In a landmark decision for the iGaming industry and big operators like IGT, the United States District Court for the District of Rhode Island has ruled that the Wire Act of 1961 applies only to sports betting.
The court’s decision came as a response to a lawsuit filed late last year by IGT seeking a final answer to a question that has dogged online gambling operators since the advent of the internet. It upholds a ruling by the First Circuit Court of Appeals (N.H. Lottery Comm’n v. Rosen) stating in essence that contrary to a 2018 opinion issued by the US Department of Justice, online gambling other than sportsbetting is not illegal at the federal level.
International Game Technology and IGT Global Solutions Corporation (IGT) sought and received a declaratory judgment that the 2018 DOJ Opinion, which held that the 1961 wire law prohibited every type of online gambling including lottery ticket sales, was incorrect.
The Providence Rhode Island-based international iGaming and lottery giant filed the suit against the Department to protect its online gambling and lottery products through declaratory relief – in essence asking for a black and white answer.
That answer was needed due to a misapplied 2006 law, an opinion by the Obama administration’s DOJ that the Wire Act applied only to sports, the 2018 Trump DOJ opinion reversing that decision, and an appeals court decision overruling that opinion which the incoming Biden administration decided not to litigate further.
Securing IGT’s $3.68 Billion Market Cap
IGT sought to protect its products by seeking declaratory relief that its online lotteries and iGaming products would be free from federal prosecution. The morass of uncertainty threatened not only IGTs company with over $3.68 billion in market capitalization, but also over $100 billion in annual US lottery ticket sales by all providers, and the entire offshore casino market. Most lottery transactions are done over the internet with at least one server’s digital traffic crossing state lines in the process.
During the trial, the DOJ moved to dismiss the case and argued that IGT hadn’t been prosecuted or suffered other injuries due to the decision so the company had no standing to sue for relief. The court disagreed, as had the unanimous Court of Appeals who noted that although no prosecutions had occurred the DOJ had threatened the Illinois State Lottery with enforcement if it continued operations past a 60-day window of compliance issued by the DOJ.
The Department also argued that the New Hampshire Lottery case and Appeals Court decision rendered the matter too speculative to give IGT Article III Standing.
The court rejected the motion to dismiss stating that simply the threat of prosecution was enough. The court found that IGT “should not have to operate under a dangling sword of indictment while DOJ purports to deliberate without end the purely legal question it had apparently already answered and concerning which it offers no reason to expect an answer favorable to the plaintiffs.”
Summary Judgement Granted – Wire Act Applies Only to Sports Betting
The court also granted IGT’s separate Motion for Summary Judgment and stated that “as to the parties now before it, the Wire Act applies only to ‘bets or wagers on any sporting event or contest.’
While the decision should open the door to all online gambling in the United States except where prohibited by state laws, it’s not likely to thanks to the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).
The UIGEA specifically states that it neither modifies existing laws nor creates new gambling prohibitions. However, “Guidance” given to all US and US-connected financial institutions in the Bush era prohibits the transfer of money to or from online casinos – under the false assumption that they are illegal (under the wire act).
The 2011 Obama DOJ opinion didn’t address intra-state gambling as it’s not a federal matter, but oddly enough it was the impetus that gave state lawmakers the confidence to launch online casinos and poker in three states. New Jersey and Delaware approved both while Nevada land-based interests kept their iGaming restricted to poker.
Today, Delaware, New Jersey, Pennsylvania, Michigan, West Virginia, and Connecticut all have online casinos but only those currently located within the state’s borders are allowed to play.
Some interstate gambling has already been coordinated between states with regulated online gambling in the form of poker “player liquidity pools”.
While individual states could conceivably model regulatory regimes the way sports betting is handled, there is apparently no need to keep all activity within a state’s own borders. Failing the creation of a federal online gambling legal framework – which is not likely given the current political climate, it would be incumbent upon states to coordinate their efforts with some sort of harmonizing framework. Barring that, there is and never has been any federal law that prohibits offshore casinos from openly and aggressively recruiting US players.
But there is a catch
Unless the Federal Trade Commission and the Department of Justice are both sued for declaratory relief in the matter of UIGEA unfairly restricting trade, it will remain illegal for offshore casino operators to process deposits and withdrawals to players in the USA since US financial institutions will most likely refuse to conduct the business.
It remains, as always, legal at the federal level for players to deposit and withdraw their funds from offshore casinos.
Interstate sports betting remains illegal as it has been since 1961.
It’s unclear if the Biden (Garland) DOJ will appeal the latest ruling.
Source: Rhode Island District Court Sides with Prior First Circuit Opinion on Wire Act Interpretation, JDSUPRA, September 19, 2022