Featured Expert Contributor, White Collar Crime and Corporate Compliance
Gregory A. Brower is Chief Global Compliance Officer for Wynn Resorts. He also serves on WLF Legal Policy Advisory Board and is a former U.S. Attorney. William E. Moschella is a shareholder with Brownstein Hyatt Farber Schreck, LLP and a former Principal Associate Deputy Attorney General, U.S. Department of Justice.
* * * *
The online gaming industry scored another significant, if limited, win in a lawsuit brought by industry leader International Game Technology (“IGT”) against the Justice Department seeking to clarify the scope of the federal Wire Act. A federal district court judge in Rhode Island granted IGT’s request for a declaratory judgement that the Wire Act’s prohibitions on interstate communications of betting information apply in the sports-betting context only. Although expressly limited to the parties before the court, absent an appeal by DOJ, this ruling provides at least some clarity to the online gaming industry as it seeks to grow into new jurisdictions.
This long saga essentially began in 2018 when DOJ’s Office of Legal Counsel (“OLC”) issued an opinion that the Wire Act applied to all forms of interstate communication of betting information. The 2018 OLC opinion was a stunning reversal of its 2011 opinion, which concluded that the Wire Act applied in the sports-betting context only. The online gaming industry rapidly developed during the ensuing decade in reliance on this 2011 opinion. In response to the release of the 2018 opinion, the New Hampshire Lottery Commission (“NHLC”) and others sued DOJ in federal court in New Hampshire, seeking a judgement declaring that the 2018 opinion was legally flawed. The federal district court in New Hampshire agreed with the plaintiffs’ view of the 2018 opinion, issued a judgement to that effect, and ordered the 2018 opinion set aside. DOJ appealed and in January of 2021, the U.S. Court of Appeals for the First Circuit affirmed the district court’s decision as to its interpretation of the Wire Act vis-à-vis the parties to the case but vacated the part of the district court’s order setting aside the 2018 opinion thus leaving it place as binding DOJ policy.
Given the limited scope of the First Circuit’s opinion, industry members remained uncomfortable with the status quo leading IGT to file its own suit against DOJ alleging that because uncertainty about possible prosecution under the Wire Act remained for many of its lines of business to the extent they operated across state lines, additional judicial clarity was needed. Thus, like what NHLC did in the New Hampshire case, IGT sought a declaratory judgement that the 2018 opinion is contrary to law and that the Wire Act applies only to sports betting. DOJ responded to the suit with a motion to dismiss, essentially arguing that IGT did not have standing to sue because the threat of a Wire Act prosecution was too speculative. The district court not only denied DOJ’s motion, explaining that the threat of prosecution facing IGT was credible enough, but also granted summary judgement for IGT, citing the First Circuit decision as precedent, and holding that the Wire Act applies only to bets or wagers on any sporting event or contest. However, as with the New Hampshire case, the court expressly limited its decision to the parties before it.
While this is a significant win for IGT, the state of the law remains unclear for others in the industry. Even if DOJ doesn’t appeal and the Rhode Island decision is left to stand—because it technically applies only to IGT—similarly situated companies theoretically remain vulnerable to prosecution. While most observers believe any such action by the Biden DOJ is extremely unlikely, legal clarity on this issue for all is needed and could come in a few different forms. One possibility is that another lawsuit could be filed outside of the First Circuit, eventually leading to a circuit split and potentially teeing up an opportunity for the U.S. Supreme Court to weigh in and decide the issue once and for all. Another possibility is that Congress could amend the Wire Act, thus clearing up the arguable ambiguity in the statute’s language. A third possibility is that DOJ could simply vacate the 2018 memo which caused this problem. Whatever the means, clarity of this issue is critical to the burgeoning online gaming industry and would likely stimulate continued growth of the online industry throughout the U.S.