On Wednesday of this week, the First Circuit Court of Appeals affirmed a declaratory ruling entered by the U.S. District Court of New Hampshire declaring that the federal Wire Act is only applicable to wagering on “any sporting event or contest” and that it does not have broader application to other forms of online gaming.   As previously reported in Volume 26, Issue 25 of The Michigan Gaming Newsletter, the New Hampshire Lottery Commission ("NHLC") and its vendor, Michigan-based NeoPollard Interactive, filed suit in federal court in New Hampshire seeking to invalidate a 2018 Opinion from the Department of Justice ("DOJ") which reversed prior DOJ opinions that had been relied upon by the lottery industry and the online gaming industry.  The 2018 DOJ Opinion took the position that the Wire Act's prohibitions extend to all forms of wagering, not just sporting events and contests.  The lower court entered a declaratory ruling stating that the Wire Act only applies to sporting events or contest transmissions over the wires, and the First Circuit affirmed this decision.   

The State of Michigan Lottery and several other states, lottery commissions, and trade associations filed amicus briefs in support of NHLC and NeoPollard. The much anticipated opinion comes after a three-judge panel heard oral arguments in June 2020, and the DOJ's fourth extension of its grace period on implementing and prosecuting cases under the 2018 Opinion. 

In its opinion written by Judge Kayatta, the First Circuit first concluded that the case presents a justiciable case or controversy, as required under the United States Constitution for a federal court to issue an opinion. The DOJ has sought to avoid a court ruling by issuing a Memorandum calling into question the application of the opinion to state lotteries.  

The Court then turned to the main issue involved, the language of two key clauses of the Wire Act. The DOJ’s 2018 Opinion and position in the litigation was that the second clause of the Wire Act prohibiting "[t]he 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"  should be broadly construed without reference back to the “sporting events or contest” limitation contained in the first clause of the Wire Act.  

The Court looked to the plain meaning of the statute's text, while looking at the whole of the statute, and not "isolated sentences." The Court concluded that Congress used shorthand in drafting the Wire Act, carrying over a phrase from the first clause to the second clause. The Court also applied a "natural reading" approach in attempt to "harmonize" the provisions of the Wire Act and "avoid the oddities" that other interpretations would create. Ultimately, the First Circuit found that the DOJ's reading of the statute created "unharmonious oddities". Legislative history also guided the Court's conclusions, as it indicated that Congress "train[ed] its efforts solely on sports gambling." The Court acknowledged the ambiguity of the Wire Act's language, but concluded that the DOJ's reading of the Wire Act would "create an odd and unharmonious piece of criminal legislation." 

In its conclusion, the First Circuit affirmed the District Court for the District of New Hampshire's grant of the Plaintiffs' motions for summary judgment  and declaratory ruling and its denial of the DOJ's motion to dismiss and motion for summary judgment, but vacated a portion of the district court’s decision relating to the federal Administrative Procedure Act, as it found it unnecessary to address that issue given its affirmation of the declaratory ruling. 

As indicated above, the Michigan Attorney General’s office played a significant leadership role working with other states in arguing in support of the plaintiffs in the case. Assistant Attorneys General Melinda Leonard, Mark Sands, and Donald McGehee worked on the matter on behalf of the state. Michigan Attorney General Dana Nessel released the following statement today related to the Court’s decision:

“This is a major victory for state lotteries across the nation that raise millions of dollars in revenue which directly supports our schools, emergency personnel and other fundamental services for residents,” Nessel said. “Preserving this critical revenue stream is incumbent on me as Attorney General of Michigan, and I am grateful for the bipartisan effort to achieve that. Ensuring our schools and first responders have funding to perform their duties should not be an issue divided by politics and party affiliation.” 


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