DOJ’s Reinterpretation of the Wire Act Draws Swift Lottery and State Opposition

As noted in a prior post, on January 15, 2019, the Department of Justice’s (“DOJ”) Office of Legal Counsel (“OLC”) issued an opinion dated November 2, 2018, replacing the OLC’s 2011 interpretation of the federal Wire Act, 18 U.S.C. § 1084. The new interpretation states that the Wire Act is applicable to any form of gambling using wire communications that cross state lines, including online gambling and online lotteries. As a result of the new interpretation, Deputy Attorney General Rod Rosenstein issued a memorandum on January 15, 2019, stating that DOJ attorneys should refrain for ninety (90) days from pursuing actions against persons and businesses that relied on the 2011 interpretation, so that they could have time to bring “their operations into compliance with federal law.”

Three weeks after its release, the new interpretation drew rebuke from the North American Association of State & Provincial Lotteries (“NASPL”) and state attorneys general over industry and federalism concerns. In a statement dated February 4, 2019,  NASPL opposed the DOJ’s new interpretation of the Wire Act, stating that the interpretation could impact state lotteries by creating “substantial uncertainty concerning the legal status of lottery transactions.” NASPL explained that the 2011 DOJ interpretation “set in motion critical enhancements and improvements within the U.S. government-sanctioned lottery industry.” NASPL consequently believes the new interpretation legally jeopardizes those critical enhancements and improvements. NASPL requested to work with the DOJ on solutions to problems the new interpretation could present to state lotteries.

Following NASPL’s opposition, New Jersey AG Gurbir Grewal and Pennsylvania AG Josh Shapiro issued a letter requesting the DOJ to withdraw its opinion or assure New Jersey and Pennsylvania that the DOJ would not prosecute companies and individuals engaged in state-authorized online gaming in their respective states. The two AGs stated that their respective online gaming industries developed in reliance on the DOJ’s clear 2011 opinion. The letter concludes by claiming that the DOJ’s latest reversal “undermines the values of federalism and reliance that our states count on.”

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 contact the authors Karl Rutledge at krutledge@lrrc.com, Glenn Light at glight@lrrc.com, or Mary Tran at mtran@lrrc.com.