Office of Legal Counsel Reinterprets the Wire Act

On January 14, 2019 the Assistant Attorney General Steven Engel of the Department of Justice’s (“DOJ”) Office of Legal Counsel (“OLC”) issued an opinion dated November 2, 2018 (the “2018 Opinion”) replacing the OLC’s 2011 interpretation of the federal Wire Act, 18 U.S.C. § 1084  (the “Wire Act”).

The 2018 Opinion states the Wire Act is applicable to any form of gambling that crosses state lines, including online gambling and online lotteries. In particular, the reinterpretation concludes that Section 1084(a) consists of two general clauses, each of which prohibits two kinds of wire transmissions, creating four prohibitions in total.

  • The first clause bars anyone in the gambling business from knowingly using a wire communication facility to transmit:
    • “bets or wagers” or
    • “information assisting in the placing of bets or wagers on any sporting event or contest.”
  • The second clause bars any such person from transmitting wire communications that entitle the recipient to “receive money or credit” either:
    • “as a result of bets or wagers” or
    • “for information assisting in the placing of bets or wagers.”

The most obvious takeaway is the OLC saying that the Wire Act applies to non-sporting events. Meaning, interstate poker compacts, e.g., Nevada, New Jersey and Delaware, would be subject to the Wire Act.

Even more baffling, however, is the 2018 Opinion’s reference to intermediate routing. By expressly noting that the Unlawful Internet Gambling Enforcement Act (“UIGEA”), which specifically states that “[t]he intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received or otherwise made,” does not alter the Wire Act, the OLC may be trying to set a basis for contending that even intrastate wagers are illegal if the transmissions bounce outside of the state (even if they originate and end in the state). While there are strong legal and public policy reasons for why the Wire Act does not apply to intrastate wagering, given the creative analysis the OLC used to broaden the scope of the Wire Act, this will be an issue studied by the gaming and the iLottery industries.

As a result of the 2018 Opinion, Deputy Attorney General Rod Rosenstein issued a memorandum on January 15, 2019 stating that DOJ attorneys should refrain from pursuing any actions against persons and businesses that relied on the 2011 interpretation for ninety (90) days in order to allow them “time to bring their operations into compliance with federal law.”

If you would like to discuss the Wire Act or have us conduct a risk analysis of your business model in light of the 2018 Opinion, please reach out to Karl Rutledge (krutledge@lrrc.com).