International Gaming Technology PLC (IGT) has emerged triumphant in its battle against the U.S. Department of Justice in order to force the DOJ to officially state that the 1961 Wire Act can no longer be construed to apply to bets or wagers excepting sports betting. In an opinion published on Thursday, U.S. District Judge William E. Smith issued a summary judgment in favor of IGT, while denying a DOJ motion to dismiss the case.
The ruling allows IGT to conduct its internet-based lottery services in 37 states without fear of prosecution by the DOJ, after the DOJ refused for years to issue a formal directive acknowledging that a related U.S. First Circuit ruling in favor of the New Hampshire Lottery Commission would stand as the law of the land. The battle over the reach of the Wire Act’s reach has extended well over a decade. Besides the multi-state lottery implications, interstate online-poker player pooling, such as that offered through MSIGA member states, could have been imperiled by any future attempt to prosecute services related to online gambling outside the First Circuit, which includes only four New England states.
The lingering Wire Act litigation had a dampening effect on U.S. regulated online poker as well. In 2018, for example, WSOP.com initially declined to launch its services in the newly regulated state of Pennsylvania until after the New Hampshire Lottery Commission received a favorable verdict in the earlier Wire Act case.
In his ruling, Judge Smith dismissed the DOJ’s ongoing assertions that IGT faced no credible threat of prosecution in the wake of the New Hampshire Lottery Commission, and that IGT thus lacked standing to bring the case. IGT maintained it felt forced to sue the DOJ over the matter in order to protect its existing business, since the DOJ had instituted a forbearance period under which it promised not to prosecute alleged illegal online-gambling operators until the New Hampshire matter had been settled.
The DOJ also promised to institute new guidelines regarding the Wire Act, that would supersede a revised opinion from 2018 that attempted to re-establish the pre-2011 interpretation that the act applied to all forms of online gambling except horseracing. Instead, the DOJ declined to issue that revised opinion, perhaps in the failed hope that federal legislators would quickly pass a modernized Wire Act that would revisit the online issue.
DOJ hoped to maintain prosecution options
Judge Smith found little merit in the DOJ’s claims that IGT lacked proper standing to sue. The mere presence of the chilling effect created by the DOJ’s failure to fully acknowledge that its 2018 revised opinion was invalid justified IGT’s suit, Smith found, and created possible economic injury due to long-term market uncertainty.
Smith also noted factors indicating that the DOJ hoped to adhere to its 2018 opinion despite the New Hampshire Lottery ruling. That 2018 opinion, actually written for the DOJ by lawyers for the late anti-online-gambling casino magnate Sheldon Adelson, was designed to reverse a 2011 DOJ opinion by then-U.S. Attorney General Eric Holder limiting the Wire Act’s reach to sports betting only. Holder’s opinion was sought by two populous states, New York and Illinois, that hoped for a legal green light to implement online lottery sales. Before Holder’s declaration, the DOJ advised New York and Illinois lottery officials that the online-lottery sales would be illegal under federal law.
The scenario mirrored developments in a different topic, marijuana legalization, where voters approved pot sales on a state-by-state basis, but the entire industry is still deemed illegal under U.S. federal law, and it has negatively impacted the pot industry in ways such as hindering electronic banking. In Thursday’s IGT ruling, Judge Smith briefly made comparisons to the legalized-marijuana battle as well.
A ‘dangling sword of indictment’
“[T]here is no question,” wrote Smith in his conclusion, “that a judgment ‘will serve a useful purpose in clarifying and settling the legal relations in issue’ and afford significant relief ‘from the uncertainty, insecurity and controversy giving rise to the proceeding.’
“Like the NHLC plaintiffs, IGT ‘should not have to operate under a dangling sword of indictment while DOJ purports to deliberate without end the purely legal question it had apparently already answered and concerning which it offers no reason to expect an answer favorable to the plaintiffs.’ Indeed, the dilemma
IGT faces – ‘between abandoning [its] rights or risking prosecution – is a dilemma that was the very purpose of the Declaratory Judgment Act to ameliorate.'”
Judge Smith concluded by writing that “a declaratory judgment will bind the United States ‘everywhere [IGT] operate[s] or would be otherwise subject to prosecution.’ Because the Court finds there is no dispute of material fact, judgment shall enter as a matter of law…. The Court declares that, as to the parties
now before it, the Wire Act applies only to ‘bets or wagers on any sporting event or contest.'”