New Hampshire sues DOJ over new Wire Act ruling that could damage the state’s lottery industry

February 15, 2019 8:32 PM
  • Howard Stutz, CDC Gaming Reports
February 15, 2019 8:32 PM
  • Howard Stutz, CDC Gaming Reports

New Hampshire on Friday became the first state to legally challenge last month’s U.S. Department of Justice decision to revise the Federal Wire Act, filing a federal lawsuit that would halt enforcement of the opinion that could keep the state from selling lottery tickets online.

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The state is asking a U.S. District Court judge to vacate the 23-page opinion from the Department’s Office of Legal Counsel, confirm that the Wire Act does not apply to state lotteries, and permanently keep the Justice Department from acting on the opinion.

New Hampshire’s lottery, which supports public education in the state, generated $87.5 million in net profits that went toward funding public schools, according to a statement from Governor Chris Sununu.

“The opinion issued by DOJ puts millions of dollars of funding at risk, and we have a responsibility to stand up for our students,” Sununu said.

The opinion, dated Nov. 2, 2018, reversed a 2011 ruling on the Wire Act that said the law only pertained to sports betting. The revised decision said the Wire Act covers any action where gaming information is transmitted over the Internet.

Gaming law experts and analysts said the new ruling could curtail online gambling activities in three states, the sale of lottery tickets over the Internet, and, potentially, mobile sports wagering, among other activities.

The New Hampshire Lottery has recorded more than $6.6 billion in lottery sales and other earnings over the last 54 years, with more than $4.4 billion paid in prizes and other cost of sales. Net proceeds to education total more than $2 billion to date.

In the complaint, New Hampshire Attorney General Gordon MacDonald argued the broadest interpretation of the opinion would prohibit all lottery-related activities that use the internet.

“There is no indication in the plain language of (the Wire Act), its structure, its purpose, or its legislative history of an unmistakable Congressional intent to outlaw state-conducted lottery activity,” MacDonald wrote. “If Congress wishes to criminalize the interstate transmissions required to operate state-conducted lotteries, it must do so in clear, unmistakable language. Congress has not done that in the Wire Act.”

Eilers & Krejcik Gaming analyst Chris Grove said in an email that Case law in the 1st Circuit is favorable on one issue raised by that state, that the Wire Act only applies to sports betting.

“But a ruling doesn’t mean an end to the case, and the appeals process could be far lengthier,” Grove said.

For now, it is unclear how the new Wire Act interpretation will impact gaming operations. Deputy Attorney General Rod Rosenstein issued a memorandum in January delaying implementation of the opinion for 90 days while the Justice Department decides how it will handle any Wire Act prosecutions.

Gaming attorney Daniel Wallach, writing on Twitter, said New Hampshire’ request for quick ruling means a judgment might take place before the 90-day “non-prosecution period” expires.

“Interesting that (New Hampshire) Lottery went for immediate summary judgment instead of a temporary restraining order or preliminary injunction,” Wallach wrote. “Won’t have to show immediate irreparable harm.”

New Hampshire’s lawsuit joins a growing chorus of voices critical of the opinion and is the first official legal action against the DOJ for the Wire Act ruling. On Feb. 6, New Jersey Attorney General Gurbir Grewal and Pennsylvania Attorney General Josh Shapiro asked the Justice Department to withdraw the decision, saying the opinion was “wrong” and an “unfounded about-face” that “undermines the values of federalism.”

Grewal also filed a Freedom of Information Act request (FOIA) seeking records pertaining to the Justice Department’s opinion and communications between the agency that involved Las Vegas Sands Corp. and the casino company’s lobbyists. Last week, a lawyer for the Sands-funded coalition that lobbied for the Wire Act changes, told the Washington Post a memo written by his firm was given to the Justice Department in 2017. The opinion, “accords entirely with the analysis my firm undertook and I shared with the DOJ.”

On Wednesday, MGM Resorts International Chairman Jim Murren call the DOJ’s ruling “perplexing” and a “poorly written” decision and added the gaming industry believes the opinion is “unenforceable.” He also said the opinion makes the 44-state Powerball lottery illegal.

Grove speculated that “other parties are poised to intervene” in the New Hampshire lawsuit.

NeoPollard Interactive, which serves as the technology and service provider of the New Hampshire Lottery’s iLottery system, filed a similar lawsuit against the DOJ in federal court.

Grove said federal court win for the state, coupled with new U.S. Attorney General William Barr’s long-standing belief against federal overreach, could allow the Department to formally carve out legal intrastate online gambling from the Wire Act.

“We believe the gambling industry is already taking steps to promote that outcome,” he said.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.