Major Win for Online Gambling in First Circuit

By Joseph Fawbush, Esq. on January 21, 2021 | Last updated on December 13, 2021

Feeling lucky? Online betting operators probably are after a First Circuit opinion rejected the Justice Department's interpretation that online state lotteries violate federal law.

In 2018, the Department of Justice issued an opinion concluding that the Wire Act prohibited all forms of online betting or wagering, including state lotteries. Anyone wanting to take their long-shot odds for millions had to go to a convenience store. Shortly after the opinion letter, the New Hampshire Lottery Commission challenged this interpretation. Not a surprising development since state lotteries have become a huge source of revenue for states. The 48 states that run a lottery generate approximately $80 billion in combined revenue per year. The New Hampshire Gaming Commission anticipates $6 to $8 million for its online lottery sales alone.

Wire Act Specifically Refers to Sports Betting

In a unanimous opinion, the First Circuit panel not only held that people could play state lotteries online but that the Wire Act did not prohibit any forms of online wagering outside of sports betting.

Section 1084(a) of the Wire Act prohibits "us[ing] a wire communication facility for the transmission in interstate or foreign commerce of . . . information assisting in the placing of bets or wagers on any sporting event or contest." The question was whether the Wire Act's prohibition was limited only to online betting on sports events. The First Circuit panel found that "the government's impractical interpretation of section 1084 must give way to the plaintiffs' more natural reading." While §1084 is "not entirely clear on the matter at hand," the DOJ's interpretation would "create an odd and unharmonious piece of criminal legislation." Therefore, the panel held, the Wire Act only prohibits online operators from running interstate online betting operations on sports. The First Circuit's decision aligns with a recent Fifth Circuit opinion on the matter. The U.S. Supreme Court has not weighed in.

Several States Allow All Forms of Online Betting

The First Circuit's decision is not limited to state lotteries, which is significant. A minority of states offer online betting with multiple operators. The New Hampshire legislature is one of a few that restricts online gambling to a single operator. The First Circuit could have ruled narrowly to apply their holding to only state lotteries. The panel, however, declined to do so.

Impact on Sports Betting

If the Wire Act prohibits online sports betting, why have several states have passed legislation specifically allowing for it? The answer is that the Wire Act only prohibits sports betting across state lines. Although the Professional and Amateur Sports Protection Act did outlaw sports betting, the U.S. Supreme Court overturned PASPA in 2018. And while the Trump Administration's position was clear (Trump, of course, owned several casinos), the DOJ under the Biden Administration is not likely to appeal.

The simple question of whether online gambling is legal still results in a complex answer. But, now that two federal appellate courts have limited the reach of the Wire Act, it appears more than ever that it is up to individual states to determine the legality of online betting. And buying that state lottery or Powerball ticket online may be that much easier moving forward.

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