The US Department of Justice (DOJ) recently released an opinion stating that the provision of the Wire Act related to online gambling is limited to sports betting. Specifically, the opinion clarified that “interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.” This decision reverses the DOJ’s prior stance on the purview of the Wire Act, which has long been viewed as a bar to all online gambling involving multiple states or foreign commerce. As a result of the DOJ’s ruling, it appears that the Wire Act now only prohibits transmissions related to sports betting, such as “off-track betting on horses,” as well as bets regarding “baseball, basketball, football, and boxing,” and that the DOJ may no longer rely upon it to prevent other forms of online gambling.

After receiving correspondence from Illinois and New York detailing the states’ proposals to sell lottery tickets using the Internet where those transmissions would be routed between multiple states, but the sales would be restricted to in-state residents, the Criminal Division of DOJ requested a clarifying opinion from the DOJ’s Office of Legal Counsel, which is responsible for providing legal opinions to the president of the United States and other executive agencies. Although the Criminal Division has long held that the Wire Act prohibits the interstate transmission of all gambling activities, including lottery purchases, the Office of Legal Counsel recently issued its opinion to the contrary, thus changing the stance of the DOJ as it relates to the Wire Act and Internet gambling.

As noted by the Criminal Division in its memorandum to the Office of Legal Counsel, “the Department has uniformly taken the position that the Wire Act is not limited to sports wagering and can be applied to other forms of interstate gambling.” Further, this long standing position has also covered wire transmissions that “crossed state lines at any point in the process” despite the fact that they may have originated and terminated in the same state. This position is contrary to the later-codified Uniform Internet Gambling Enforcement Act (UIGEA), which expressly excludes the “intermediate routing of electronic data” as a factor in determining the location of a bet from its definition of unlawful Internet gambling.

In coming to its decision, the Office of Legal Counsel analyzed the specific section of the Wire Act that has been attributed to Internet gambling, which provides that, “whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest. . .” The Office reviewed the legislative history behind the provision, the clauses in the provision, and the word placement in an effort to determine whether “sporting event or contest” should be read to apply to both instances of “bets or wagers” or only to the instance immediately preceding the phrase. In the end, the Office determined that the more pragmatic reading of the provision required that “sporting event or contest” apply to the entire provision, thus limiting the reach of the Wire Act. After coming to this decision, the Office chose not to discuss UIGEA and its scope as it relates to the Wire Act.

Although initiated as a response to inquiries regarding lotteries, this recent opinion may be viewed as the lifting of a bar related to Internet gambling, narrowing the purview of the Act to sports betting. This small victory in the area of online gambling is, however, still subject to the restrictions of UIGEA and state law, which must be reviewed prior to developing any gambling-related venture. Additional federal regulations may also be on the horizon.

Arent Fox is continuing to monitor developments related to Internet gambling.