Crossed Wires: What is the Wire Act and why are we talking about it?

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It is perhaps ironic that the opening up of the US online gambling market could be delayed by a law that was enacted in 1961, long before the internet was even thought of.

The Federal Wire Act specifically prohibits the use of all wired communication facilities for any type of interstate or foreign transaction that involves betting or wagering. This means that, even though the Supreme Court overthrew the ban on sports betting back in 2018, any operation that crosses state or international borders could still be in breach of federal law.

The Wire Act was never intended to cover online transactions

Of course, given it’s the USA, there are plenty of people in Washington looking to find ways to limit the scope of the Supreme Court ruling and the Wire Act has been their first point of call. In 2011, the Department of Justice had stated that the act only applied to sports betting, which led to some states launching online lottery sales for the first time. Some went further and permitted online casinos and poker.

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The Wire Act case could go all the way to the Supreme Court where the future of online lottery in the USA will be decided.

 

Fast forward to 2018 and, following the Supreme Court judgement, the DoJ suddenly backtracked and announced that the Wire Act did in fact apply to all forms of electronic gambling. This meant that not only were new interstate gambling ventures potentially illegal, the established online operations of the state lottery operators could be too, given that they could potentially be played in other parts of the country.

Now, judge in New Hampshire has thrown out the new interpretation of the law, telling the DoJ to return to its 2011 reading. This is an Appeals Court ruling that could potentially apply to the whole country, unless the DoJ chooses to go to a higher court, although given the number of filings made against the 2018 opinion – New Hampshire was simply the first to come to court – that is not a certainty.

Online lotteries are not covered by the Wire Act

So, it’s looking like interstate casinos and online lottery will be permitted. So where does that leave sports betting? The answer, as with all gambling-related questions in the USA, is not straightforward. It’s possible for bookmakers to run sportsbook operations in states where regulatory regimes have been introduced, but any interstate transactions risk violating the Wire Act. Therefore, the use of geolocation is a must, at least in the short term.

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New York will be one of the states affected by the decision on the future of the Wire Act.

 

By limiting operators to single states, the Wire Act also means that bookmakers must apply for a licence in every state where they operate and, given that there is no appetite to legislate for betting and gaming at the federal level, that’s a situation that’s not likely to change soon. Of course, the removal of the Wire Act would not automatically make it easier to trade in multiple states without individual licences, but it would remove the main legal detriment to this type of operation.

The US gambling marketplace continues to open up

For now, the slow opening up of the US betting market continues as predicted, with major operators entering into partnerships with media and data companies as some states rush to legislate and others drag their feet. For the online lottery market, major opportunities remain as online lotto betting is legalised and state operators prepare to launch their games on the web.

It’s likely that the Wire Act case will go all the way to the Supreme Court, which will have immediate implications for online lottery and casino operators. More importantly, it will have long-term implications for all gambling companies. If the DoJ does finally lose the case, there will increasing pressure to rescind the entire act, which would have positive implications for sports betting as well.

If there’s one thing we’ve learnt about the US gambling market, it’s never to take anything for granted. The Wire Act saga is likely to continue at least until the end of 2019, which is when the DoJ moratorium on prosecutions is scheduled to end, although this could be extended if the Supreme Court has yet to hear the case. Whatever happens, you can expect to hear a lot more about the Wire Act before the future of US online gambling is resolved.

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