DOJ Wire Act Opinion to Exclude Lotteries
April 11, 2019
In January of this year, the US Department of Justice (DOJ) indicated it was going to reverse it's prior 2011 opinion regarding the Wire Act of 1961.
The Wire Act of 1961 was passed to ban the use of wire systems to send funds to gambling operators. Since the Internet was at least 20 years from invention, lawmakers were presumably trying to prevent gamblers from using wire transfers to make payments to their illegal bookies.
In 2011, the DOJ offered the same interpretation regarding the Wire act, effectively stating that the ban on wires to fund gambling accounts was only applicable to sports gambling. Based on this interpretation, many US states have recently passed legislation that allows gamblers to fund their online gambling accounts related to poker, horse racing, fantasy sports, lotteries and more recently, several states have legalized online casino gambling and sports betting.
In a surprise move, the DOJ, under new Attorney General William Barr, has offered up a a significant change to the opinion issued in 2011. The DOJ's new opinion effectively makes it illegal for gamblers to fund any gambling accounts through a registered wire system. That would include the use of credit/debit cards, Western Union, PayPal and traditional bank wires.
To say this new opinion caught a lot of states off-guard would be a gross understatement. Throughout the nation, states all over the country are having to revisit the entire process of legal online gambling. To be clear, online gambling is not banned via federal legislation. The legalization of online gambling lays in the hands of each state legislature as representatives for its citizens. The work around for states that have already passed legislation that allows online gambling would be to open casinos or deposit centers where customers could walk in and personally make deposits.
Several states, including New Hampshire are quite upset with the DOJ's revised opinion due to well-integrated online lottery systems. So much so that they are suing the DOJ in federal court. This has perhaps promoted the DOJ to exclude state and national lotteries from the provisions of the 1961 Wire Act. While the exact reasoning behind the DOJ's opinion regarding lotteries is not evident, Barr issued the following to prosecutors and the FBI:
"The OLC (Office of Legal Counsel) opinion did not address whether the Wire Act applies to State lotteries and their vendors. The Department is now reviewing that question. Department of Justice attorneys should refrain from applying Section I 084(a) to State lotteries and their vendors, if they are operating as authorized by State law, until the Department concludes its review."