Byron La Fleur interviewed Mark Hichar, Greenberg Traurig, LLP on what the recent DOJ memo on the Wire Act means for the lottery industry. For those who are not aware, the recent memo deals directly with U.S. Lottery industry, stating that “The OLC opinion did not address whether the Wire Act applies to State lotteries and their vendors.”

 

Byron La Fleur: The memo April 8th memo states that the recent Office of Legal Council (OLC) Wire Act opinion does not apply to the lottery industry. What will likely happen to the New Hampshire Lottery lawsuit?

Mark Hichar, Greenberg Traurig, LLP: The April 8th Memo actually states that the U.S. Department of Justice (the “Department”) is “reviewing” the question whether the Wire Act applies to state lotteries and their vendors.  It does not decide the question.  The Department argued in its pleadings that “[b]ecause Plaintiffs [the New Hampshire Lottery, et al.] do not have a current credible fear of prosecution, Plaintiffs lack standing to challenge OLC’s interpretation of the Wire Act. If the Department ever determines that state lotteries and their vendors are subject to prosecution under the Wire Act, Plaintiffs might at that time contend that they have standing to challenge the 2018 OLC Opinion.”  (Defendant’s Reply Memorandum, p. 1.)

At the April 11th  hearing on the Department’s motion to dismiss and the motions by the Plaintiffs for summary judgement, U.S. District Court Judge Paul Barbadoro declined to dismiss the suit based on the Department’s standing argument grounded in the April 8th memo.  Among other things, the Judge felt that the uncertainty created by the OLC’s November 2, 2018 memo has resulted in real legal consequences to the plaintiffs.  It was also noted at the hearing that payment processors, upon which the New Hampshire Lottery and many other state lotteries depend, are not lottery vendors and thus are not subject to possible exclusion from Wire Act coverage as discussed in the April 8th memo.  Payment processors remain subject to the June 14th  compliance deadline set forth in Deputy Attorney General Rod Rosenstein’s memo of February 28, 2019.  Thus, the New Hampshire lawsuit continues.

BL: Why would the Wire Act not be applicable to the lottery industry? Why would it?

MH: At the April 11th hearing, Judge Barbadoro stated that, in his opinion, there was a “strong argument” that the Wire Act’s prohibitions in 18 U.S.C. § 1084(a) were not applicable to state lotteries.  The argument appears to be based, in part, on the fact that 1084(a) is applicable to:  “Whoever, being engaged in the business of betting or wagering …”  The federal “Dictionary Act”, at 1 U.S.C. § 1, provides that the term “whoever” applies to various specifically listed entities, but it omits “states” from the list.  Therefore, arguably, “states” are not included in “whoever.”  However, the “Dictionary Act” also states that its definitions apply “unless the context indicates otherwise …”  Therefore, one could argue that the context of 1084(a) suggests that states ARE included within the term “whoever.”

As you may recall, the OLC’s 2018 Opinion expressly refers to state lotteries as having relied on the OLC’s prior 2011 Opinion (which opined that the Wire Act applies only to sports betting), thus arguably implying that state lotteries are covered by the Wire Act and the OLC’s new interpretation.  The 2018 Opinion states:  “Some States, for example, began selling lottery tickets via the Internet after the issuance of our 2011 Opinion. But in light of our conclusion about the plain language of the statute, we do not believe that such reliance interests are sufficient to justify continued adherence to the 2011 opinion.”  (2018 Opinion, pp. 22-23, footnotes omitted.)

Note that while Judge Barbadoro felt that state lotteries might not be covered by the Wire Act, he also felt that whether the Wire Act applied to state lottery employees and lottery vendors was a different question.  Thus, the Wire Act could be held inapplicable to state lotteries, but still applicable to lottery employees and vendors upon which state lotteries depend.  The judge asked that these questions be briefed, namely – If the Wire Act were held not to apply to state lotteries, would the Wire Act apply to state lottery employees and/or to lottery vendors?

Byron La Fleur: What happens to states that have regulated iGaming like New Jersey?

Licensed iGaming operators (that are not state lotteries) would not be covered by a decision holding that the Wire Act did not apply to state lotteries.