The DOJ’s 2011 Formal Opinion And Interpretation Of The Federal Wire Act Of 1961

The Criminal Division of the US Department of Justice along with the DOJ’s Office of Legal Counsel (OLC) released an unexpected memo written by Assistant Attorney General from the OLC Virginia A. Seitz on December 23rd, 2011. This memorandum contained the U.S. Justice Department’s formal opinion and interpretation of the Federal Wire Act, a US Federal gambling law, in relation to online gambling. The release of this memo changed the application of the 1961 Federal Wire Act and landscape of the U.S. gaming market. Which is why it is important to keep up with every country’s laws on gambling to ensure lawful participation in gambling-related activities.

What Did the DOJ’s 2011 Memo State?

The US DOJ under the Obama administration revealed their new position on the Wire Act which only limits the Act’s prohibition to domestic online sports wagering and betting. This stance from the DOJ greatly contrasts earlier statements and assertions made by the DOJ under the Bush administration which defined the Federal Wire Act’s prohibition to include all forms of online gambling and specifically targeted internet poker sites whether they were domestic or foreign. These previously general statements were made in 2001 by the DOJ which were reversed 10 years later.

What Did the DOJ’s 2011 Memo Change?

Due to the memo’s clarification by the Justice Department’s Office of Legal Counsel, whose responsibility is to advise the most high-level individuals in the U.S. government including the U.S. Attorney General, the President, and his administration, it was formally concluded the Federal Wire Act only maintained limited governance over domestic online gambling and its prohibition could only be specifically applied to US-based online sportsbook operations. Therefore, the DOJ’s clarification exemplified US-based online casinos and online poker sites from remaining outlawed by the Wire Act. You can view the original memo here.

The Federal Wire Act which was drafted in the 1960’s long before the implication of a consumer side application of the internet occurred. Therefore, it was needed for the Department of Justice to clarify the out of date language and properly define the Act’s application in a more modern world capable of delivering online services. The DOJ’s memo rectified previous conceptions about the Act to now only limit its prohibitive application to US-based sports betting operations and does not extend its jurisdiction to the U.S. hosted online casinos, poker, bingo, and lottery nor offshore online gambling businesses and sites. The DOJ’s clarification only federally illegal owning or running an online sportsbook in the U.S.A., as well as, a US-based brick and mortar bookmaker.

Why Was the DOJ’s Wire Act Clarification Memo Necessary?

The Federal Wire Act originally targeted illegal sportsbook operations run by mobsters and local bookies through telegraphic and telephonic communication to put an end to racketeering and number-fixing. At the time the law was written and enacted, lawmakers were aware of its limitations. However, as years passed, and new technology emerged, lawmakers began arguing over the Act’s vague language and its application to the internet. Many debated over the reach of the Federal Wire Act and the states began petitioning the DOJ for a review of the law considering the newly available market for online lottery sales. Illinois and New York were interested in offering online lottery ticket sales but were afraid it would violate the Wire Act. This finally caused the DOJ to respond to their concerns and settle the state online lottery issue once and for all in an earlier DOJ Memo released on September 20th, 2011.

Their decision which then led to the release of the DOJ’s formal opinion on the Federal Wire Act allowed for regulated domestic non-sports related online gambling and created a brighter future for states and the USA gaming market. US states were thus given the ability to control their own online gambling laws. Not only that, the DOJ’s memorandum allowed for licensed offshore online casinos, sportsbooks, and poker sites to better access and serve the US online gambling market.

What Immediate Effect Occurred Upon the Release of the DOJ Legal Opinion On The Wire Act?

The DOJ offered much-needed clarification on the Wire Act as to put an end to legal debates over its application to non-sporting activities. However, the most significant and immediate impact the DOJ’s memo was that it provided legislators at both the state and federal level to move forward with the regulation of domestic online gambling outside of sports-related betting. Paired with new legal confidence, states were able to offer their residents access to state-based and regulated online casino, poker, and chance game platforms. Due to a number of states licensing and regulating their own online gambling platforms, Congress may have to step in to set up a federal framework for online gaming platform standards and guidelines or else have players face choppy and inconsistent terms and conditions.

The DOJ’s 2011 memorandum reversed their previous stance in 2001 which outlawed all domestic and international online gambling. The DOJ’s previous application of the Federal Wire Act allowed the DOJ to prosecute offshore online gambling businesses, particularly online poker sites which catered to U.S. players. Upon releasing the memo, the DOJ’s was no longer permitted to criminalize non-sports related gambling whether it was facilitated by wire or web, compel individual states to prohibit the legal sale of lottery tickets online, nor prohibit states from legalizing and regulating online gambling within their borders.

However, the DOJ confirmed this decision does outlaw the owning or operating of a U.S.A. based online gambling business; Particularly, if said business is unlicensed and located within a state that has made state-based gambling online illegal, whether the need for formal licensing and registry is present or not. Outside of the United States, the Federal Wire Act has no jurisdiction over the operation of offshore gambling sites and sports books and cannot prosecute the operator or player unless the online site is unlicensed and unregulated

What States Began Offering US-based Online Gambling After the Release of the Memo?

A number of states began writing legislation toward legalizing their own form of online gambling, several states jumped on board with permitting online lottery ticket sales and created suitable platforms to host purchasing. Illinois became the first state to offer online lottery tickets the following year in March. Other states followed suit including Georgia, Michigan, Kentucky, Pennsylvania, New Hampshire, and at one-point Minnesota. In 2017, more states began crafting bills to legalize and offer online lotteries such as Hawaii, New Jersey, Connecticut, and Massachusetts.

Several US states, including New Jersey, Delaware, and Nevada all passed bills which allow them to license and regulate their own iGaming platforms. Nevada, New Jersey, and Delaware are the only states that have launched online poker sites and/or online casinos having launched their online gaming initiatives not long after the opinion was released by the DOJ.

In 2017, several states proposed legalized iGaming bills to serve their state markets as well, these states were Michigan, West Virginia, New York, and Massachusetts. Recently, Delaware and New Jersey agreed to share their poker player pools through an interstate compact and soon after Nevada agreed to join the two states in the agreement.

A Movement to End Online Gaming

Many anti-gambling legislators were unhappy with the DOJ’s formal opinion on the Federal Wire Act’s application to online gambling. After a number of anti-online gambling bills failed to gain momentum, legislators were able to create a bill that gained some traction. This bill is known as RAWA, short for the Restoration of America’s Wire Act which acts as a resistance to states expanding their online gaming offers. RAWA would reinforce previous assertions of the Wire Act by formally including all forms of online gambling under its prohibitive ban. RAWA was introduced by Senator Lindsey Graham of South Carolina and Utah Representative Jason Chaffetz and was supported by the likes of brick and mortar casino billionaire, Sheldon Adelson.

The Federal Wire Act was considered controversial entering the new era of technology due to its generalized interpretation which allowed the Act to expand its application to a variety of internet games while during its creation the thought of online gambling had yet to be conceived. It is no coincidence that during the time before the DOJ’s formal clarification that the U.S.A manipulated the existing law to fit its own self-interests – particularly in shutting down online gambling sites whether they were domestic or foreign.

Anti-online gaming legislators wanted to put an end to the online gaming market in the USA and were able to stunt its growth for many years between 2001 and 2011. The government used this period to fully utilize the vague language in the Federal Wire Act to prosecute offshore and domestic operators and obtain millions in fines. They did this because they knew crafting a new legislation which contained language that directly prohibited online gambling would hardly have the chance to pass.

FAQ’s

Is the Internet an Extension of Wire Communications?

Yes, since the internet does utilize similar technology by sending or receiving data through wired networks that transmit data electronically. The worldwide web can be considered a wired communication network and thus become covered under the Federal Wire Act. While at the time of the Federal Wire Act’s creation, the law was intended to apply to telegraphs and telephones, however, with the use of fiber-optic cables and internet service providers the Wire Act now governs domestic online sportsbooks as well.

Who Benefits from a Wide-Scope Viewpoint Versus a Focused One?

Anti-gambling legislators benefit the most from the use of the Federal Wire Act’s prohibition on a wide scope rather than a focused one. Their intention to limit the access to online gambling, in general, was highlighted during the time of the Bush administration when they used the DOJ to harass numerous domestic and international gaming sites who served U.S players. Limiting the Federal Wire Act to a focused view has allowed for states to grow their own regulated and domestic online gambling offers and permit licensed offshore online sportsbooks to cater to US bettors much to the dismay of anti-gambling lawmakers.

Is Online Betting Legal In The US?

Currently owning or operating a U.S. based sports book is illegal. However, United States players are allowed to bet on offshore online sports betting sites so long as they are legally licensed by a legitimate agency which is recognized by the international gambling regulatory community. At the moment, there is only one U.S. state that does not permit their residents from accessing offshore online gambling, this state is Washington.