The First Circuit’s decision is a win for the New Hampshire Lottery, its online lottery vendors and other state lotteries throughout the United States.

In a January 20, 2021, decision, the United States Court of Appeals for the First Circuit held that “the Wire Act’s prohibitions are limited to bets or wagers on sporting events or contests.” The case was in front of the Court because of an appeal by acting Attorney General Jeffrey Rosen, the U.S. Department of Justice (DOJ) and the United States (collectively, the “Government”) who challenged a similarly constrictive ruling by a district court that the Wire Act is limited to sports gambling. The district court had ruled in a consolidated case that was originally filed by the New Hampshire Lottery and one of its vendors. The New Hampshire Lottery and its vendor had argued that a 2018 DOJ opinion[1] on the Wire Act could be interpreted to apply to state lotteries and therefore result in restrictions on operations that would cause a loss of millions of dollars a year by each of the plaintiffs. Further, additional states appeared before the First Circuit as amici curiae to assert the potential impact of the 2018 DOJ opinion, including New Jersey and Pennsylvania, with the latter estimating a loss of $1 billion in revenue.

The Wire Act

In its decision on the appeal, the First Circuit completed a granular analysis of the grammar and syntax of Section 1084(a) of the Wire Act to determine whether “the phrase ‘on any sporting event or contest’ (the ‘sports-gambling qualifier’) qualifies the term ‘bets or wagers’ as used throughout section 1084(a).” In relevant part, Section 1084(a) 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 as 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.

18 U.S.C. §1084(a).

Further, two select clauses of the above section were excised for examination in the appeal:

Clause One

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 (emphasis added).

Clause Two

The transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers.

Government’s Argument and First Circuit’s Analysis

In its appeal, the Government argued that the phrase “on any sporting event or contest” at the end of Clause One only qualifies the second use of “bets or wagers” in that clause. Further, the Government argued that the sports-gambling qualifier does not apply to Clause Two because that clause contains no reference to sporting events or contests and is “grammatically independent of the first clause.”

In its analysis, the First Circuit was clear that the Government’s position was unsupported by Senate committee reports and Supreme Court case law and reasoned that a fundamental change in a statute’s scope is not typically accomplished with a subtle move. In the First Circuit’s eyes, the Government failed to illustrate its view of Congress’ legislative intent and explained that any backing of the Government’s position would create an “odd and unharmonious piece of criminal legislation” that Congress likely did not intend. Following its analysis, the First Circuit affirmed that the Wire Act only applies to interstate communications relating to sports betting, and not an expanded scope as the Government argued.

A Victory for State Lotteries and iGaming

The First Circuit’s decision is a win for the New Hampshire Lottery, its online lottery vendors and other state lotteries throughout the United States. In determining whether to opine on the issue, the First Circuit stated:

New Hampshire and its vendors should not have to operate under a dangling sword of indictment while the DOJ purports to deliberate without end the purely legal question it had apparently already answered and concerning which it offers no reason to expect an answer favorable to the plaintiffs.

New Hampshire and its vendors no longer have to concern themselves with potential prosecution, which makes this a clear win for not only New Hampshire, but all state lotteries―and welcomed news for iGaming platforms. However, as the sports betting industry grows nationwide, sports betting operators must still adhere to the Wire Act’s restrictions.

Looking Toward the Future

While campaigning, President Joe Biden stated that he supported the New Hampshire Lottery’s position in the case. Accordingly, President Biden’s nominees to the DOJ will not likely appeal the First Circuit’s decision. This potential position by the DOJ would affirm that the Wire Act only applies to sports betting, and could potentially open up a path for interstate gambling including iGaming.

For More Information

If you have any questions about this Alert, please contact Frank A. DiGiacomo, Joseph F. Caputi, Steven J. Brody, any of the attorneys in our Gaming Industry Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.