. New Hampshire Governor Chris Sununu said New Hampshire wasn’t interested in negotiating an out-of-court settlement.

On June 3, 2019, U.S. District Court Judge Paul Barbadoro issued a summary judgment that the Wire Act was limited to sports betting, and that the 2018 Office of Legal Counsel opinion was to be set aside. The Department of Justice filed notice of its intention to appeal Barbadoro’s ruling to the U.S. First Circuit Court of Appeals on August 16, 2019.

Court of Appeals Rejects Department of Justice Appeal

On January 20, 2021, the U.S. Court of Appeals for the First Circuit upheld the decision of a lower court to permit the New Hampshire Lottery Commission to continue selling lottery tickets online. The sale of online lottery tickets was not in violation of the Wire Act of 1961.

Appeal Not Likely?

With the inauguration of the Joe Biden administration, it’s not entirely clear whether the Department of Justice will pursue an appeal to the Supreme Court. A lot of online gaming experts in the industry think it’s more likely that the Department of Justice under Joe Biden will revert back to the 2011 interpretation of the Wire Act, and permit the First Circuit’s decision to stand without an appeal.

Assuming the ruling stands, the interpretation of the Wire Act, which limits its application to betting on sports, might have effects that go well beyond selling lottery ticket online. Nobody would argue that the Wire Act prevents states from authorizing playing poker or casino across state lines.

Multi-State Agreements

State authorization of poker or casino across state lines, even without the threat of legal action from the Department of Justice, would be complex, as states would need agree on how to regulate and tax interstate gambling.

Any multi-state agreements would be limited to casino gaming and poker play online. Sports betting online is growing as more states legalize and regulate online sports wagering. But wagering on sports would still be subject to the Wire Act, and continue to be operated only on an intra-state basis.