U.S. Department of Justice files motion to dismiss IGT’s Wire Act lawsuit

Haley Hintze
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Posted on February 24, 2022 4:10 pm EST

The United States Department of Justice (DOJ) is seeking to dismiss a lawsuit filed last November by International Game Technology PLC that sought clarification on the reach of the 1961 Wire Act into avenues of online gambling other than the Wire Act’s initial target, sports betting. In its motion, filed yesterday in the U.S. District Court of Rhode Island, the DOJ asserted that IGT’s action must be dismissed for “lack of subject-matter jurisdiction.”

IGT is the United States’ largest business involved with the transmission of information connected to the country’s many lotteries, offered at both the state and multi-state level across almost the entire U.S. IGT operates services in other online-gambling sectors as well. IGT’s overall services include wire-based gambling solutions to state lotteries, physical casinos, and online casino-style gaming databases, according to the DOJ’s filing.

IGT filed its action in November after the DOJ failed to fulfill its repeated promise to clarify the current reach of the Wire Act. The 60-year-old law was presumed curtailed in the wake of a federal appellate ruling declaring that it did not apply to the online-lottery services offered by the state of New Hampshire. However, that ruling was very narrow in scope; it created a carveout only for those specific lottery-based services, and is legally binding only in the U.S.’s First Circuit, which includes only Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico.

International Game Technology has ongoing business interests stretching far beyond its New England-based lottery operations. Therefore, after realizing the DOJ appeared to have no interest in fulfilling its own repeated promise to clarify the Wire Act’s revised status, the company finally filed its suit, citing the “chilling effect” of the DOJ’s inaction upon its ongoing business interests.

DOJ claims IGT faces ‘no credible threat of prosecution’

The motion to dismiss filed by the DOJ claims that despite IGT’s claims, there is no legitimate threat that the company will face enforcement activity under the Wire Act’s aged statutes. “To the extent that IGT implicitly seeks to extend the benefit of favorable First Circuit precedent to other jurisdictions where it engages in non-sports gambling — jurisdictions where courts have not yet decided whether the Wire Act reaches any non-sports gambling — IGT fails to establish a credible threat of prosecution even in those jurisdictions,” the DOJ asserts.

In fact, the DOJ asserts that IGT’s willingness to continue offering services in what might be a legal grey area is itself proof that the company’s lawsuit should be dismissed. The DOJ wrote, “IGT, which is the largest gaming and lottery services company in the country, does not allege that it has ceased or even limited its activities that it contends expose it to a risk of prosecution in the nearly one year between the date when the government announced it would no longer forbear from enforcing the Wire Act against conduct in which IGT openly engages and the date IGT filed this lawsuit. In that time, IGT’s alleged fear of prosecution for wire-based non-sports gambling apparently was not strong enough to prevent it from continuing to conduct its business as usual.”

The dismissive rebuttal from the DOJ then declared, “The perceived threat that IGT may be prosecuted in some [non-First Circuit] jurisdiction for its non-sports gambling activities is merely speculative and certainly not imminent or substantial.” The DOJ’s motion to dismiss was filed on the final day of a 30-day extension in the case agreed to last month by both sides in the case.

Wire Act interpretations have long and tangled history

The DOJ’s arguments substantially ignore both its own prior promises to clarify the Wire Act following the New Hampshire decision and the back-and-forth struggle over the Wire Act’s reach. The latter is of vital interest to all forms of U.S.-based online gambling, including online poker, since the only way the Wire Act could be read is that it applies either to all of online gambling (barring specified exemptions such as horse racing or, now, New Hampshire’s lotteries), or only to sports betting.

In 2011, an opinion issued by the U.S. attorney general at the time, Eric Holder, narrowed the perceived scope of the Wire Act to apply only to sports betting. The Holder opinion had been sought by several states interested in selling lottery tickets online, including New York and Illinois, who had been overblocked by online banking services that dampened those planned services’ outlook.

Holder’s opinion opened the door for many forms of online gambling to expand on a state-by-state basis. When coupled with New Jersey’s victory in a separate federal case that struck down the related Professional and Amateur Sports Protection Act (PASPA) as unconstitutional, opening the door for states in addition to Nevada to legalize sports betting, a new era of legalized online gambling in the U.S. appeared at hand.

Foes of online gambling weren’t done, however. When a political push called “Restore America’s Wire Act” (RAWA) failed in Congress, its primary financier, Las Vegas Sands Corp. casino magnate Sheldon Adelson, then financed a new anti-online-gambling opinion issued directly by the DOJ. That 2018 opinion, which was written by Adelson’s corporate lawyers and lobbyists and was technically unsigned by any DOJ official, attempted to nullify Holder’s 2011 opinion that narrowed the Wire Act’s reach.

That in turn led to New Hampshire and its two state-run lottery agencies to sue the DOJ, where they ultimately prevailed after a two-year battle. Yet the decision favoring New Hampshire remains limited in its own reach.

DOJ’s failure to clarify current Wire Act reach remains

The DOJ’s willful failure to address the Wire Act’s current reach created the “chilling effect” that IGT cited in its initial complaint last November, and by filing its motion to dismiss, the DOJ implicitly prefers that the old law’s current reach should remain unresolved. Whether that is the intent of like-minded allies of the late Adelson is also open to interpretation.

What can be determined, however, is that the DOJ has chosen to ignore its own prior promises to clarify the Wire Act matter. In yesterday’s filing, the DOJ attached six separate memos that the agency published, advising states’ attorneys general not to take action on Wire Act matters until the New Hampshire lawsuit was settled. Those memos include repeated extensions of a continuing forbearance period under which perceived Wire Act violations were not to be prosecuted, and in which possible Wire Act violators would be allowed to curtail their own grey-market online gambling activities.

The last of those forbearance extensions expired at the end of 2020, however, creating another reason for IGT to file its lawsuit against the DOJ. Instead of acknowledging its own failure to clarify the matter, the DOJ now asserts that individual states’ decisions not to prosecute any perceived violations is itself proof that IGT faces no serious legal threat. This comes despite the DOJ’s acknowledgment that between 2005 and the issuing of Holder’s 2011 opinion, the DOJ prosecuted 17 separate cases under the Wire Act that were unrelated to sports betting. Leaving the matter of the Wire Act’s reach unresolved thus remains an invitation to anti-online-gambling prosecutors to find reasons to sue, despite the DOJ’s latest disavowal.

Featured image source: Department of Justice logo