Federal Wire Act Explained

The Interstate Wire Act of 1961, known more simply as the Wire Act, was passed in 1961 as a part of Congressional efforts to put pressure on the organized crime groups that had embedded themselves in the US sports betting industry at the time.

A paper published by the Center for Gaming Research at the University of Nevada, Las Vegas provides some interesting context related to the bill’s original purpose. As the paper explains, Attorney General Robert F. Kennedy proposed the Wire Act as a means to attack the finances of mafia operations.

Media reports at the time explained that Kennedy believed sports betting was one of the mafia’s most profitable activities at the time. While they lived “respectable lives in one state,” they controlled sports betting rackets in other states and used wire communications (telephone and telegraph at the time) to manage their businesses remotely.

The Wire Act (full text) specifically targeted the use of wire communications and sought to disrupt the mob’s gambling operations. Other, more effective laws for prosecuting mobsters were introduced later, and the Wire Act mostly collected dust until the rise of online gambling.

In the mid-to-late 90s, online gambling proliferated despite strong anti-gambling laws in the United States. Offshore sportsbooks and gambling sites hosted on foreign territory began taking bets from Americans over the internet on the premise that they were acting according to the laws in their host countries.

Lawmakers dusted off the Wire Act at around this time to target offshore gambling sites. The Wire Act’s provisions against using “wire communications” was interpreted to also apply to the internet. Thus, the Wire Act played a prominent role in early efforts to stamp out online gambling.

The Wire Act was largely responsible for a nationwide prohibition of online sports betting, poker and gambling in the United States. State lawmakers occasionally expressed interest in legalizing online gambling, but were unable to do so as it would be a clear violation of the Wire Act.

Today, the Wire Act continues to stand out as a troublesome piece of legislation that unnecessarily complicates efforts at the state level to legalize various forms of online gambling. A 2011 DOJ opinion paved the way for some of those state efforts, and then a 2019 reversal of that opinion once again muddied the waters.

DOJ Changes Interpretation of the Wire Acct

Up until 2011, the Wire Act was broadly interpreted to apply to all forms of online gambling. This included sports betting, casino gaming and poker. In 2009, officials form New York and Illinois requested an opinion from the Justice Department regarding certain online lottery proposals.

Specifically, New York and Illinois wanted to know if the Wire Act would preclude them from offering online lottery ticket sales. The DOJ responded in 2011 with a decision that would change the face of online gambling in the United States.

In a memorandum issued in 2011, the DOJ stated that it interprets the Wire Act to only apply to sports betting. The memorandum did not specifically mention online casino games or poker, but it nonetheless opened the doors for states to legalize those forms of online gambling. The new interpretation was clear:

“…we conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act.”

This new interpretation of the Wire Act gave the green light for states to legalize and regulate online casinos and poker sites. New Jersey, Nevada, Delaware and Pennsylvania were among the first states to seize the opportunity and passed laws to regulate one or both forms of online gaming.

The Wire Act still stands to this day, but its scope has been greatly reduced thanks to the new interpretation from the Department of Justice. If it wasn’t for that 2011 decision, we would not have legal online gambling anywhere in the United States today.

Efforts to Restore the Wire Act

A number of Congressmen have expressed an interest in restoring the original interpretation of the Wire Act in order to stamp out legal online gambling in the United States. Iterations of a bill titled the Restoration of America’s Wire Act (RAWA) have been introduced across several legislative sessions dating back to 2014.

The basic goal of RAWA is to amend the Wire Act and ensure it specifically bans online gambling of all types, not just sports betting. The full text of the bill makes for a quick read as all it seeks is to firmly establish that the Wire Act prohibits online gambling and poker in addition to sports betting. However, RAWA would exempt online horse racing betting and fantasy sports.

Billionaire casino Mogul Sheldon Adelson has lobbied extensively to convince lawmakers to restore the original interpretation, but support for RAWA has languished in the face of increased support for states’ rights and limiting government involvement in citizens’ private lives.

With additional states seeking to legalize online gambling and generate money for state coffers, we believed it was unlikely RAWA would gain the traction it needs to become law. Between many states introducing online gaming legislation and the Supreme Court ruling PASPA unconstitutional, legal online gambling has all the momentum in its favor.

RAWA itself still hasn’t become law, but the Department of Justice effectively accomplished the same goal by changing its interpretation of the Wire Act.

2019: DOJ Changes Opinion Once Again

The 2011 DOJ opinion stood in place for eight years – just long enough for multiple states to legalize and implement online gambling, poker and sports betting. With little warning, the DOJ reversed its 2011 opinion and once again inserted significant amounts of uncertainty into the nascent online gaming industry.

Now, the DOJ’s most current opinion of the Wire Act is that it applies to all forms of online gambling, not just sports betting. This paragraph from the new opinion sums up the DOJ’s decision as follows:

“The Criminal Division has asked us to reconsider our 2011 Opinion. We do not lightly depart from our precedent. But having reconsidered our conclusion, we now reach a different result. The 2011 Opinion, in our view, incorrectly interpreted the limitation on “any sporting event or contest” (the second “sports-gambling modifier”) to apply beyond the second prohibition that it directly follows: the prohibition on transmitting “information assisting in the placing of bets or wagers.”

Will the Wire Act Disrupt Legal Online Sports Betting?

The two key paragraphs in the Wire Act read as follows:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

“Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.”

Some gaming insiders have theorized that the Wire Act may hinder the implementation of online sports betting in the United States. These concerns are based partially on the fact that past court rulings have determined the Wire Act applies to the internet and not just telephone lines.

We at one time believed those fears to be a bit exaggerated, but the DOJ’s flip-flopping opinions have introduced uncertainty into all forms of online gambling. The full extent of the Wire Act on sports betting (and other forms of online gaming) remains to be seen, but the uncertainty alone is likely to impact legal efforts at the state level and cause gaming operators to reconsider how much money they invest into an industry that is so subject to the whims of federal officials.

Having said that, we should keep in mind that online sports betting was legalized in multiple states even though the DOJ has always contended it applies to sports betting. In time, we will gain a clearer understanding of the Wire Act’s true impacts on legal online betting.

It is true the Wire Act could potentially be interpreted to stop online sports betting even in states where the activity has been legalized, but there are also potential avenues to sidestep the Wire Act that would not require yet another lengthy legal battle.

For one, states could implement geolocation technology to ensure all sports wagers are kept entirely in-state. The Wire Act applies only to interstate sports wagering, so if a state can ensure that a bet is never transmitted across state lines, that may provide an out.

The Wire Act also specifically notes that it does not apply to the transmission of “information assisting in the placing of bets” from one state to another if sports betting is legal in both states. Under this provision, only the bet itself would be barred from crossing state lines in two states where sports betting is legal.

From here, we would get into definitions of what constitutes the bet itself and what is merely “information” that assists in placing the bet. Is a page on an online sportsbook detailing the latest odds on the Cowboys game merely information? It is easy to imagine a scenario where states consider bets to take place entirely in-state while permitting information pertaining to those wagers to move across state lines and the federal government finding that acceptable.