State Lotteries Can Breathe a Sigh of Relief — For Now

The legal landscape of the Wire Act continues to develop as the DOJ takes a step back from its updated Wire Act stance published earlier this year.

On January 15, 2019, the Department of Justice’s Office of Legal Counsel published a legal opinion that left the future of internet gaming in a state of uncertainty due to its conclusion that the transmission of any bet or wager – not just those on a sporting event or contest – across state lines, violates the Wire Act. The 2019 Opinion reflects a change in the DOJ’s position since 2011, where in an opinion it concluded that the Wire Act only applied to sports gambling. As a result of the 2011 Opinion, several states launched or moved forward with intrastate online lottery, casino gaming and poker.

The DOJ is currently refraining from prosecuting violations of the Wire Act in reliance on the 2011 Opinion until June 14, 2019. Following the release of the 2019 Opinion, however, the New Hampshire Lottery Commission initiated litigation against the DOJ in the United States District Court for the District of New Hampshire, challenging the legality of the 2011 Opinion. Various non-parties have filed amicus briefs in the case, including the State of New Jersey.

On April 8, 2019, the DOJ filed a declaration in the litigation, which includes as an exhibit a memorandum entitled “Notice Regarding the Applicability of the Wire Act, 18 U.S.C. [Section] 1084, to State Lotteries and their Vendors,” from Deputy Attorney General Rod Rosenstein. The memorandum states that the January 15, 2019 Opinion “did not address whether the Wire Act applies to State lotteries and vendors.” The memorandum indicates that DOJ attorneys should refrain from applying Section 1084(a) to State lotteries and their vendors pending the DOJ’s review. Further, the memorandum states that if the DOJ determines that the Wire Act does apply to State lotteries, then DOJ attorneys should extend the forbearance period for 90 days after a public announcement of this position, to allow State lotteries and vendors a reasonable time to conform their operations to federal law. This position is curious given that the 2011 OLC opinion was issued in response to a request by the New York and Illinois lotteries for clarification of the Wire Act. Now, in clarifying that opinion, the DOJ has taken the position that its clarification does not apply to state lotteries.

The filed memorandum also states that all other provisions of the January 15, 2019 memorandum remain in effect. The parties in the New Hampshire litigation have completed briefing, with oral argument on motions for summary judgment scheduled for April 11. We will continue to provide updates on this fast-moving topic.