The Interstate Wire Act of 1961, also referred to as the Federal Wire Act, is a federal law that prohibits certain types of gambling operations in the US. Now that the Professional and Amateur Sports Protection Act of 1992 (PASPA) is no longer in place, the Wire Act is the next challenge to the legality of sports betting in the US. Let’s take a closer look at the Wire Act and explore why it was introduced, the Department of Justice’s (DoJ) interpretation of the law and what it means for modern day sports betting in the US.
What is the Interstate Wire Act of 1961?
The Wire Act is a federal law that prohibits certain gambling businesses from operating in the US. The law specifically targeted individuals and groups that used wire communications (telephone and telegraph) to help facilitate illegal wagering across state lines.
The first line of federal law reads: “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 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.”
The legalese in this passage can be broken down into four different elements:
- Being engaged in the business of wagering or betting.
- Knowingly being engaged in the business of wagering or betting.
- The use of a wire communications facility.
- Transmitting (or sharing) betting or wagering information and helping other parties placed wagers on sporting events across state lines.
Why was the Wire Act passed?
The Wire Act was a product of the Kefauver Committee, a task force that was responsible for investigating organized crime in the early 1950s. According to the US Senate’s archive, the Kefauver Committee was a “Special Committee on Organized Crime in Interstate Commerce.”
The committee was headed up by Carey Estes Kefauver, a representative from Tennessee, between 1950 and 1951 and then Herbert O’Conor, a Senator from Maryland, in 1951. The Wire Act became part of the Kefauver Committee’s final report but was largely ignored for several years.
When Robert F Kennedy became the US Attorney General in 1961, he insisted that Congress implement laws that would prohibit interstate gambling. Eight proposed bills were sent to Congress that year. Among them was Senate Bill 1656, The Wire Act. The Attorney General’s brother, President John F Kennedy, signed The Wire Act into law on 13 September 1961.
In a 2014 paper published by the Center for Gaming Research at the University of Nevada, it was revealed that Robert F Kennedy intended to use the Wire Act as a means to crack down on the finances of organized crime operations across the nation.
The federal law gave the Department of Justice (DoJ) more power to combat illegal bookmaking operations that were run by organized crime groups. Under the law, if a criminal enterprise used telephones and other wired technology to place wagers, fund gambling accounts and collect debts, they could face action under the Wire Act.
The Wire Act and the rise of online gambling
In the mid-90s, illegal online gambling grew at an exponential rate in the US, with offshore gambling sites from international jurisdiction serving US residents. These offshore sites operated on the premise that they were legal in regulated in the countries they were based, therefore making them legal in the US. This was misleading, as these sites were not regulated or licensed to operate in the US, therefore making them illegal.
In order to clamp down on the spread of illegal offshore gambling sites, the Wire Act was used to target these illegal gambling sites. The Wire Act’s text that referred to “wire communications” was interpreted to apply to the internet and online gambling websites.
As a result of this, the Wire Act played a massive role in the prohibition of online poker, online sports betting and other forms of online gambling in the US. There have been several instances over the years where lawmakers in individual states have attempted to pass online gambling legislation but have failed due to the Wire Act. The Wire Act initially targeted illegal, interstate sports wagering operations but that changed in 2001 with a reinterpretation of the Wire Act.
The 2001 Wire Act opinion
In 2001, during George W Bush’s presidency, the DoJ revised its opinion on the federal anti-gambling law. Under this new opinion, the DoJ interpreted the Wire Act to apply to all forms of online gambling, not just sports betting and wagering.
The new Wire Act opinion was controversial, as the law only names one form of gambling, sports betting. Online casinos and online poker are not mentioned in the law and therefore not covered by the scope of the wire act.
This new opinion was met with scrutiny from stakeholders in the gambling industry, as well as lawyers, and even some state-level politicians who wished to expand their state’s gambling laws.
The 2011 Wire Act opinion
In 2011, while under the Obama Administration, the DoJ revised its opinion on the Federal Wire Act again. The 2011 opinion on the law clarified that the law only covers interstate sports betting, not all forms of online gambling.
This opinion was clarified in a memo responding to New York and Illinois after the states proposed the sale of online lottery tickets for their interstate lottery games. The DoJ memo stated: “Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not prohibit them.”
It had now been clearly established that the Wire Act only applied to sports wagering and no other forms of online gambling.
The 2018 Wire Act opinion
After the repeal of the Professional and Amateur Sports Protection Act (PASPA), the Trump Administration’s DoJ reversed its opinion on the Wire Act again. In a memo dated 2 November 2018, the DoJ said that the Wire Act does apply to all forms of online gambling, as well as sports betting. This also included online casinos, online lotteries and other forms of online gambling. This created a legal issue for all states with some form of online gambling, such as online casinos and sportsbooks, as well as state lotteries with interstate games.
On 15 January, Deputy Attorney General, Rod Rosenstein delayed the implementation of the new Wire Act opinion for 90 days, which would allow businesses that were in violation of the new opinion, “time to bring their operations into compliance with federal law.”
Even with the extension, gambling stakeholders, state lawmakers and legal analysts scrutinized the new opinion, with some states event threatening to sue the DoJ.
In February, the New Hampshire Lottery filled a lawsuit over the Wire Act opinion. In a press release, New Hampshire’s Governor said: “Today New Hampshire is taking action to protect public education in New Hampshire. The opinion issued by DOJ puts millions of dollars of funding at risk, and we have a responsibility to stand up for our students.” New Hampshire is one of the many states that allocates a portion of its lottery revenue to fund public education programs.
After the New Hampshire lawsuit was filed, the DoJ extended the implementation of the new Wire Act interpretation by another 60 days into June.
In the lead up to the legal proceedings between the DoJ and New Hampshire, Deputy Attorney General Rosentein released another memo which states that the new 2018 Wire Act opinion “did not address” lotteries.
The memo read: “The OLC opinion did not address whether the Wire Act applies to State lotteries and their vendors. The Department is now reviewing that question. Department of Justice attorneys should refrain from applying Section I 084(a) to State lotteries and their vendors, if they are operating as authorized by State law, until the Department concludes its review.”
This was seen as an attempt by the DoJ to have the New Hampshire Lottery case dismissed but it was unsuccessful.
Fast forward to the end of the legal proceedings and the federal judge on the case issued a 60-page ruling in favor of the New Hampshire Lottery. The ruling rejected the DoJ’s 2018 opinion that the Wire Act applies to all forms of online gambling.
In response to this, the DoJ issued yet another memo stating that it won’t enforce the Wire Act until 2020. The extended time frame suggests that the Department is likely to file an appeal against the court ruling
Shortly after this, Congress involved itself in the Wire Act debate. On 18 June, federal lawmakers came out in support of state-regulated online gambling interests after members of the Rules Committee filed an amendment to an appropriations bill. The amendment would block the funding needed to enforce the DoJ’s enforcement of the Interstate Wire Act.
Wire Act timeline
1961 – The Interstate Wire Act was signed into law.
1990s – The Wire Act was used to crack down on illegal offshore gambling sites
2001 – Under the Bush Administration, the DoJ interpreted the Wire Act to apply to all forms of online gambling
2011 – Under the Obama Administration, the DoJ reversed its opinion on the Wire Act, clarifying that it only applies to sports betting.
2018 – Under the Trump Administration, the DoJ once again reversed its Wire Act opinion. The DoJ now believes the scope of the Wire Act extends to all forms of online gambling.
2019 – On 15 January, the DoJ delayed the implementation of the new Wire Act opinion for 90 days.
On 4 February, the North American Association of State and Provincial Lotteries (NASPL), which represents all state lotteries, issued a statement detailing how dangerous the new Wire Act opinion is.
On 5 February, New Jersey and Pennsylvania submitted a joint letter to the DoJ on the Wire Act opinion. New Jersey also filed a Freedom of Information Act request to view records behind the decision to reverse its opinion on the law.
On 15 February, the New Hampshire Lottery filed a lawsuit against the DoJ over the Wire Act opinion.
On 1 March, the DoJ extended the implementation of the Wire Act by another 60 days.
On 11 March, New Jersey and Michigan joined the legal battle against the DoJ and its Wire Act interpretation. Both state’s filed Amicus briefs which stated that the DoJ was breaking the legal intent of the Wire Act. Michigan’s filing included 11 other lotteries which were:
- The District of Columbia
- Kentucky Lottery Corporation
- Virginia Lottery
- Tennessee Education Lottery Corporation
- Rhode Island Lottery
- North Carolina Education Lottery
- Delaware Lottery
- Idaho Lottery
- Mississippi Lottery
- Vermont Lottery
- Alaska Lottery
On 26 March, the DoJ filed a motion to dismiss the New Hampshire Lottery lawsuit but was unsuccessful.
On 8 April, the DoJ Deputy Attorney General released a memo stating that the new interpretation of the Wire Act doesn’t apply to state lotteries. This was another unsuccessful attempt to get the New Hampshire case dismissed.
On 14 April, the New Hampshire lawsuit made its way to federal court where a judge heard arguments from both the New Hampshire Lottery and the DoJ.
On 4 June, the federal Judge on the New Hampshire v DoJ case ruled in favor of the New Hampshire Lottery. The judge rejected the DoJ’s 2018 opinion on the Wire Act and stated that the law only applies to sports betting.
On 12 June, the DoJ published a new memo stating that it won’t enforce its new interpretation of the Wire Act until 2020.
On 18 June, Congress proposed an amendment to an appropriations bill that would block the DoJ’s funding to enforce its interpretation of the Wire Act.
This is a constantly developing situation. For more updates on the Wire Act as they happen, be sure to stick with Compare.bet.