New Hampshire won its lawsuit against the US Department of Justice

In 2011 the Department of Justice (DoJ) under Barack Obama issued an opinion that the Wire Act only applied to sports betting. That decision was rendered after the DoJ was asked to determine whether it was legal for lotteries to sell tickets online to non-residents and after a few states asked for the right to offer online casino gambling in their states. The DoJ scrutinized the exact wording of the Wire Act, looked at precedent cases relating to the Wire Act, such as the 2002 Mastercard case, and in conjunction with the best legal experts concluded that the Wire Act was only meant to apply to sports betting and contests. That decision opened the door to legal non-sports online gambling including casinos and poker which New Jersey, Nevada, Delaware and a few other states availed themselves of.

In January of this year, however, that opinion was overturned when the new DoJ said that it was giving a different opinion and the Wire Act applied to all forms of gambling. The decision apparently was made in November of 2018 after the Democrats won control of the House in the midterm elections, but was only announced in January 2019. Almost all experts agree the decision was hastily made to appease an irate Sheldon Adelson who felt that if the DoJ didn’t act to affirm RAWA before the Democrats took control of the House, it would never pass. There have been rumors that Adelson effectively threatened to cut off Republican support going forward if they didn’t adhere to his demands and the Republicans couldn’t risk losing Adelson’s money since he is the largest donor to Republican candidates, bar none. The wording of the new opinion showed that it was written without much forethought and unlike the 2011 opinion was devoid of any real substance.

Instead of providing thoughtful and well-reasoned arguments why the 2011 decision was wrong and more importantly why that decision had to be overturned for the public good, the new opinion instead went into 28 pages of rambling comments about missing commas in the Wire Act and assumptions of what the 1961 Congress intended to relate, even though there was no proof that Congress at the time meant any more than what was written, i.e. that it was limited to "wagering on a sporting event or contest."  The current DoJ apparently found a different section that it says overrides that clear directive which could be applied to non-sports bets as well. Ironically the current DoJ called the Wire Act ambiguous even though the only real ambiguity is with the opinion of the DoJ that goes in circles and comes to a conclusion that can’t be justified. It reminds me of many governments nowadays (and it happens often) who make a terrible deal, receive public backlash, decide to renege on the deal to save face and then tries to justify the about face and any penalties made for changing its mind by simply saying that the whole series of bad decisions "is a good deal for the taxpayers." The full text of the new DoJ opinion can be read here. 

Rod Rosenstein, the Deputy Attorney General, who now seems to be fighting to keep his job, gave the states 90 days to comply with the new rules, but then extended the deadline to June 14th. It’s not quite certain what the new rules are other than states that do not already have online gambling would not be permitted to offer it and states doing any interstate wagering would have to ensure that everything is done intrastate to meet the requirements of both the Wire Act and the UIGEA.

New Jersey, Delaware and other states immediately announced plans to fight the new decision in the courts but, with the June 14th deadline coming, the New Hampshire Lottery asked the District Court in New Hampshire to decide if the new DoJ opinion is legal and binding. And to the court’s credit, Judge Paul Barbadaro decided that the new opinion was wrong:

"I hereby declare that § 1084(a) of the Wire Act… applies only to transmissions related to bets or wagers on a sporting event or contest." He concluded with "The 2018 OLC Opinion is set aside."

The DoJ, not surprisingly, disagreed with the judge and said it hadn’t even decided if lotteries would be included in the ban. But in not so many words the New Hampshire Lottery effectively said that they had to act when they did to get a clarification now because they simply don’t trust the current DoJ to be fair and reasonable. Chances are lotteries would have been exempted, since the DoJ is supposedly taking its marching orders on this from Sheldon Adelson and Adelson doesn’t care about lotteries, but to be on the safe side the NH Lottery didn’t want to be caught up in a political battle.

As many will remember when the USTR was fighting Antigua at the World Trade Organization there were some suggestions that the U.S. government was going to ask the horse racing industry to forego some rights given to it under the Interstate Horse Racing Act in order to meet the WTO ruling.  The horse racing industry replied "over our dead bodies," and threatened to sue the government if they attempted in any way to rescind any rights they fought for and won. And like the horse racing industry, the lotteries want to ensure the things they fought for aren’t going to be overturned either.

What's Next for the Wire Act?

The question now becomes what the DoJ will do next. A source told me last week that he had it on good authority that as soon as June 14th rolled around the DoJ were prepared to take swift and aggressive action to enforce the new opinion. And while that source didn’t know for certain what that was going to entail, speculation was that the DoJ was going to shut down the WSOP.com website and possibly even seize it with a message that the site has been seized by the FBI (as it did with sites on Black Friday) since WSOP has a multi-state compact allowing games and tournaments with players from New Jersey, Delaware and Nevada, and Pennsylvania expected to join soon as well. The belief, according to my source, was that this move would cause huge ripples in the online gambling space spooking both gambling websites and players alike, especially since the start of the World Series of Poker main event is just weeks away so it would get a lot of attention. The New Hampshire decision, however, now effectively kills any chance of that seizure happening. One thing the decision will do almost certainly is convince states that are planning on introducing online gambling to do so now, before another court changes the New Hampshire decision again. There is after all a belief that if by some longshot online gambling is finally found to be illegal, that any states that already offer it will be grandfathered in, as is the norm with any previous legislation surrounding social issues and was the case with PASPA in 1992.

Judge Barbadaro half-jokingly said that he expects the DoJ to abide by his ruling, but he also said he expects in the end it will end up in the Supreme Court. But the last thing the DoJ wants is this to go there. SCOTUS shocked the world by overturning PASPA in 2017, so there is no reason to expect any difference with online gambling – it’s still a state’s rights issue. But more importantly with impeachment hanging over Donald Trump’s head and with much of the public calling for Congress to act, the last thing the DoJ wants is another high-profile case that is going to get the public’s attention and garner more anger against the government. And there is no doubt if this moves to the Supreme Court it will garner a ton of attention the same way the New Jersey case to overturn PASPA did.

So the ball has been punted to the DoJ, and the Republicans will have to ask themselves if upsetting citizens and possibly losing votes in states like Pennsylvania, Indiana, New Hampshire and other states that seem interested in offering online gambling is really worth keeping Sheldon Adelson happy for an issue the DoJ clearly doesn’t personally care about. We’ll soon enough know for certain but no doubt the WSOP must be breathing a sigh of relief.

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