US Wire Act applies only to sports betting and not lotteries, says federal judge

A federal judge ruled Monday that a law prohibiting interstate wagering applies only to sports gambling, setting aside a Justice Department reinterpretation of the Wire Act that some states feared would make online lottery activities including Powerball illegal and put the programs they fund at risk.

Judge Paul Barbadoro’s ruling comes in response to a suit filed by the New Hampshire Lottery Commission in February, which said a Justice Department opinion issued last year subjects its employees to prosecution, creates uncertainty about whether it should cease operations and could cost the state more than $90 million a year.

Data gathered by The Associated Press shows states would have been at risk of losing $220 million in net profits annually if the Justice Department had targeted single tickets sold online or more than $23 billion under the broadest interpretation that would have prohibited all lottery-related activities that use the internet, including popular games like Powerball.

“Today’s ruling is a historic victory for the State of New Hampshire and we are proud to have led this effort,” Gov. Chris Sununu said in a statement. “New Hampshire stood up, took action, and won — all to protect public education in our state.” A spokesman for the Justice Department said it “is reviewing the decision and declines to comment further at this time,” AP News reported.

Matthew D. McGill, who represented the NeoPollard Interactive, which operates the state’s online lottery, said the ruling will not be limited to New Hampshire. Michigan, New Jersey and Pennsylvania filed friend-of-the-court briefs in this case.

“Because the court ‘set aside’ the Justice Department’s incorrect re-interpretation of the Wire Act, this ruling has a nationwide impact,” he said in a statement. “Throughout the country, state lotteries and others in the gaming industry once again can rely on the Justice Department’s 2011 opinion that the Wire Act is limited to sports betting.”

But the Coalition to Stop Internet Gambling, which is backed by GOP (Republican Party) megadonor Sheldon Adelson and filed an amicus brief in support of the Justice Department in the case, argued the ruling was limited and would likely be appealed.

“While we disagree with many of the views expressed in Judge Barbadoro’s ruling, we are happy that the scope of the opinion was confined to the parties involved,” the group said in a statement. “We are confident that other jurisdictions will see this issue very differently and our resolve to protect at-risk populations has only been strengthened by today’s decision.”

The case revolves around the Wire Act, a 1961 law meant to target the mob that prohibits interstate wagering. Decades later, New York and Illinois asked the Obama administration whether selling lottery tickets online violated the law.

The department in 2011 concluded that online gambling within states that does not involve sporting events would not break the law. But the agency changed its mind in November, interpreting the act as applying to any form of gambling that crosses state lines, not just sports betting. But on Monday, Barbadoro said New Hampshire had the standing to sue and that the Wire Act was limited to sports gambling.

Much of his argument came down to the interpretation of the language in the Wire Act, with the judge agreeing with the commission and the 2011 ruling that the law was meant for sports betting even though one clause only mentioned bets and wagers. The Justice Department argued the fact this clause didn’t mention sports betting by name meant the law could be interpreted more broadly.

The judge also sided with the commission in determining it was at risk of potential prosecution, rejecting the Justice Department’s request to dismiss the lawsuit. The Justice Department had filed a memo in the case suggesting that its opinion didn’t address state lotteries and that it was in the process of determining whether the Wire Act applied. It said federal prosecutors had been advised not to enforce the November opinion until a decision was made.

But the state argued the prosecutions would still be possible and argued further delays in the case could complicate the state’s budget process, since a key source of revenue comes from lottery revenues.