Congress passed the Interstate Wire Act of 1961, known more simply as the Wire Act, in 1961 to put pressure on organized 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. Lawmakers later introduced other, more effective laws to harry organized crime groups, 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 were taking bets from Americans over the internet on the premise that they were acting according to the laws in their host countries.
The US legal system was unprepared to deal with online gambling at the time, and law enforcement had almost no legal recourse to put an end to online gambling even though it was completely unregulated. US officials dusted off the Wire Act around this time and interpreted its provisions against using “wire communications” as applicable to online gambling. Thus, the Wire Act played a prominent role in early US 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.
Even after US states began legalizing online gambling, the Wire Act remained a troublesome piece of legislation that complicated their efforts. A 2011 DOJ opinion paved the way for states to legalize online casinos and poker sites, but a 2019 reversal of that opinion once again muddied the waters.
DOJ Changes Interpretation of the Wire Act
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 from 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) were introduced across several legislative sessions dating back to 2014.
The basic goal of RAWA was 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 made for a quick read as all it sought was 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 lobbied extensively to convince lawmakers to restore the original interpretation, but support for RAWA languished in the face of increased support for states’ rights and limiting government involvement in citizens’ private lives. Additionally, the passing of Sheldon Adelson in early 2021 may have put a permanent end to RAWA efforts.
Today, legal online gambling and sports betting have all the momentum in their favor. As more states pass laws to legalize one or more forms of online gambling following the overturn of PASPA, it grows increasingly unlikely that federal efforts to stop legal online gambling will ever gain significant traction.
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 injected significant amounts of uncertainty into the nascent online gaming industry.
This paragraph from the DOJ’s revised opinion sums it up:
“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.”
2019 Part Two: Judge Reverses the DOJ’s Reversal
Not surprisingly, the DOJ’s sudden decision in late 2018/early 2019 to reverse its 2011 Wire Act opinion frustrated states and gaming operators across the country who had relied on the 2011 interpretation to pass legislation and launch entire industries around online lotteries, casino games and poker.
In fact, the DOJ’s new interpretation expanded the scope of the Wire Act beyond even its pre-2011 interpretation. The decision did not just threaten online lottery tickets and casinos; it also threatened the viability of established multi-state lottery drawings such as Powerball and Mega Millions that also rely on interstate communications to function – even in states that do not sell tickets to those games online.
The New Hampshire Lottery Commission (NHLC) sued the DOJ over the decision, calling it arbitrary, vague and contrary to the plain language of the Wire Act as it was originally written. A federal judge sided with New Hampshire and issued a decision in mid-2019 reversing the DOJ’s reinterpretation.
With the new ruling in place, the Wire Act is once again interpreted as applying only to sports betting. The DOJ may still appeal the ruling and potentially even take this all the way to the Supreme Court, but states with online casinos and lotteries can rest a little easier in the meantime knowing they are no longer at risk of serious disruption.
The DOJ responded to the judge’s decision by ordering state Attorneys General to delay any enforcement actions on the new interpretation of the Wire Act until “December 31st, 2019 or 60 days after entry of final judgement in the New Hampshire litigation, whichever is later.”
In a letter responding to the decision, the DOJ said it is “evaluating its options in response to this opinion.” The DOJ also said this in the letter:
“Providing this extension of the forbearance period is an internal exercise of prosecutorial discretion and does not create a safe harbor for violations of the Wire Act. All other provisions of the January 15, February 28, and April 8, 2019 memoranda remain in effect.”
Online gambling advocates secured an important victory in January 2021 when the First Circuit Court of Appeals upheld the lower court’s opinion that the Wire Act only applies to sports betting.
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.
The Wire Act presented a serious threat to legal online sports betting efforts at one point, but multiple court rulings siding with online gambling advocates have given states the legal footing they need to puruse legalization. As even more states pass laws to authorize online sports betting, gambling, and poker, it grows increasingly unlikely that efforts to reverse course will be successful.