NH Lottery, Interstate Poker Compacts Get Reprieve From Controversial DOJ Opinion

A decision on whether to maintain a controversial reversal by the U.S. Department of Justice of an interpretation of the Wire Act of 1961 may be determined by a new presidential administration.

Last week, Deputy Attorney General Jeffrey A. Rosen issued a “Further Update to Memo on the Applicability of the Wire Act to Non-Sports Gambling.”

In 2011, DOJ had clarified that the Wire Act only applied to a prohibition on sports betting across state lines. With that in mind, several states set up online lottery offerings, and New Jersey, Nevada, and Delaware forged an interstate online poker compact.

But in late 2018, DOJ issued a formal opinion (made public in January 2019) that seemed to make any gambling with an interstate component fair game for prosecution. That complicated matters not only for the poker compact and online lottery sales, but potentially for any lottery, because the technology involved often routes information electronically to sources in other states before the transaction is completed at a cash register.

That led the New Hampshire Lottery to sue DOJ, and last June a U.S. First Circuit Court of Appeals judge sided with the lottery’s position that the Wire Act only applied to sports betting.

During the appeal process ever since, DOJ has continued to insist that the matter was moot because it kept promising to delay any enforcement of its opinion.

The latest DOJ memo

Last week, Rosen wrote: “In the June 11, 2020 memorandum to all U.S. Attorneys, Assistant Attorneys General, and the FBI, the Deputy Attorney General extended the grace period until December 1, 2020, on implementing the Office of Legal Counsel’s (OLC) 2018 opinion finding that all but one of the prohibitions of the Wire Act apply to non-sports gambling.”

During the grace period, federal prosecutors should not apply the Wire Act to non-sports-related betting or wagering. The deputy attorney general also directed that, to ensure continuity across the country, any Wire Act charges must be reviewed and approved by the Criminal Division’s Organized Crime and Gang Section.

James Trusty, who led that section from 2011 to 2018 before he joined the Ifrah Law firm in Washington, D.C., told US Bets Tuesday that he is not surprised by the latest delay.

“I don’t think the current administration has a ton of fire in its belly for pushing this 2018 OLC revision on the Wire Act,” said Trusty, whose firm represents the internet gaming industry in the New Hampshire Lottery lawsuit. “These non-prosecution memos are now up to about 17 months of coverage, so I suspect federal prosecutors will barely miss the new position when it disappears later this year.”

The two sides are set for oral argument in the case on Thursday, but Trusty said this memo would not be particularly significant.

“One of the arguments that DOJ keeps making is that the NH Lottery case is ‘premature’ because DOJ has not figured out its own position,” Trusty said. “That position gets weaker every time they push these non-prosecution memos out.”

Time to move on?

Trusty said that it’s time for the Department of Justice to move on from an opinion that critics claim was written to appease Las Vegas billionaire Sheldon Adelson, the leading opponent of online gambling and a huge fundraiser for the Republican National Committee and President Donald Trump.

“Really, what they should do is simply announce that a) gambling regulation is primarily for the states, b) the Wire Act will never be used for licensed or state-sanctioned activities, and c) as it has always been, DOJ does not look for gambling prosecutions unless there is some greater justification for using those statutes,” Trusty said.

The multiple delays waiving efforts to prosecute based on the opinion are a mixed bag for those involved, Trusty said.

“The continuous extensions are putting lotteries and compact participants in purgatory,” he said. “It could always be worse, but it’s not conducive to making long-term decisions.”

The decision to vacate any efforts to prosecute until after the 2020 presidential election amounts to “the big punt,” Trusty said.

“Theoretically, it’s all about waiting for the First Circuit ruling to come out,” Trusty said. “But I think there may be people high up in the administration who have no love for this ‘midnight hour’ OLC opinion and who recognize that the First Circuit may well be persuaded to uphold the sound reasoning of the District Court.”