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DOJ Does High “Wire Act” – Flip Flops on Legality of Online Gambling

The Department of Justice (DOJ) has issued an opinion (DOJ Opinion) that reverses its 2011 Memo, in which it opined that the prohibitions of the Wire Act are limited to sports betting. In the DOJ Opinion, the DOJ has concluded that the 2011 opinion was wrong! It now opines that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting.

The Wire Act of 1961 prohibits persons involved in the gambling business from transmitting several types of wagering-related communications over the wires. The prohibitions are found at 18 U.S.C. § 1084(a), which states:

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.

The DOJ Opinion indicates that Section 1084(a) consists of two general clauses, each of which prohibits two kinds of wire transmissions, creating four prohibitions in total. The first clause bars anyone in the gambling business from knowingly using a wire communication facility to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.” The second clause bars any such person from transmitting wire communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.”

It concludes that the “sporting event or contest” limitation only applies to knowingly using a wire communication facility to transmit “information assisting in the placing of bets or wagers on any sporting event or contest.” It does not apply to the other three prohibitions.

This is a significant reversal and potentially will have significant impact on certain companies that relied on the 2011 memo.

This new opinion is not necessarily binding on courts. In fact, some courts ruled that the Wire Act was limited to sports betting even before the 2011 memo.

However, the Criminal Division of the DOJ could engage in enforcements based on this interpretation, unless and until there is a successful legal challenge or Congress changes the law (but don’t hold your breath on Congress getting anything done.)

It is likely that this interpretation may be challenged. Read an update: DOJ Wire Act Update.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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James Mattinson Blockchain Technology and Digital Currency Lawyer Sheppard Mullin Washington DC
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Jim Gatto is a partner in the Intellectual Property Practice Group in the firm's Washington, D.C. office. He is also Co-Team Leader of the firm's Digital Media Industry and Social Media and Games Industry Teams, Blockchain Technology and Digital Currency team, and Team Leader of the firm's Open Source Team. 

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