A federal judge in New Hampshire ruled that the DOJ’s new interpretation of the Wire Act is wrong. In fact, the court said the Wire Act only applies to sports betting. The new court ruling provides some clarity to gambling companies and state lotteries.
The federal government enacted the Wire Act to help states suppress gambling activities cross state lines. Enacted in 1961, it has two provisions. The first one makes it illegal to wager using any type of interstate communications. The second provision is for the creation of a limited safe harbor.
The first provision has wording that can be confusing. As a result, Illinois and New York asked the DOJ for clarification starting 2009. They want to know if the Wire Act prohibits in-state lottery ticket sales if the sales caused data to be sent across state lines. For instance, some states use out-of-state servers to process payments or store lottery tickets.
Wire Act Interpretations
In 2011, the DOJ told the pay per head industry that the Wire Act only applies to sports betting. In fact, the agency reached the conclusion by analyzing the statutes legislative history, policy purposes, and text. As a result, gambling firms and state lotteries started developing and launching online gambling platforms.
However, the DOJ changed its opinion in late 2018 that surprised the gambling industry. The agency reversed its 2011 interpretation and concluded that the statute makes all types of interstate online gambling illegal. As a result of the change in opinion, the DOJ gave firms and individuals a 90-day grace period to comply with its new ruling.
Even if the US Supreme Court overturned the PASPA, the DOJ maintained that sports betting is illegal due to the Wire Act if the act of betting crossed state lines. As a result, operating a local sportsbook pay per head is still a gray area according to the law.
After the announcement of the new opinion, the New Hampshire Lottery filed a lawsuit to challenge its validity. On June 3, 2019, the court determined that the latest Wire Act opinion is wrong. In addition, the court said it only applies to sports betting. Although state lotteries are celebrating, it is a big blow to the bookie pay per head industry.