PA Lottery Wants Federal Judge To Reject DOJ Wire Act Reinterpretation

Posted on March 5, 2020

Pennsylvania officials are asking a federal judge for some clarity regarding online gambling in an ongoing court case.

The Nov. 2, 2018 Department of Justice (DOJ) Wire Act opinion – and its subsequent January 2019 memorandum – has no doubt caused excessive headaches for regulated gaming across the US. Pennsylvania and New Jersey are no exceptions.

Both of these states have built up strong state and local revenue sources via the legal gambling sector. They did so based on and compliant with the 2011 DOJ opinion that concluded the 1961 Wire Act applied only to sports betting, not other forms of gambling.

The 2018 opinion put forth by the DOJ Office of Legal Counsel (OLC) went back on its previous interpretation, prompting legal action from the New Hampshire lottery and their service provider, NeoPollard. The case, filed Feb. 15, 2019, has continued to drag out in the courts with a series of appeals.

This week, a whole host of interested parties submitted new amicus briefs laying out their arguments against the 2019 DOJ opinion. Among those to put forward briefs Monday were: the states of Pennsylvania, New Jersey, and Michigan as well as gaming organizations.

Conflicting DOJ opinions threaten legal gaming industry

The 2011 opinion paved the way for states to legalize online gambling including casino and poker, as PA and NJ did. It also specified that online lottery sales were also in the clear. More specifically, state lotteries were cleared to accept internet-based payments, which may cross state lines during the transmission process. As per the 2011 DOJ opinion:

“…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.”

Several states thus proceeded to set up online lottery, and offer draw tickets to multi-state games like Mega Millions and Powerball for purchase on the internet. PA just did so in January 2020.

The 2018 opinion essentially threatens the foundation on which all of these state-sanctioned online gambling sources were built. State lotteries took notice, and New Hampshire’s also took legal action. Other lotteries and states likewise offered up their support for the NH lottery and against the 2018 opinion.

On June 3, 2019, Judge Paul Barbadoro sided with the NH lottery and online gambling providers in his ruling in the New Hampshire District Court. In August, the DOJ filed a notice of appeal with the US Court of Appeals for the First Circuit. Following an extension, the DOJ filed its opening appeal brief with minutes to spare on Dec. 20, 2019.

Support for the NH lottery in the case continues this week with a new wave of amicus briefs.

PA and others add to case against 2018 DOJ opinion

Latin for “friend of the court,” amicus curiae are simply briefs filed with the court by interested parties not directly involved in a case. They have become increasingly common in recent decades and have been commonplace in the NH Lottery v. DOJ case as well.

The latest wave of briefs follow the DOJ’s recent appeal, and offer further support for the plaintiffs’ case. One such brief comes from the Pennsylvania lottery.

PA debuted online lottery games on June 1, 2018, via the PA iLottery platform. The addition was part of the state’s 2017 gambling expansion legislation. Online draw ticket sales followed in January, 2020.

The crux of the PA lottery’s argument in the amicus brief is simple. PA added online lottery products with the assurance from the 2011 DOJ opinion that state lottery sales fell outside of Wire Act limitations.

The brief goes on to explain the benefits PA lotto sales have had for the Commonwealth, including over $30 billion to support older Pennsylvanians since 1971. The 2018 DOJ memorandum, if upheld, thus threatens the existence of the PA iLottery due to online payment processing. The argument reads:

“Given the use of wire transmissions for Pennsylvania Lottery games, the broadest interpretation of the 2018 Opinion, which the USDOJ has refused to renounce, could result in the suspension of most, if not all, state lottery sales, leading to an immediate annual loss of over $1 billion in Lottery proceeds that benefit older Pennsylvanians, as well as additional expenses that would be incurred in complying with the 2018 Opinion. It would also jeopardize the jobs and livelihoods of countless Pennsylvania citizens.”

The Commonwealth of PA also requested within the brief five minutes of oral argument in court.

New Jersey offers similar arguments as PA lottery

The amicus brief from New Jersey echoes the sentiments of the PA lottery. Namely, NJ argues that important online gaming industries that provide necessary state funding were developed and sanctioned based on the DOJ’s previous interpretation.

“The Department of Justice’s 2018 Opinion reinterpreting the Wire Act can be struck down because the DOJ failed adequately to consider the very significant reliance interests that resulted from the decisions of multiple States that developed and built well-regulated, state-sanctioned gambling industries in reliance on DOJ’s previous 2011 Opinion.”

Just as PA argued, NJ says upholding the 2018 opinion would cause irreparable harm to the state. Specifically for NJ, it would revoke significant wages, thousands of jobs, and millions of dollars of state revenue.

“The DOJ’s reinterpretation of the Wire Act should be rejected not only because its statutory arguments are flawed, but also because its change of position ignores the harms that would result from reasonable actions taken by the States in reliance on DOJ’s 2011 Opinion.”

Other briefs discredit 2018 DOJ opinion

In their brief, Michigan et al. also lay out the harm that would be caused to various states’ public services if the 2018 opinion were upheld. The brief also pokes holes in the foundation of the OLC opinion. Additionally, Michigan’s brief urges the court to resolve the issue hanging over state lotteries.

“…For multiple reasons, Plaintiffs (and their amici) will continue to face hardship if judicial consideration is delayed.”

One such hardship Michigan mentions is the lingering threat of criminal prosecution, which stems from the 2019 DOJ memorandum that followed the 2018 OLC opinion.

Three other briefs came from organizations related to state gaming interests. They include: iDEA (iDevelopment and Economic Association), International Game Technology, and Association of Gaming Equipment Manufacturers.

The briefs from these three groups further discredit the DOJ’s legal grounds to overturn the 2011 DOJ opinion, or to uphold or enforce the 2018 OLC opinion. They further emphasize vast investment based on the 2011 opinion, and harm that would come from overturning it.

They also brought up the fact that the federal government has historically deferred to states in matters of gaming law. Enforcing the 2018 opinion by deeming state-sanctioned iGaming and iLottery operations illegal, and subject to criminal prosecution, would go against precedent in the US.

We at PlayPennsylvania will continue to bring you the latest in the Wire Act case as the appeal process unfolds in the coming months.

Valerie Cross Avatar
Written by
Valerie Cross

Valerie Cross is the managing editor of PlayPennsylvania. Valerie taught English as a Second Language before transitioning full-time to poker media. She has a B.A. from Furman University and MA and PhD degrees in language education from Indiana University. A former associate editor at PokerNews, Valerie currently resides in Northern California.

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