Last Thursday a federal judge gave the DoJ two weeks to clarify its stance on laws regulating internet gambling. This after hearing arguments from both the New Hampshire officials and the DOJ’s Office of Legal Counsel.
Judge Paul Barbadoro issued the deadline for the DoJ to determine the range of the federal Wire Act. He then gave seven days for other parties to respond. After that, Barbadoro is expected to rule on the lawsuit filed by the New Hampshire Lottery Commission.
Impact
It is unclear whether the ruling would apply only to New Hampshire, as the department would like, or more broadly to all 47 states with government-operated lotteries. Several of those, including Michigan and Pennsylvania, filed friend-of-the-court briefs in this case.
“We have an obligation to protect state revenues, fund education in New Hampshire.” Those were the words of Charlie McIntyre, the executive director of the New Hampshire Lottery, said after the hearing. “That is a lot of money. … Over the next biennium, you are talking $192 million. … It’s real money, so we have to protect it.”
The Wire Act enacted in 1961. It targeted the mob and prohibits interstate wagering. In 2011, New York and Illinois asked the Justice Department whether selling lottery tickets over the internet violated the Wire Act. The department concluded that online gambling within states that does not involve sporting events would not violate federal law.
However, in November last year, the department issued an opinion interpreting the wire act – as applying to any form of gambling that crosses state lines, not just sports betting. That raised concerns about the viability of online poker and other gambling across states, as well as state lotteries.
New Hampshire law requires that all net lottery profits go toward education funding. Since 1964, that has amounted to more than $2 billion.
Only a small portion of the $90 million the state gets annually from the lottery comes from its iLottery. The broadest interpretation of the opinion would prohibit all lottery-related activities that use the internet, including popular games like Powerball. If so, and that would jeopardize $80 billion in revenue.
Consequences
That Monday, the DoJ filed a memo saying, its opinion didn’t address state lotteries. And was in the process of determining whether the Wire Act applied. Thus, requested more time to consider the reach of the act. It also stated that federal prosecutors were not to enforce the November opinion pending a new decision.
However, the request for the additional time didn’t sit well with the New Hampshire Lottery Commission. So, they sued the department in February.
Yet, the state claimed prosecutions were nevertheless still possible. Further delays could complicate the state’s budget process since a key source of revenue comes from lottery revenues. It also argued Monday’s memo demonstrated how the department failed to consider the impact of its opinion. Thus, didn’t understand how modern lotteries do business.
New Hampshire wants the court to vacate the 2018 opinion. Therefore, rule that the Wire Act does not apply to state-run lotteries.
Other Concerned Parties
Meanwhile, vendors who help run the online lotteries argued the 2018 opinion served to harm their efforts to raise capital and expand their gaming businesses.
“Today, we are at risk of being disconnected from the internet,” Matthew McGill, a lawyer representing Neopollard Interactive, which operates the state’s online lottery, told the court. “We are under all kinds of threats that arise from the 2018 memo. … We need this declaratory judgment now. It’s critical to our business.”
On the other side, supporters of the department’s opinion include the Coalition to Stop Internet Gambling. This also backed by GOP megadonor Sheldon Adelson, a staunch opponent of internet gambling.
It joined the National Association of Convenience Stores in arguing in a brief submitted in this case that the two have a “strong interest” in ensuring the Wire Act is applied properly because of the “devastating effect” that online gambling has on “vulnerable individuals.”
But in its own brief, the state of New Jersey suggested that Adelson is trying to limit the competition to his brick-and-mortar operations. And was instrumental in pushing the department to issue its 2018 opinion.
McIntyre echoed those concerns. He speculated that Adelson had turned to the department after failing to convince Congress to amend the Wire Act.
