A Guide To Understanding The Wire Act
A Guide To Understanding The Wire Act
The Interstate Wire Act is the most important federal law that affects gambling in the United States. The brainchild of Robert F. Kennedy, the 1961 statute prohibits the use of wire communications to place sports wagers across state lines. Originally, the then-attorney general wanted the new law as another weapon in his fight against organized crime, which had a stranglehold on gambling in the US.
However, the intent behind a law’s enforcement does not always stay the same, and the enforcement history of the Wire Act is no different. In more recent times, questions about the Wire Act have come from states, rather than criminal elements. Online gambling has been expanding dramatically across the US in the past two decades, and state regulators and legal gambling website providers have questions about how they are affected by the 1961 law.
The bottom line is that if you are involved in the gambling industry or simply have an interest in it, or play on any of the legal online casinos or sportsbook sites mentioned at Playin USA, it is critical that you understand the ins and outs, the latest news, and the effects that the Wire Act of 1961 has on online gambling in the US.
Below is a comprehensive guide on the Wire Act, including its text, its effect on gambling, and how it has been affected by recent executive and judicial opinions.
What is the Wire Act?
The Interstate Wire Act of 1961 is a federal criminal statute signed into law by President John F. Kennedy that makes it illegal to pass gambling information and instructions across state lines through the use of electronic wires. Specifically, the relevant text of the law is as follows:
“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.”
What does the Wire Act do?
In layman’s terms, the Wire Act does the following:
- Makes it illegal to use a wire communication facility in order to host a betting service or act as a tout for sports betting.
- Prohibits the use of a wire communication transmission (i.e. a phone) to place a bet or give a tip about a betting opportunity.
Robert Kennedy realized that the use of these devices in order to place wagers had become so integral to illicit gambling operat ions that rendering their use illegal would constitute a “mortal blow” to their operations. The law was created specifically to assist the AG and states in carrying out and enforcing their sports betting and bookmaking laws. Kennedy also made clear, through testimony to the US Senate, that ordinary citizens betting with their friends was not the purpose of the law and that his prosecutors would be encouraged to use their discretion in this regard. More than anything else, Kennedy wanted to cripple the gangsters.
However, there was never any sunset provision on this law, and it has remained the law of the land long beyond Robert Kennedy’s service or, for that matter, lifetime. The statute and its definitions were written broadly enough that new technology has fit into the law without much of a hiccup. Even amid the tremendous telecommunications advances of the last 20 years, it’s not much of a stretch to see how internet sources could fit the definition of a wire communication facility under the law:
“The term ‘wire communication facility’ means any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission.
So, the Wire Act remains very much in effect 60 years after its passage. However, let’s talk about what has happened in regards to the law during the last decade.
The Wire Act today
For the first 50 years of its existence, the Wire Act generated few ripples. After all, gambling was largely an in-person event, and it’s not like you could call a casino in Las Vegas or Atlantic City and bet on the Rose Bowl. The only people negatively affected by the law were likely its intended targets — mafiosi and other organized crime figures.
However, the advent of the internet age meant that an organization’s reach could stretch much farther than ever before. Criminal elements continued to operate and struggle under the Wire Act, but legitimate entities, like state governments, had their own designs in mind. Even before full-scale sports betting became a possibility in 2018, states wondered if they could sell things like lottery tickets to people out-of-state or open the door, eventually, to online casinos.
2011: A focus on sports betting
In 2011, the states of New York and Illinois posed a question to the Department of Justice on this issue regarding their lotteries. They wanted to know if, in the eyes of the federal enforcement agency, the law covered just sports betting or all types of gambling. The confusion stemmed from the second part of the law, which does not mention sports betting explicitly and could be construed to mean all types of gambling.
The Department of Justice under the Obama administration considered the requests, then opined that the Wire Act only prohibits sports betting across state lines, not other types of betting. In the agency’s own words:
“Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests the Wire Act does not, in our view, prohibit them.”
Of course, this opinion didn’t stop with the lotteries in the Empire State and the Land of Lincoln. If the Wire Act didn’t prohibit non-sports-related gambling in the eyes of the federal government, then there’s a whole universe of gambling options that were now on the table. New Jersey online casinos launched just two years later.
Additionally, online poker could be shared across state lines if states managed to come to an agreement about offering them. This very thing occurred with the Multi-State Internet Gaming Agreement (MSIGA), which we’ll discuss below.
2014 – 2016: Restoration of America’s Wire Act (RAWA)
In 2014, opposition to the spread of online gambling coalesced into a proposed law in Congress — the Restoration of America’s Wire Act, or RAWA.
RAWA sought to amend the Wire Act back to what supporters, like Sen. Lindsey Graham (R-SC), called the “original interpretation” of the law. RAWA’s stated goal was to amend the Wire Act’s language as follows:
- by striking “bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest,” and inserting “any bet or wager, or information assisting in the placing of any bet or wager,”;
- by striking “result of bets or wagers” and inserting “result of any bet or wager”; and
- by striking “placing of bets or wagers” and inserting “placing of any bet or wager”
The new law also elucidated that the wire communication facilities and transmissions of a wire facility did, in fact, refer to internet transmissions. In other words, RAWA’s goal was to cripple almost every type of online gambling available in the US. The only type of wagering allowed to cross state lines, according to RAWA, would be lottery bets.
RAWA and Sheldon Adelson
RAWA came to life as a pair of twin bills in the US House of Representatives and Senate. Rep. Jason Chaffetz (R-UT) introduced the House version as H.R. 1301, while Graham unveiled the Senate version as S 2159 in 2014. The two lawmakers then tried a variety of tactics to move their bills onto the president’s desk. Their most common thought was to attach RAWA to a must-pass bill, similar to the strategy that put the Unlawful Internet Gambling Enforcement Act (UIGEA) past Congress in 2006. However, they attempted to call a special session in order to force a vote on RAWA.
When the effort to pass the bill failed in 2014, the two congressmen were undeterred. They refiled both bills in 2015 as H.R. 707 and S 1668. Graham did make a few small edits to his law, but they were mostly identical. Most bills probably wouldn’t get this kind of attention, but Graham and Chaffetz (allegedly) had a very deep-pocketed benefactor: Las Vegas Sands owner Sheldon Adelson. Adelson reportedly spent millions of his own money in his crusade against online gambling.
After two failed runs at it, though, the congressmen finally gave up on the effort. Chaffetz retired from office in 2017, and the notion of banning online gambling largely faded into the background. Adelson continued his crusade against online gambling until his death from natural causes in 2021 at age 87.
Incidentally, the assertion that RAWA would restore the Wire Act back to its original interpretation is unsupported by legal opinion up to that point or, for that matter, contemporary statements from Kennedy himself. As Michelle Minton wrote for the Center for Gaming Research at UNLV, there was never a point prior to RAWA that anyone believed the Wire Act to be the law for all types of gambling.
2018: A new Wire Act opinion
There’s no denying that 2018 marked a paradigm shift for gambling in the US. The Supreme Court decision to do away with the Professional and Amateur Sports Protection Act (PASPA) in May meant that states could offer intrastate sports betting at their leisure. The decision was a crushing blow to stakeholders who sought to limit sports gambling in America, which included both the major sports leagues and the federal government itself. Furthermore, the Department of Justice of 2018 was not the same organization that it was in 2011, and its values and priorities had shifted dramatically under President Donald Trump.
Given those two elements, it probably shouldn’t have been a surprise that the DOJ tried to walk back its previous opinion on the Wire Act’s applicability. The agency issued a statement dated November 2018 (but released in January 2019) that said the following:
“Having been asked to reconsider, we now conclude that the statutory prohibitions are not uniformly limited to gambling on sporting events or contests. Only the second prohibition of the first clause of section 1084(a), which criminalizes transmitting “information assisting in the placing of bets or wagers on any sporting event or contest,” is so limited. The other prohibitions apply to non-sports related betting or wagering that satisfy the other elements of section 1084(a).”
In other words, the Wire Act affects all gambling, not just sports betting, according to this guidance. To say that this reversal of course generated shockwaves in state houses and gambling companies across the country is to put it mildly. After seven years of operating with the guidance from 2011, states and operators felt the horse was way too far out of the barn to reverse course like this. Even in-state gambling options might be affected by this reversal, due to the fact that internet signals often cross state lines even if their beginning and ending points are in the same state. Under the law, it could be argued that these transactions are interstate and are now prosecutable under the Wire Act.
The reversal was also troubling as a barometer of government neutrality and transparency, too. The DOJ was not known for reversing its opinions in this manner. There was a barrage of rumors that Las Vegas Sands owner Adelson, who had long railed against online gambling, was the driving force behind the change of stance. Moreover, the reversal flew in the face of existing legal precedent that considered the Wire Act as a sports betting-only law. Even if we put aside the 2011 opinion from the DOJ itself, a 2004 decision from the Fifth Circuit Court of Appeals clearly stated that the Wire At did not govern non-sports gambling.
2019: States react to Wire Act reversal
Unsurprisingly, several state governments and other entities were not amused by the reversal. One of the first voices from the states came from New Jersey, which was only months removed from its triumph over the government regarding PASPA. New Jersey Senate President Stephen Sweeney blasted the ruling in a letter to Deputy Attorney General Rod Rosenstein, stating:
“The 2019 opinion, which took 26 pages of tortured analysis of sentence structure and comma placements to determine that the clear language of the Wire Act applied to all forms of gambling, was contrary to the much better reasoned opinion of the 5th Circuit and the “thorough review” of the Department of Justice in 2011. If the OLC 2019 Wire Act opinion is not rescinded, I have authorized former Sen. Raymond Lesniak to file suit in US District Court on behalf of the New Jersey Senate for a declaratory judgment that the 2019 OLC Opinion is arbitrary and capricious and that the statutory prohibitions of the Wire Act are uniformly limited to gambling on sporting events or contests.”
The viewpoint in Sweeney’s salvo was quickly seconded by New Jersey and Pennsylvania attorneys general Grebir Gurwal and Josh Shapiro, respectively. Rep. Dina Titus of Nevada also wrote a letter to the DOJ to express her dismay. New Hampshire and Massachusetts issued statements of concern about their activities. The North American Association of State and Provincial Lotteries (NASPL) indicated that the new opinion “creates substantial uncertainty concerning the legal status of lottery transactions.”
Needless to say, it was a given that the DOJ would be heading to court over its opinion. The surprising thing was the state that arose as the chief litigant in the case — New Hampshire. Although New Jersey, Pennsylvania, and Michigan added amicus briefs in support of New Hampshire’s position, it was the Granite State’s suit for injunctive relief that became the root of the opposition. New Hampshire sued in concert with its lottery technology partner, NeoPollard Interactive, which filed its own concurrent case with the following language that expressed the problem succinctly:
“As a result of the OLC’s erroneous change in position, gaming activities long thought to be lawful are now under threat of imminent criminal and civil prosecution.”
It soon became clear that the Department of Justice knew that it had erred in its reversal. In April 2019, the agency re-reinterpreted their opinion to say that the Wire Act does not affect lotteries. Since the parties in New Hampshire were focused on the lottery, the government agency hoped to sidestep the problem by declaring the lottery exempt. The ploy didn’t work, though, and neither did the DOJ’s assurances that it wouldn’t prosecute very often.
2021 – Present: A return to normalcy
Ultimately, New Hampshire prevailed in both district court and in front of the First Circuit Court of Appeals. On the same day of Joe Biden’s inauguration as President of the United States, the appeals court declared victory for New Hampshire. The decision likely spelled the end of the 2018 opinion, since the new administration was and is less favorable to a crackdown.
So, that brings us to where we are today with the Wire Act. It is still an effective tool against black-market gambling. But the Wire Act has come all the way back to targeting its initial targets.
What the Wire Act means for legal sports betting
In the past decade, there has been quite a bit of debate in court about the jurisdiction and effect that the Wire Act possesses. Even though the law celebrated its 60th birthday in 2021, it remains the law of the land and is the most profound statute regarding gambling that exists at the federal level. In a nutshell, the Wire Act prohibits sports betting from occurring acr oss state lines.
Even though the language in the act, with its wire communication facilities and its transmissions of a wire communication, is a bit dated, it clearly still holds merit in the internet age. To our knowledge, there have been no serious legal challenges regarding whether it covers internet transmissions. In fact, the aforementioned court case between New Hampshire and the Department of Justice hinged, in part, on the fact that internet transmissions can sometimes move outside the borders of states even if their two contact points are inside the state lines.
We’re also not aware of any challenges to the law itself that are in process. Regulating interstate trade as it sees fit is perfectly within the purview of the federal government, and the law has no constitutional issues on its face. So, for sports betting, both the short term and long term look the same with relation to the Wire Act. We may see sports betting in as many as 48 states before it’s all said and done — Utah and Hawaii notwithstanding — but we will never see a national sportsbook offering while the Wire Act remains in effect.
Why the Wire Act matters to online gambling
With regard to US online gambling such as casinos and online poker rooms, the Wire Act is important precisely because it does not affect those activities. According to multiple courts at multiple levels of the appellate system, the Wire Act only affects interstate sports betting, not interstate gambling. The court decisions have set aside and rebutted opinions by the Department of Justice that would’ve vastly expanded the prohibitions prescribed by the Wire Act.
Even so, states that launch or plan to launch online gambling structure it as a fenced-in market with geolocation services verifying players are within state lines. The only type of online gambling site to appear in a multi-state context is online poker and it comes with limitations, too. The Multi-State Internet Gaming Agreement is a compact between states with legal online gambling to aggregate their player pools and generate more activity across the board.
At present, New Jersey, Nevada, and Delaware have all signed onto the agreement. It is thought (and hoped) that Michigan and Pennsylvania will join the group soon, though, as both of those states have legal iGaming and are significantly more populous than the three signatories working together right now. However, the agreement only applies to companies that operate in all included states, i.e. WSOP online poker and 888 Poker.
Wrapping up the Wire Act
The Interstate Wire Act of 1961 has stayed on the books longer than Robert Kennedy probably intended or could’ve imagined at the time. Its original target — organized crime figures who relied upon gambling as one of their chief sources of income — has largely been neutralized in the US, and certainly no longer has the stranglehold over gambling that it once enjoyed.
Instead, the Wire Act now serves mostly as a form of regulation on legitimate gambling companies and state agencies. As long as the Wire Act stays in place, it is likely to serve as a legal precedent for keeping gambling an intrastate activity, even if the law itself refers to sports betting only.