Online gambling industry can exhale

The online gambling industry appears to be back on the good side of the Interstate Wire Act of 1961 (Wire Act). On Thursday, the US District Court for the District of Rhode Island ruled in favor of International Game Technology (IGT) in the gaming company’s lawsuit against US Attorney General Merrick Garland and the US Department of Justice.

a sword of Damocles hung over IGT, its business potentially at risk

IGT filed its suit against the DOJ in November 2021, claiming that an opinion on the Wire Act issued by the Justice Department’s Office of Legal Counsel (OLC) in 2018 resulted in the company having to commit resources (read: money) on potential lawsuits, should the government pursue legal action. Effectively a sword of Damocles hung over IGT, its business potentially at risk because of the 2018 Wire Act interpretation.

In February 2022, the DOJ filed a motion to dismiss, claiming that IGT “didn’t provide sufficient evidence to confirm its claim that there’s a threat of prosecution” and that the Wire Act does not apply to land-based lottery and casino services, which comprise much of IGT’s business.

IGT wanted a definitive ruling and it got that this week.

Politics, money influenced 2018 opinion

The Wire Act was originally written to prevent interstate or foreign sports betting over wire communications as a way to curtail organized crime. The controversy surrounding the Wire Act began around the time of the online poker boom, in the decade of the aughts. Some lawmakers – generally ones who were anti-online gambling – claimed that the Wire Act applied to all online gambling, not just sports betting (by this point, the internet was considered “wire communications,” even though it clearly didn’t exist in 1961).

opened the door for state-by-state legalization of online poker and casino gambling

In 2011, the OLC, then under the Obama Administration, issued an opinion in response to two state lotteries that wanted to sell lottery tickets online. The opinion said that the Wire Act only applies to sports betting, which opened the door for state-by-state legalization of online poker and casino gambling, though not many states have done so.

Then, in 2018, the OLC, now under the Trump Administration, issued a surprise, revised opinion, reversing the 2011 opinion, this time saying the Wire Act applied to all online gambling. The Wall Street Journal later reported that the DOJ was urged to revisit the Wire Act by Las Vegas Sands CEO Sheldon Adelson, the country’s most powerful opponent of online gambling and a billionaire Republican political donor.

New Hampshire Lottery led the charge

Though nothing really came of the 2018 opinion, the uncertainty it presented was difficult for the gaming industry. In February 2019, the New Hampshire Lottery Commission (NHLC) filed a lawsuit against the DOJ and then-Attorney General Bill Barr, urging the US District Court for the District of New Hampshire to toss the OLC opinion, as it could damage the Commission to the tune of millions of dollars per year.

In June of that year, US District Court Judge Paul Barbadoro ruled that the Wire Act only applies to sports betting, as the 2011 OLC opinion read. The DOJ appealed, but Judge Barbadoro’s decision was upheld.

That leads us to IGT’s lawsuit, filed this past November. Neither the Biden Administration nor the current DOJ never appeared to have an interest in going after any gambling companies, but IGT needed to know for sure that its business was in the clear. Now it knows it is and the ruling appears to kill any Wire Act uncertainty once and for all.