The New Federalism: The Wire Act and How Congressional Inaction Regarding Online Gambling is Unsustainable

Ostrich-man-head-in-sand

When we last left our discussion regarding Federal Online Gambling Law, the Justice Department was reeling from the 5th’s Circuit’s interpretation of the Wire Act (that it only applies to sport gambling.) More than five years later, the federal governed finally acquiesced to that decision. On December 2011, the Justice department issued a letter in response to inquires from Illinois and New York regarding proposals to use the internet to buy out-of-state lottery tickets. In the opinion, the Justice Department concluded that interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.[1] This has essentially eliminated most federal restrictions on online gambling other than the relatively weak Unlawful Gambling Enforcement Act. [2]

Many thought that this was the end to the wire act debate. Yet, leave it to lawmakers in Washington to reignite a seemingly settled issue. In March of this year, a group of lawmakers, led by Utah Rep. Jason Chaffettz, proposed a bill that they say will “re-establish” the 1961 Wire act. According to Chaffetz, there was a specific reason why they used the word “re-establish” in the proposed bill.[3] “This bill is not as much about gambling as it is about restoring the law to what it was before the Justice Department decided to unilaterally reinterpret it. This is just one of any number of issues on which this administration has failed to consult Congress and ignored the law,” Chaffetz said. [4]

The Chaffetz bill has not been the only response to the Justice Departments letter this year. In February, the attorney generals for 16 different states sent a letter to Congress requesting that they act to stay the Justice’s department’s interpretation, because it would “give federal and state law enforcement agencies time to fully assess and report on the implications Internet gambling has on our respective charges to protect the citizens of our states.” [5]

In contrast, some lawmakers have taken the momentum gained from the Justice department’s remarks to propose bills for federal legalization of online gambling. A bill proposed by Peter King, Rep. from New York seeks to legalize all forms of online gambling while a similar bill from Rep. Joe Barton would legalize online poker specifically.

Conclusion:

The Justice department was correct to issue the letter. The Fith Circuit’s interpretation of the act is so much more logical. The Wire Act, as enacted in 1961 was simply not broad enough, to cover online gambling nor was it ever intended to cover anything other than sport’s betting. The gray area in the law was not good for the economy. Of course, it is always difficult to admit that you were wrong. Likely, this is why it had taken over seven years for the letter to be issued in the first place. Moreover, the bills brought by Peter King and Joe Barton are a step in the right direction. The federal government cannot ignore the fact that online gambling is growing in popularity. Without proper federal regulation, inconsistency in the law will continue to plague the U.S. (hurting the economy) and the black market for online gambling will flourish. Next week, I will cover the state’s responses to online gambling.

[1] http://www.forbes.com/sites/nathanvardi/2011/12/23/department-of-justice-flip-flops-on-internet-gambling/

[2] http://www.Newsmax.com/Newsfront/online-gambling-gaming-ban/2014/04/04/id/563757/#ixzz3GEwu9c3U

[3] http://www.Newsmax.com/Newsfront/online-gambling-gaming-ban/2014/04/04/id/563757/#ixzz3GEwu9c3U

[4] http://www.Newsmax.com/Newsfront/online-gambling-gaming-ban/2014/04/04/id/563757/#ixzz3GEwu9c3U

[5] https://www.scribd.com/doc/214631788/State-Attorneys-General-Letter-on-the-Wire-Act

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~ by rzlatkin on October 15, 2014.

2 Responses to “The New Federalism: The Wire Act and How Congressional Inaction Regarding Online Gambling is Unsustainable”

  1. While I understand the interpretation of the law based on the plain reading of the Wire Act and the numerous court opinions that express the shared the interpretation of the 5th Circuit, I’m struggling to see the difference between sports betting and other forms of online gambling.

    The Court in the Mastercard case noted that had the plaintiffs alleged that any of the transactions placed online were sports bets, the outcome of the case could have been very different because sports betting is proscribed against by the Wire Act. Naturally, because none of the plaintiffs asserted such claim, the Court could not rule on the matter. However, I’m not convinced that the courts are taking a generalized approach away from including online gambling in their interpretations of the Wire Act.

    If a court someday hears an issue related to ONLINE sports gambling and rules that the Wire Act applies, then I can’t see a major reluctance to extend that line toward other forms of online gambling as well. In my opinion, this extension of law would naturally follow from the courts’ general trend toward inclusiveness. I just can’t see much of an argument for not extending the Wire Act to include other forms of online gambling… where is the distinction?

  2. It’s interesting, though somewhat disturbing, that the goal was to “re-establish” the Wire Act. That statute was passed in 1961. Why not craft legislation that is better tailored to handle the difficulties of modern online gambling? This is the major debate regarding online activities – do you try to fit them into existing legal doctrines, as Chris proposes, or do you take a “law of the horse” approach and analyze/legislate them as distinct issues from their classical analogs?

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