First Circuit and the way forward for government-approved sports activities betting

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The First Circuit's recent ruling in the New Hampshire Lottery Commission v Rosen1 case states that the Wire Act's prohibitions on interstate activities apply only to sports betting, and not to all types of wagering and betting such as online lotteries, poker and other dollar games. State lotteries and non-sports betting providers welcomed the decision, but the decision is disappointing for the sports betting industry as their business may still be in violation of federal law.

The case first hit the headlines in early 2019 when a group of plaintiffs, led by the New Hampshire Lottery, sued the Department of Justice ("DOJ") over its recent reinterpretation of the Wire Act, a decade-old federal law that bans the use of interstate wires, to place certain bets. At first glance, the language of the Wire Act is ambiguous about the specific types of interstate wagering activity it prohibits. In a 2011 DOJ statement, the Wire Rope Act was interpreted narrowly to prohibit only the use of interstate wire transmissions in connection with sports betting. In a subsequent DOJ statement from 2018, however, the Wire Act was reinterpreted to the effect that virtually all bets – both sports and non-sports betting – that use interstate wires are largely prohibited. The First Circuit statement focused on the structure and legislative history of the Wire Act, noting that the 2018 DOJ statement would create a "strange and inharmonious piece of criminal law," and the Wire Act's limitation to the use of interstate wire applies only for sports betting.

With the non-sports online betting industry embracing the opinion of the First Circuit, online sports betting providers must now grapple with the reality that the Wire Act prohibits online sports betting – at least until the Supreme Court rules otherwise or Congress changes the law. While the U.S. Supreme Court's May 2018 ruling in the Murphy v NCAA case gave individual states the power to approve sports betting, the Wire Act remains a barrier to state-licensed bookmakers wishing to offer online or app-based sports betting. This is because a bettor and a sportsbook may be in the same state and thus allowed under Murphy. However, the structure of the internet practically ensures that with every online or app-based bet, data is transmitted across state borders and thus violates the Wire Act.

In the near future it remains to be seen how the Biden administration will interpret the wire law. As a presidential candidate, Biden stated that he "does not support adding unnecessary restrictions to the gaming industry as the Trump administration has done." Although Congress could pass a bill that clarifies or completely changes the scope of the Wire Act, the likelihood of new legislation is unknown.

In the meantime, states are quick to bet on sports betting, even if it's against the Wire Act. In the years since Murphy, 25 states and the District of Columbia have approved some form of sports betting. Given that sports fans prefer to gamble online rather than in person, betting companies in many of these states are grappling with the tension between state-approved sports betting and the prohibitions of federal law on interstate sports betting. Many state-legal cannabis businesses – which remain illegal under federal law – have operated under the unofficial protection of the federal government since instructing the U.S. law firm to think carefully before bringing charges of marijuana-related crimes. Government-approved sports books that appear to be in violation of the Federal Wire Act may be on similar ground without Supreme Court intervention, new DOJ guidance or legislative action taken by Congress.

1 New Hampshire Lottery Commission et al. v. Jeffrey Rosen, Acting US Attorney General, Case No. 19-1835 (Cir. 1 January 2021).

© Copyright 2020 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XI, Number 32