Bill Introduced in Congress Would Undo DOJ Reinterpretation of Wire Act

by Snell & Wilmer
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The Restoration of America’s Wire Act, H.R. 4301, 113th Cong. (2nd Sess. 2014), S. 2159, 113th Cong. (2nd Sess. 2014) (RAWA), was introduced in Congress on March 26, 2014. The bill amends provisions of the federal criminal code, commonly known as the Wire Act,[1] to prohibit all forms of Internet gambling in the United States except for horse racing. If enacted, the bill would restore the federal ban on Internet gaming.

The Wire Act - 18 U.S.C. § 1084

The Wire Act was originally enacted in 1961 as part of Attorney General Robert F. Kennedy’s effort to combat organized crime and, specifically, interstate gambling. The statute’s purpose was to cut “the Wire” - the name organized criminals gave to the telegraph wire used by illegal bookies to get race results before their bettors. Although intended to shut down interstate bookmaking on sporting events, the Wire Act was, for decades, interpreted by the U.S. Department of Justice (DOJ) as outlawing all interstate gambling.

DOJ’s 2011 Memo

In December 2011, DOJ’s Office of Legal Counsel (OLC) released a memorandum declaring that the Wire Act’s prohibition on interstate gambling applies to sports betting only. The DOJ memo resulted from the Illinois and New York state lotteries’ request for clarification of the law as it related to the selling of intrastate subscriptions. The Illinois and New York lotteries simply wanted to know if out-of-state payment processors could be used for those Internet purchases. However, DOJ’s response was far broader in scope, opining that not only can states sell lottery ticket subscriptions over the Internet and use out-of-state payment processors, but suggesting that the operation of any game legal under state law did not violate the Act, so long as it was not considered sports betting. In essence, the memo clarified DOJ’s position that the Wire Act does not apply to intrastate non-sports wagering to the extent it complies with applicable state law.

Congressional Response to the OLC Memo

Unhappy with DOJ’s reinterpretation of the Wire Act, Senator Lindsey Graham (R-South Carolina) and Representative Jason Chaffetz (R-Utah) introduced, in March, legislation known as the Restoration of America’s Wire Act. The bill would restore the Wire Act’s ban on all Internet gaming, and does not include any carve-out for existing state-regulated online gambling, including the online gambling now allowed under the laws of Nevada, Delaware and New Jersey. Instead, any state wanting to legalize online gaming would have to obtain permission from Congress. The bill does, however, contain a partial exemption for state lotteries. The main concern raised by this proposed legislation is that, historically, it has always been up to the states to determine their own public policies with respect to gambling. This legislation would clearly change that long-standing approach of the federal government and infringe upon sovereignty of the several states. Another concern is that RAWA would seem to be in direct conflict with another proposal, supposedly being worked on by Nevada Senators Harry Reid and Dean Heller that would “fix” the Wire Act issue, while ensuring a safe harbor for online poker. RAWA has not yet been scheduled for a hearing.

The proposed bill can be found here.

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Notes:

[1] 18 U.S.C. § 1084 (1994).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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