Judge Upends Expanded U.S. Prohibition on Online Gambling

Jun 03

USA - U.S. District Judge Paul Barbadoro ruled on Monday that the recent move of the U.S. Justice Department to prohibit interstate online gambling under a 1961 law only applies to sports betting.

Judge Barbadoro’s ruling brought relief to interstate lottery operators as well as other internet-based gambling sites who were concerned that the Justice Department’s interpretation of the law would jeopardise all online wagering activities that crosses state lines.

The controversy surrounding the Wire Act of 1961 began when the States of New York and Illinois asked the Obama administration to look into the possibility that the online sale of lottery tickets could violate the said law. In 2011, the Justice Department ruled that online gambling sites would not be in violation of the law if their wagering activities do not involve sporting events. It therefore came as a surprise when, in a November 2018 ruling that was disclosed in January 2019, the Department changed its mind and interpreted the law as prohibiting all forms of gambling that crosses state lines.

Following this disclosure, the New Hampshire Lottery Commission filed a suit in February to have the broader interpretation of the law overturned. They argued that this expanded interpretation creates uncertainty about whether they should cease their operations, opens their employees up to prosecution, and may cost the state over $90 million a year. Michigan, New Jersey, and Pennsylvania backed New Hampshire by filing friend-of-the-court briefs.

The conflicting interpretations from the Justice Department resulted from the ambiguous grammar in a key passage in the Wire Act. In making his ruling, Judge Barbadoro said he had to look beyond the grammar and look closely into the context of the law. He found a separate law that was passed at the same time as the Wire Act and averred that the simultaneous passing of these two laws showed the intention of Congress.

“That these two gambling statutes were passed the same day sends a strong contextual signal concerning the Wire Act’s scope. The Paraphernalia Act demonstrates that when Congress intended to target non-sports gambling it used clear and specific language to accomplish its goal. In other words, when Congress wished to achieve a specific result, it knew how to say so,” Barbadoro said.

Matthew D. McGill, a representative of NeoPollard Interactive, which operates online lottery in New Hampshire, is confident that the ruling is not limited to their state. “Because the court set aside the Justice Department’s incorrect re-interpretation of the Wire Act, this ruling has nationwide impact,” McGill said. “Throughout the country, state lotteries and others in the gaming industry once again can rely on the Justice Department’s 2011 opinion that the Wire Act is limited to sports betting.”

The Coalition to Stop Internet Gambling, however, disagrees. They believe that the ruling is limited, and that it will likely be appealed. In a statement, the group says: “We are confident that other jurisdictions will see this issue very differently and our resolve to protect at-risk populations has only been strengthened by today’s decision.”

For New Hampshire Governor Chris Sununu, “Today’s ruling is a historic victory for the State of New Hampshire and we are proud to have led this effort. New Hampshire stood up, took action, and won.”