DOJ Clarifies that Online Communications Regarding Bets Violate the Wiretap Act Only If They relate to a “sporting event or contest,”

December 26th, 2011

Here is the opinion from DOJ:

Having considered the Criminal Division’s views, as well as letters from New York and Illinois to the Criminal Division that were attached to your opinion request,1 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. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not, in our view, prohibit them. Given this conclusion, we have not found it necessary to address the Wire Act’s interaction with UIGEA , (Unlawful Internet Gambling Enforcement Act ) or to analyze UIGEA in any other respect.

One of my lingering concerns about offering prizes on FantasySCOTUS is running afoul of anti-gambling laws. Hell, even the first WSJ Law BLog post about FantsySCOTUS compared it to Vegas! So is betting on the outcomes of Supreme Court cases a “contest”?

“Contest” seems to be very sports-oriented:

More broadly, the Wire Act’s legislative history reveals that Congress’s overriding goal in the Act was to stop the use of wire communications for sports gambling in particular. Congress was principally focused on off-track betting on horse races, but also expressed concern about other sports-related events or contests, such as baseball, basketball, football, and boxing. The House Judiciary Committee Report, for example, explains . . .

The Attorney General testified, for instance, that recent disclosures revealed that gamblers had bribed college basketball players to shave points on games, and that up-to-the- minute information regarding “the latest ‘line’ on the contest,” “late injuries to key players,”
and the like was critical to bookmakers. Id.; accord Senate Hearings at 6 (statement of Robert F. Kennedy, Att’y Gen.);  . . .

As noted above, the Justice Department played a key role in drafting S. 1656, and it understood the bill to reach only the use of wire communications for sports-related wagering and communications. The colloquy between Mr. Miller and Senator Kefauver, chairman of a committee that held hearings to investigate organized crime and gambling in the 1950s, underscores that Congress was well aware of that understanding:

SENATOR KEFAUVER. The bill [S. 1656] on page 2 seems to be limited to sporting events or contests. Why do you not apply the bill to any kind of gambling activities, numbers rackets, and so forth?

MR. MILLER. Primarily for this reason, Senator: The type of gambling that a telephone is indispensable to is wagers on a sporting event or contest. Now, as a practical matter, your numbers game does not require the utilization of communications facilities.


SENATOR KEFAUVER. I can see that telephones would be used in sporting contests, and it is used quite substantially in the numbers games, too.

How about laying off bets by the use of telephones and laying off bets in bigtime gambling? Does that not happen sometimes?

MR. MILLER. We can see that this statute will cover it. Oh, you mean gambling on other than a sporting event or contest?


MR. MILLER. This bill, of course, would not cover that because it is limited to sporting events or contests.

Senate Hearings at 277-78.

What would Congress have thought about FantasySCOTUS? I need to ask Justice Breyer. He’ll know!

The answer seems to be here!

1 We also considered the possibility that, in the Wire Act’s reference to “any sporting event or contest,” 18 U.S.C. § 1084(a), the word “sporting” modifies only “event” and not “contest,” such that the provision would bar the wire transmission of “wagers on any sporting event or [any] contest.” This interpretation would give independent meaning to “event” and “contest,” but it would also create redundancy of its own. If Congress had intended to cover any contest, it is unclear why it would have needed to mention sporting events separately. Moreover, as discussed above, the legislative history of the Wire Act makes clear that Congress was focused on preventing the use of wire communications for sports gambling in particular. And, legislative proposals from the 1950s in which the phrase “any sporting event or contest” originated further confirm that Congress intended to reach only “sporting contests.” A key debate at that time concerned whether to regulate “any sporting event or contest” or “any horse or dog racing event or contest.” See, e.g., S. Rep. No. 81-1752, at 3, 22, 28 (1950) (explaining committee amendment to bill narrowing the definition of “gambling information” from covering “any sporting event or contest” to “any horse or dog racing event or contest”); compare S. 3358, 81st Cong. § 2(b) (1950) (as introduced), with S. 3358, 81st Cong. § 2(b) (1950) (as reported by the Interstate and Foreign Commerce Committee). If Congress had intended the Wire Act’s predecessors to reach any “contest,” however, the debate over which adjectival phrase to apply to “event” would have been meaningless.

So it only reaches *sporting contests.* That’s not what FantasySCOTUS is.

Now i still need to worry about the Unlawful Internet Gambling Enforcement Act, which this memo does not address.

Given that the Wire Act does not reach interstate transmissions of wire communications that do not relate to a “sporting event or contest,” and that the state-run lotteries proposed by New York and Illinois do not involve sporting events or contests, we conclude that the Wire Act does not prohibit the lotteries described in these proposals. In light of that conclusion, we need not consider how to reconcile the Wire Act with UIGEA, because the Wire Act does not apply in this situation. Accordingly, we express no view about the proper interpretation or scope of UIGEA.

The Times has this to say:

Although the opinion dealt specifically with lottery tickets, it opened the door for states to allow Internet poker and other forms of online betting that do not involve sports. Many states are interested in online gambling as a way to raise tax revenue.

New York has offered an online subscription service since 2005 that allows state residents to enter a string of Lotto or Mega Millions drawings. . . .

The new policy merely reverses the Justice Department’s longstanding position that all forms of online gambling are illegal in the United States. It does not necessarily pave the way for national rules governing online gambling.

But experts in gambling law said Saturday that the new policy does imply that states can band together to allow gambling across state borders. The exception would be online sports betting, which is explicitly prohibited under federal law.

Update: This 1/18 article from the Times and this post seem to support my interpretation.

Most states are looking to legalize online gambling only within their own borders — so that both the gamblers and the computers that process their bets would be in the state. But Mr. Danielson said he believed that the recent Justice Department opinion — which was issued this fall in response to questions by New York and Illinois about whether the Wire Act of 1961 prevented them from selling lottery tickets online — could pave the way for Iowa to join other states in a bigger online poker game.

Mr. Christie vetoed the bill in part over concerns that it would undermine his administration’s efforts to prop up Atlantic City, whose gambling revenues has suffered as neighboring states have opened casinos. In his veto message, he noted that “nothing contained in the legislation would prohibit commercial establishments outside Atlantic City such as nightclubs, bars, restaurants, cafes and amusement parks from offering Internet gambling opportunities.”

But this month Mr. Christie said that “given the Justice Department’s go-ahead,” the state should move forward with its plans. “I think New Jersey should be in that business, I think we should be an epicenter for that business, but I want to do it right,” he said.

Analysts expect states to act quickly. I. Nelson Rose, a professor at Whittier Law School in California who writes a blog called Gambling and the Law, predicted that states would move faster to approve Internet gambling than they did to establish lotteries, which are now run in 43 states.