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DOJ: We May Come after Wire Act Violators Retrospectively

Posted on by John Lathram

Wire ActThe DOJ has warned it may come after operators who are currently violating the revised opinion of the Wire Act if a future court hearing finds in its favor.

In January, the Department of Justice´s Office of Legal Counsel issued a memorandum revising its interpretation of the 1961 Wire Act. Rather than applying only to interstate sports betting, the DOJ claimed the Wire Act should be applied to all interstate gambling activities. This not only had implications for online poker compacts between regulated states, but also for multistate lotteries.

Many states rely heavily on “sin taxes” to support their spending; and New Hampshire – which supports its education program with lottery taxes – filed a complaint against the DOJ seeking “declaratory and injunctive relief” against the revised interpretation. The New Hampshire Lottery Commission was supported in its legal action by its lottery vendor, the state of New Jersey, and the state of Michigan.

Judge Finds in Favor of New Hampshire, but Not Everyone

Last week, a District Judge in New Hampshire upheld the complaint – granting declaratory relief for the complainants and every other state in the Multi-State Lottery Association (MSLA). Effectively the judge told the DOJ to keep its hands off of online lotteries; and, due to the states that have regulated online poker being members of the MSLA, online poker compacts were allowed to continue as well.

The judge gave the DOJ sixty days in which to appeal the decision; acknowledging that, however he ruled, the case would not likely be finally resolved until it reach the Supreme Court. Judging by a memorandum issued yesterday by the Office of the Attorney General, it looks as if the DOJ is exercising its right of appeal; and, if it wins the appeal, it will come after operators retrospectively.

Memo Does Not Create a Safe Harbor for Wire Act Violators

The memorandum is an instruction to United States Attorneys and Assistant Attorney Generals not to enforce the Wire Act until sixty days after a final judgement in the New Hampshire case or December 31st 2019, whichever is the later. It is really no more than a further extension of the non-prosecution period announced in January, which was subsequently extended in March 2019.

The timing of the memorandum coincides with the expiration of the current non-prosecution deadline (June 14th) and it is noteworthy that the memo includes the line “providing this extension … … is an internal exercise in prosecutorial discretion and does not create a safe harbor for violations of the Wire Act” – implying that, if the DOJ gets a favorable verdict in the New Hampshire case, operators, payment processors, and online affiliates currently in breach of the revised Wire Act could still face prosecution.

More Uncertainty for the Online Gambling Industry

This latest chapter in DOJ´s campaign against online gambling creates more uncertainty for the online gambling industry and its associates. Following the District Court´s verdict in the New Hampshire case, it was felt that the DOJ might not pursue an appeal due to its contentious reinterpretation of the Wire Act being dismantled during the hearing.

However, it appears that the political pressure being put on the DOJ by a well-known Republican supporter, who has vowed to spend whatever it takes to stop online gambling (aka Sheldon Adelson), is being maintained. With his continuing opposition to online gambling- and the money to support it – the likelihood is this saga still has several years to run, during which time online gambling operators and their associates will have the threat of retrospective enforcement action hanging over them.

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