Gaming law expert Tony Cabot believes a Michigan company has an ace in the hole as it heads into a legal battle to fight potential U.S. Justice Department changes to the Federal Wire Act.
NeoPollard Interactive, which provides Internet lottery systems and technology to three states, is being represented in its federal lawsuit in New Hampshire by Washington D.C. attorney Ted Olson.
Ted Olsen
The former U.S. Solicitor General under President George W. Bush, Olson earned accolades from the gaming industry after he represented New Jersey in front the U.S. Supreme Court in December 2017. Those arguments led to the justices’ 6-3 ruling in May that overturned the Professional and Amateur Sports Protection Act, allowing states nationwide to legalize sports betting.
Cabot, who is now teaching gaming law at University of Nevada, Las Vegas’ Boyd School of Law following a 37-year legal career in Las Vegas, said Olsen will have an easier time arguing to scuttle the Wire Act opinion put forward by Justice Department’s Office of Legal Counsel.
The 23-page opinion, which was dated Nov. 2, 2018, and released in January, has been roundly criticized by gaming law experts and the gaming industry.
“Olson is one of the best Supreme Court lawyers of his generation,” Cabot said Thursday during a discussion with two other gaming attorneys on the Wire Act at the law school. “He took on a difficult case (legal sports betting) and won it. Now he’s taken on a softball.”
The case will most likely be appealed to the First Circuit Court. If New Jersey and Pennsylvania follow through with threatened lawsuits, the case could land in the Third Circuit. Any legal action brought by Nevada would end up in the Ninth Circuit. So far, Nevada gaming regulators and the Attorney General’s office have been reluctant to comment on the Wire Act.
From left, Jennifer Roberts, Greg Gemignani, Tony Cabot
Bleak picture
Cabot, who serves as the school’s Distinguished Fellow in Gaming Law, painted a bleak picture for the gaming industry should the opinion stand. The document reverted to the original interpretation of the Wire Act, the 1961 law that prohibits certain types of betting businesses in the United States.
A December 2011 opinion by the Office said the Act pertained only to sports betting. The new decision threw out the seven-year-old ruling and added back in other forms of online gaming, including Internet wagering and the sale of lottery tickets over the Internet.
Cabot said the opinion, whose implementation has been twice delayed by the Justice Department, is already causing states to re-examine their online gaming activities. Pennsylvania, which legalized Internet gaming last year, is telling licensees their online wagering servers have to be located within the state’s boundaries.
“Companies stand a chance to lose millions in their investments,” Cabot said.
NeoPollard joined the state of New Hampshire is filing lawsuits to block the Justice Department from implementing the opinion. New Hampshire’s lottery began selling tickets online last year using the NeoPollard’s technology. The state is one of nine with online lottery tickets sales.
New Hampshire wants a federal judge to vacate the opinion, confirm that the Wire Act does not apply to state lotteries, and permanently keep the Justice Department from acting on the opinion. The lottery, which supports public education in the state, generated $87.5 million in net profits that went toward funding public schools.
NeoPollard, which also provides online gaming technology to Michigan and Virginia, said in its lawsuit the Wire Act interpretation “potentially requires them to discontinue their current business practices related to the delivery of iLottery systems and related services.”
UNLV adjunct law professor Jennifer Roberts, the associate director of UNLV’s International Center for Gaming Regulation, said state lotteries in New York and Illinois filed the original challenge to the Wire Act. That action led the 2011 reinterpretation by the Office of Legal Counsel.
‘World is a different place’
Roberts and Dickinson Wright gaming attorney Greg Gemignani, who is also an adjunct law professor at UNLV, both said the gaming industry has evolved and “the world is a different place” since the Wire Act became law in 1961. Gemignani said Act’s original intent was to curb organized crime’s efforts in illegal gambling activities.
The Justice Department, which originally delayed the implementation of the Wire Act opinion until April 15, extended the delay last week another 60 days until June 14. U.S. District Judge Paul Barbadoro of New Hampshire, who is overseeing the lawsuits, strongly urged the Justice Department to extend the delay.
Cabot said Deputy U.S. Attorney General Ron Rosenstein, who wrote the extension memo, “was not at all comforting” in the language he used to delay implementation. Rosenstein was expected to step down from his position this month.
Cabot expressed a view that the opinion would be hugely detrimental to the gaming industry if it stands. In addition to the end of online lottery ticket sales, the four states with online gaming could see their activities curtailed while the multistate agreement to share players between Nevada, New Jersey, Delaware would illegal.
Online sports wagering and mobile sports wagering – both within state lines – would be endangered. Daily fantasy sports, however, wouldn’t be impacted.
In 2001, Nevada legalized online gaming and several sites went live. However, the Justice Department issued a warning saying the activity was in violation of the Wire Act. The sites were quickly shut down.
“To do the same thing now, shut down everything, would cause real complications for the gaming industry,” Cabot said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
