At one time, not so long ago really, the only way you could gamble remotely was to place bets on sporting events over the telephone. Sports betting was and continues to be illegal in almost every state, but a state’s criminal law jurisdiction ends at their borders, and up until the Federal Wire Act of 1961 was passed, operators could get around a state’s laws by simply being located outside the state.
So to assist states in helping them prosecute illegal sports betting operations with their residents, Congress passed the Wire Act which was signed into law by President John F. Kennedy.
For most of its history, none of this was really controversial, unless you were an illegal bookie, or placed bets with bookies, but that was already against the law in these cases and the Wire Act exclusively went after out of state bookmaking operators, which is the reason why it is specifically addressed to those who are in the business of accepting wagers on sporting events or contests.
The Wire Act has been used a number of times over the years to help prosecute sports bookies, including both before and after online gambling came on the scene. There is no question about what its scope is, as it explicitly refers to sports betting and there is not even a hint of this being applicable to other forms of betting.
In fact, the possibility of it even being possible to play poker or gamble at a casino over a wire wasn’t even conscionable in those days, when all we had was the telephone and the telegraph. However, if they did build in something into the law that would at least allow the possibility of this applying to other forms of gambling such as poker and casino games, the courts may have interpreted this broadly and decided that the interstate transmissions of these wagers were prohibited, or at least those in the business of taking such wagers were breaking the law.
Once internet gambling came on the scene, U.S. authorities wished to stop it, so they made the claim that the scope of the Wire Act was broader than just applying to sports betting. The matter went to federal court, and the court decided that they were wrong. This did not stop the Department of Justice (DOJ) insisting that they were still right and the court was wrong, which is quite ridiculous since the courts have the final say here, but an inconvenient truth was not to stand in the way of their anti gambling lobbying.
Things Finally Change Once Lotteries Start Lobbying
This opinion of the DOJ probably stood for so long because it was neither tested nor opposed, this was the last time that they tried to use this in court, but they could still rattle their sabers over it and there wasn’t anyone standing up to make them correct this opinion of theirs.
The department even held the opinion that the Wire Act prohibited intrastate wagering, claiming that even intrastate wire transmissions were under their authority, and in spite of the law being limited specifically to interstate wire transmissions.
In 2011, two prominent state lotteries in New York and Illinois sought to sell their lottery tickets online, which may have exposed them to violating the Wire Act under the DOJ’s interpretation. This caused the DOJ to finally agree that it was indeed limited to sports betting and did not apply to other forms, including online poker, online casino betting, the lottery, or other forms.
So it took 9 years from the time that the courts told them exactly this that they finally gave in, and it was one thing to look to beat back offshore operators of whom U.S. law does not apply anyway with a bombastic view of the Wire Act, but when two of the country’s biggest lotteries were caught in the net, that was enough to finally turn the tide and let reason prevail.
Over the years, there have been some efforts to amend the Wire Act to be more inclusive, but none of these efforts have succeeded, and today there is no federal law regulating online gambling in any sense.
The Aftermath of the Decision
To hear some tell this story, it’s as if the government changed the law here, where it was once illegal to offer interstate gambling period, but now they changed their mind and made it legal. However this was by any account a correction, and it’s difficult to imagine their being confused by what was a clear directive to how the courts were seeing this matter, and it’s the courts that ultimately decide this should they ever choose to prosecute anyone for other forms of gambling.
Some people on the other hand saw this as a bigger deal than it actually was, as the Wire Act even under the incorrectly broad interpretation really didn’t have much practical scope, and whether or not it would apply to a state as an actor in the business of gambling isn’t certain.
There’s no way a state could be convicted of a lottery offense though as this would get tossed out of court, so once the state lotteries sought legal opinion on this the jig was up so to speak.
Many people believed that offshore operators offering poker and casino betting were now free of the law, but the Wire Act or any other U.S. law does not apply to them, even though the DOJ may indict them, as they did with Black Friday, but these are meaningless indictments that are only shows for the media.
What about the effect on the UIGEA? Well again, that’s a U.S. law, but the DOJ did claim that any interstate gambling violated the Wire Act and therefore financial transactions involving them violated the UIGEA.
Since that was no longer held to be the case, the UIGEA does also address illegal gambling at the state level, but the illegality must be clear, and not just speculated on, and there’s only one state, Washington, which has clearly made online gambling illegal.
The only effect with any real practical value was the fact that states were feeling better about the federal government not getting in the way of any interstate pacts that they may agree to among themselves, and we’ve seen one already. This mostly applies to the game of poker where interstate agreements can be valuable and even necessary, and the door has been fully opened now to this.
Of course, there are politicians that would still like to see all interstate gambling prohibited at the federal level, but thus far nothing has come to pass, and we likely won’t see anything anytime soon either, due to this interfering not with offshore interests but domestic ones that actually do have a fair bit of political clout.