Federal Appellate Court Rejects Trump Administration’s Wire Act Reinterpretation

The United States Court of Appeals for the First Circuit on Wednesday affirmed the 2019 decision of District Court Judge Paul Barbadoro that the scope of the 1961 Wire Act is limited to sports betting, once again clearing the way for interstate online gambling.

The ruling in favor of the New Hampshire Lottery Commission (NHLC) came as the result of its litigation against the US Department of Justice after its Office of Legal Counsel (OLC) released a reinterpretation of the Wire Act in January 2019 that sought to prohibit the transmission of data over the internet that crossed state lines for the purpose of gambling. A 2011 interpretation of the Wire Act by the DOJ limited the scope of its prohibition to sports betting.

“In conclusion, we find that the plaintiffs’ claims are justiciable and that the Wire Act applies only to interstate wire communications related to sporting events or contests,” the official ruling reads.

Online poker players, who have been one of the groups most adversely affected by the attempt to ban interstate online gambling, began to celebrate as online gaming attorney and long-time online poker advocate Jeff Ifrah broke the news on Twitter.

“This landmark decision is a victory for states’ rights; for clear reading of federal statutes, and for the gaming industry and its customers,” Ifrah said in a statement released by iDEA Growth (iDevelopment and Economic Association).

DOJ doesn’t often lose litigation over the meaning of federal statutes,” Ifrah continued. “However, the OLC’s 2018 opinion was so misguided that the court resoundingly rejected it.”

Court Delivers Strong Rebuke of DOJ’s Argument

The NHLC has been successful in every attempt to stop the DOJ from expanding the reach of the Wire Act beyond sports betting largely because the courts were not swayed by the government’s legal arguments and the First Circuit Court of Appeals was no exception.

The ruling authored by Judge William Kayatta made several references to the quality of the DOJ’s claims including:

  • “The government’s reading poses unharmonious oddities…”
  • “The lack of coherence in the government’s proposed reading…”
  • “Even less convincing is the government’s broader argument…”
  • “The government offers a couple of other reasons why we should prefer its reading over the plaintiffs’. Neither is persuasive.”
  • “the government’s resolution of the Wire Act’s ambiguity would lead to odd and seemingly inexplicable results.”
  • “The government’s reading of the statute, however, would most certainly create an odd and unharmonious piece of criminal legislation. Neither common sense nor the legislative history suggests that Congress likely intended such a result.”

Interstate Online Poker in the US Expected to Boom in 2021

The ability to combine player pools from multiple jurisdictions (referred to in the industry as “shared liquidity”) is key to the success of online poker which is highly dependent on attracting large numbers of players to its games in a similar way to multi-state lotteries.

For poker, the more people that play, the more games that are available and the bigger the prize pools. And the more games that are available and the bigger the prize pools, the more people will play.

Currently, only one online poker network allows players from multiple states. The All American Poker Network (AAPN) powered by 888poker is the software platform used by WSOP.com in Nevada and New Jersey along with three racinos that offer online poker in Delaware. 888 also has its own branded online poker room on the network in New Jersey.

The AAPN was in existence prior to the attempt by Trump’s DOJ to reinterpret the Wire Act, and with lawsuits attempting to thwart the DOJ’s reinterpretation filed so quickly, it decided to continue operating while the dispute played out in the courts.

But the revised opinion had a chilling effect on the expansion of interstate online poker networks, and it even caused the state of Pennsylvania to delay the launch of its online gaming market in 2019.

And while Pennsylvania eventually did launch online gaming and online poker, the state decided to not join New Jersey, Nevada, and Delaware in the Multi-State Internet Gaming Agreement (MSIGA) until a clearer picture about the legality of interstate online gaming emerged.

West Virginia legalized online poker in 2019, but so far not a single online poker room has opened in the state, presumably because such a small population would make online poker difficult to sustain without being able to share liquidity with other states.

Michigan has a law that explicitly allows its gaming regulators to decide if online poker operators can combine their player pools (once they launch this year) with their player pools in other states where it is legal as long as doing so does not break federal law.

But with the issue of the legality of interstate online poker settled for now, expect these states to join MSIGA and allow operators in their states to combine their player pools with those in other states.

Such a move would likely result in the addition of two new multi-state online poker networks. Already established is the partypoker US Network which currently exists but only functions in New Jersey. Skins on the network include BetMGM, partypoker NJ and Borgata Poker.

The partypoker US Network and its operators have already been issued licenses in Pennsylvania, Michigan and Nevada but so far have not launched in either of those three states. Partypoker has indicated that it has plans to launch in Nevada once it could link its player pool there with other larger states.

The other interstate online poker network that will emerge is PokerStars US. PokerStars currently operates in PokerStars NJ and PokerStars PA, which if combined, would be larger than the AAPN. PokerStars has also been issued a license in Michigan and is expected to launch PokerStars MI soon.

Why the Latest Wire Act Ruling Settles the Issue for Now but Not Forever

There are multiple reasons why online gaming operators and state regulators should be comfortable with the idea that interstate online poker is allowed by federal law.

The biggest is the ruling on Wednesday by the United States Court of Appeals for the First Circuit that the Wire Act is limited in scope to sports wagers and contests. If the DOJ were inclined to appeal this ruling, it could go before the US Supreme Court, but there is no guarantee that the highest court in the land would even hear the case.

Another reason to be assured that interstate online poker is here to stay (for at least a little while) is the Joe Biden was just sworn in as President of the United States. Remember, Biden was Vice President 2011 when the Obama DOJ opined that the Wire Act did not prohibit forms of online gaming other than sports, and Biden has indicated that he still supports that position.

The recent death of casino mogul Sheldon Adelson is yet another reason that interstate online poker will remain on the right side of the law for the foreseeable future.

Adelson was a staunch opponent of online gaming and had been funding RAWA (Restoration of America’s Wire Act) efforts for years. It was also widely suspected that his influence was behind the 2018 reinterpretation of the Wire Act under the Trump administration.

However, nothing is forever, and there is no law that explicitly legalizes interstate online gaming in the US. But even if there were, law can be changed. So for now, while the legal status of interstate online poker may not be absolutely perfect, it is almost as good as it gets.

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