HomePublicationsNewsletter ArchiveVolume 26Issue 25First Circuit Hears Oral Arguments in Wire Act Litigation While DOJ Extends Prosecution Forbearance Period

The First Circuit Court of Appeals heard oral arguments in the Wire Act litigation dispute on Thursday, June 18, 2020.  The case involves a 2018 Opinion from the Department of Justice (“DOJ”) indicating that the Wire Act’s prohibitions extend to all forms of wagering and are not simply applicable to sports wagering.  In issuing this Opinion, the DOJ expressly rescinded a prior 2011 opinion which had limited the application of the Wire Act to only sports wagering.   The 3-judge panel hearing the case consisted of Judge Torruella, Judge Lynch, and Judge Kayatta.  Both the DOJ and the New Hampshire Lottery Commission were allocated 16-minute arguments to the panel. 

The DOJ opened the arguments.  It argued that the 2018 Opinion did not open and the DOJ currently does not have any position as to whether the Opinion applies to State Lotteries and therefore there is no credible threat of prosecution and the challenge is not ripe for determination.  The DOJ also argued that the Opinion was not a final agency opinion and therefore judicial review is not appropriate.  Judge Torruella began the questioning by asking whether the DOJ’s position was that there is no possibility of prosecution at any time in the future?  The DOJ indicated that in the future the DOJ may determine that the conduct may be illegal, but it has not done so and there is no credible threat of prosecution right now, which is the determinative question.  The judge asked whether the Opinion reflected a change in interpretation and when that was confirmed by the DOJ, he asked why that wouldn’t lead to judicial review?  Judge Lynch next questioned the DOJ, wanting to know whether the issue was ripe because the guidance from the DOJ indicating they would not prosecute state lotteries only occurred after New Hampshire brought the lawsuit?  While the DOJ argued that the case was still not ripe because the DOJ had not taken any public position about prosecution of state lotteries, Judge Lynch pushed whether the DOJ’s position was because it was sufficiently vague under the Opinion there was no threat of prosecution?  Judge Lynch noted that there had been considerable reliance upon the previous 2011 Opinion resulting in spending hundreds of millions of dollars in investment that was put in jeopardy due to the 2018 Opinion.  Judge Kayatta followed with additional questions, noting that part of the reason for the 2018 Opinion was to precipitate judicial review of the interpretation and that it did not distinguish between state lotteries and other operators.  He also questioned whether the fact that the DOJ can change its opinion about the potential illegality of the state lotteries at any time and the state would only get a 90-day forbearance period from that time make this a ripe issue?  The DOJ indicated that while true, that still doesn’t create a credible threat of prosecution.

The New Hampshire lottery presented its case next.  It argued that the lotteries generate millions of dollars for public uses and the 2018 Opinion puts these revenue streams at risk and reverses the 2011 Opinion and restores a pre-2011 DOJ opinion that the Wire Act prohibits state lotteries from using interstate transmission and criminalizes the current online lottery operations.  Judge Torruella asked if New Hampshire understood the DOJ position to provide an indefinite moratorium?  New Hampshire responded that no, it was an act of prosecutorial discretion but at any time the DOJ could reverse, and the state would only have 90 days to cease.  Judge Lynch noted that the relief requested was not limited to New Hampshire and requested a judicial interpretation that would void the 2018 Opinion as to not just state lotteries but all online operators.  He asked whether that request was a cause for concern?  New Hampshire responded that it is not a concern, because the issue is not related only to state lotteries but the broader question of whether the Wire Act is limited solely to sports betting.  Judge Lynch asked if a state changed its lottery operations and moved into sports wagering, would state lotteries still be exempt?  New Hampshire indicated that the 10thamendment would still prevent the DOJ from prohibiting the state from offering this form of wagering.  Judge Kayatta asked about the legislative history specifically regarding comments and asked whether language from previous drafting and punctuation would have made the issue clearer if the draft language had not been deleted?  New Hampshire conceded that it would do so, but even without the deletions, the Wire Act as drafted accomplishes the goal of preventing criminal enterprise from engaging in illegal sports betting and does not need to be read more broadly.   

A decision is expected from the appellate panel later this summer or in the fall.

In a related note, prior to the oral arguments, on June 11, 2020 the Deputy Attorney General issued a memorandum to all U.S. Attorneys extending the grace period on the implementation and prosecution of cases pursuant to the 2018 Opinion.  The memo can be found here in its entirety.  The memo directed the U.S. Attorneys not to apply the Wire Act to any non-sports related betting or wagering until December 1, 2020.  It also directed that any Wire Act charges brought by U.S. Attorneys must first be approved by the DOJ’s Criminal Division Organized Crime and Gang Section.  The extension is the fourth extension ordered by the DOJ relating to the new 2018 Wire Act Opinion.

 

 

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