On Friday, December 23, 2011, the Department of Justice (DOJ) released for the first time that a memorandum signed by Virginia A. Seitz, the Assistant Attorney General for the Criminal Division, dated September 20, 2011, reacting to two different questions — one from two state lotteries and one from two U.S. Senators — regarding the applicability of the Wire Act (18 U.S.C. ?? 1084) to intrastate sales of lottery tickets on the Internet. At a 180-degree reversal, the DOJ memo takes the place that the Wire Act doesn’t apply to non-sports betting. This change in position has wideranging implications for the Internet gaming arena in the U.S. Of particular interest, it usually means that DOJ doesn’t longer contend that states can’t license intrastate online gambling, provide lottery matches across the Internet or compact with each other to present online gambling.
Much of the gaming industry had heard rumors that such a memo was in process, and few were surprised that DOJ chose to delay release of the memo before the Friday before Christmas to minimize media policy.
The Wire Act
The Wire Act was passed in 1961 as part of a Kennedy-era push against organized crime. It reads in relevant part:
“Whoever being engaged in the company 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, or for the transmission of a wire communication which entitles the recipient to get money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”
Even the Justice Department had long maintained that, regardless of the reference to”sporting event or contest,” that the Act effectively prohibits any telecommunicated wager placed or obtained by a individual found in the United States.1 DOJ had also maintained that even Internet wagers positioned and approved within precisely the exact same state violated the Wire Act, arguing that the publicly-switched telephone network and the Internet are inherently global media.
From 1996-2006, Congress attempted on several occasions to update and explain the Wire Act as to what it did and didn’t prohibit; each of those efforts failed primarily due to internecine conflicts between different gaming sectors — i.e., industrial vs. tribal, horse vs. dog racing, lotteries vs. convenience shops. In 2006, Congress abandoned efforts to update the Wire Act, and instead passed the Unlawful Internet Gambling Enforcement Act (UIGEA, 31 U.S.C ?? 5361-67), which prohibited the acceptance or processing of a financial instrument for the purpose of”unlawful online gambling” but failed to directly define that phrase, rather relying on other federal and state laws in regard to what wagers were illegal. UIGEA did include certain exceptions from its own enforcement mechanism, such as wagers accepted with a state-licensed thing from individuals in the state where it was authorized, however, UIGEA made apparent it did not plan to legalize those wagers.2
Back in 2002, the Fifth Circuit Court of Appeals upheld a lower court judgment in a civil case that discovered that the words”sporting event or competition” made clear that the Wire Act only applied to sports gambling.3 No other Circuit has ruled directly on the point. DOJ nonetheless had made clear that they didn’t agree with the Fifth Circuit’s findings.
Late in 2010, the District of Columbia enacted a law permitting its lottery to provide both lottery tickets and casino-type matches to individuals in D.C., and the D.C. lottery is currently preparing to launch its Internet solutions. It was in response to this Senators Harry Reid (D-NV) and Jon Kyl wrote to Attorney General Holder requesting him to describe DOJ’s position regarding whether the Wire Act would prohibit . Additionally, two state lotteries had asked DOJ to clarify its own position regarding Internet sale of lottery tickets. From the memo published on December 23, DOJ embraced much of this Fifth Circuit’s reasoning in stating that, because the Wire Act only prohibits sports betting, there’s absolutely no national impediment to states in selling lottery tickets on the Internet.
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