In the two years since the U.S. Department of Justice revised its 2011 opinion on the Federal Wire Act in an effort to halt the expansion of online casino gaming, the activity has grown from three states to five with Michigan becoming the sixth state on Friday.
On Wednesday, the First Circuit Court of Appeals validated that evolution.
The court, in a 49-page opinion, sided with a lower court ruling and the New Hampshire State Lottery arguments that the antiquated 1961 law applies only to interstate sports betting.
Anthony Cabot, UNLV Boyd School of Law
Gaming law experts said the ruling marked the second time a federal circuit court had agreed the Wire Act only covered information sent across state lines that are used for sports wagers. In 2002, the Fifth Circuit agreed with a lower court’s opinion that funding Internet gaming wasn’t covered in the Wire Act in a case brought by MasterCard.
Nevada gaming attorney Tony Cabot, now a Distinguished Fellow in Gaming Law at UNLV’s William S. Boyd School of Law, doesn’t believe the Department of Justice will appeal the New Hampshire ruling.
“The Department of Justice has no motivation, either politically or on a policy basis, to continue to pursue this case,” Cabot said. “Moreover, even if the DOJ had a reason to pursue it, the likelihood that the Supreme Court would hear the case is extremely low. In either case, this appears to be the end of the road for the opposition to state-authorized Internet gaming.”
A 23-page opinion from the Justice Department’s Office of Legal Counsel, dated Nov. 2, 2018, reversed a 2011 ruling on the Wire Act that said the law only pertained to sports betting. The revised decision said the Wire Act covered any action where gaming information is transmitted over the Internet.
New Hampshire argued in federal court in 2019 that the Wire Act didn’t apply to the sale of state-run lottery tickets online.
At the time of the Justice Department’s revised decision, online casino gaming was legal in Delaware and New Jersey, and online poker was legal in Nevada. Since 2019, online casino gaming expanded to Pennsylvania and West Virginia with Michigan initially approving the activity that same year.
In December, the total combined online casino revenue for Pennsylvania, New Jersey, Delaware, and West Virginia was just under $175 million, a 12% increase over November’s $154.2 million.
Meanwhile, online sports betting is legal and regulated in 16 states and Washington D.C.
The 2018 opinion came under then-Attorney General Jeff Sessions.
Legal experts believe the current Justice Department, including incoming Attorney General Merrick Garland who is awaiting Senate confirmation after being nominated by President Joe Biden, will have a different view of the Office of Legal Counsel opinion.
Gaming and sports betting legal expert Daniel Wallach suggested the Biden administration, with a Congress controlled by Democrats, could reform the Write Act, including the section to “immunize sports wagers made between states where sports betting is legal.”
Wallach said the growth of legal and regulated sports betting under the current Wire Act law has the potential to “create a federal crime out of an activity that is lawful” when sports wagers are transmitted between states where it is legal.
Biden, he said, might favor ending “the anachronistic language” in the Wire Act.
“I would expect President Biden to be supportive of a modernization of the Wire Act to permit the kind of pooled/shared liquidity that could enable smaller states, such as his home state of Delaware, to enter into multi-state compacts,” Wallach said.
Former Nevada Gaming Control Board Chairwoman Becky Harris, who is now a Distinguished Fellow in Gaming and Leadership, at UNLV’s International Gaming Institute, said changes in the Wire Act won’t happen right away.
She said more immediately pressing matters will occupy Washington D.C. lawmakers for the time being.
“I think there is an opportunity for changes to occur in the Wire Act, but we’ll have to see if they are initiated by the Department of Justice,” Harris said.
She added that more states are considering adding online casino games as a companion to online sports betting. The effort could result in additional tax to help state repair budget holes created by the pandemic.
“Clearly, this online gaming is an opportunity for states,” Harris said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgmaing.com. Follow @howardstutz on Twitter.
