Lottery operator IGT sues U.S. Justice Department over ambiguity on Wire Act
November 26, 2021 5:03 am
PROVIDENCE – International Game Technology PLC, the company that operates Rhode Island’s lottery games and slot machines, is suing the U.S. Department of Justice and Attorney General Merrick B. Garland, calling on the government to clarify its legal position on whether the company can perform gambling-related transactions electronically across state lines.
The 18-page complaint filed Tuesday by IGT, which is based in Providence, calls for a declaratory judgment on the U.S. Wire Act and a prior court ruling from earlier this year, when the state of New Hampshire successfully challenged a November 2018 Department of Justice opinion claiming that the federal law applied broadly to all forms of gambling, not just sports betting as its referred to in the law.
Like the state of New Hampshire, IGT said it was concerned that the 2018 Department of Justice opinion could threaten its lottery operations, and IGT said it was concerned because the court ruling earlier this year only provided relief to New Hampshire.
“IGT has standing to bring this action because it uses wire communication facilities for the interstate transmission of non-sports bets and wagers and therefore faces an imminent threat of prosecution,” according to the lawsuit from International Game Technology and its subsidiary, IGT Global Solutions Corporation.
The lawsuit was filed in U.S. District Court of Rhode Island.
The lawsuit states that former U.S. Deputy Attorney General Rod Rosenstein, who embraced the 2018 opinion as federal policy, had advised that the Wire Act should not be applied to state lotteries until the Department of Justice issued further guidance on the subject. But that guidance never came, the lawsuit states, and the Department of Justice decided in June this year not to appeal the New Hampshire ruling.
IGT said it’s concerned about its multistate jackpot lottery games, such as Powerball and Megamillions, due to its interstate transactions, in addition to iLottery services it provides for Georgia, Kentucky and Rhode Island, which added online scratch tickets last year amid the COVID-19 pandemic.
“Those ticket sales rely on interstate wire transmissions both at the time the ticket is purchased and at the time winning tickets are redeemed,” the IGT lawsuit states. “Most state lottery contracts further require wagers to be routed through a secondary data center in a different state, or at least a sufficient distance apart from one another in the same state.”
IGT said it’s a serious matter of survival for the company, which employs more than 5,450 people in the U.S. It employs more than 1,000 in Rhode Island.
“[The Department of Justice 2018 opinion on] the Wire Act puts IGT to the choice of either fundamentally restructuring [or closing] its business, or risking a federal felony prosecution,” the lawsuit states. “Based on this severe and present hardship, IGT requests a declaratory judgment that the 2018 [Office of Legal Counsel] opinion is contrary to law and that the Wire Act applies only to ‘bets or wagers on any sporting event or contest.’ ”
And IGT said it’s also worried about its iGaming products. IGaming is currently only allowed in six states – Delaware, Michigan, New Jersey, Nevada, West Virginia and Pennsylvania. IGT said it currently offers iGaming products in New Jersey, Pennsylvania and Michigan. IGaming is another word for online casino gambling, involving virtual slot machines, roulette tables and blackjack games.
“IGaming necessarily uses a channel of interstate commerce (the internet), even though IGT has invested in state-of-the-art technology to ensure that the bettor is physically present in the state where the lottery or casino game is offered,” the IGT lawsuit states. “As an outgrowth of its land-based gaming properties, IGT enables its gaming partners to offer popular casino games over the internet to players’ computers or mobile devices.”
Daniel Wallach, a Florida-based attorney focused on U.S. gambling law who is an adjunct professor at the University of New Hampshire Law School, said the government could have avoided the lawsuit by clearly communicating that it no longer has any intention to abide by the 2018 legal opinion from the Office of Legal Counsel at the Department of Justice. Wallach said he understands why IGT would want to file the lawsuit, even though the matter appears settled, since the stakes are so high for the company.
“Companies that operate in heavily regulated industries need to have some degree of reliability and comfort that they’re not going to be prosecuted,” Wallach said. “There’s not a bona fide legal issue anymore. IGT must not have received that level of assurance from the federal government. If they had, there may be no need to file the lawsuit. I’m surprised at the apparent disconnect between IGT and the Department of Justice.”
In response to a request for comment, IGT offered an emailed statement asserting its support for the ruling in the New Hampshire case as it was upheld by the First Circuit Court of Appeals, adding that, “the Wire Act only applies to sports betting and not to other forms of gaming.”
Wallach, founder of Wallach Legal LLC, said if it wasn’t for the “flakiness” of federal officials, failing to offer a firm stance on the issue, then the lawsuit would be unnecessary. Regardless, Wallach said the legality of the Wire Act has now been settled. IGT just doesn’t want to take any chances, he said.
“This lawsuit is more out of an excess of caution. IGT is bringing this lawsuit because it operates in one of the most heavily licensed industries in the U.S.,” he said. “They can’t be wrong. They need absolutely assurance. There’s no margin for error if you’re a licensed gambling company.
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