However, the UIGEA can be misleading because certain conduct specifically excepted from the term “unlawful Internet gambling,” and therefore lawful under the UIGEA, may nevertheless be considered unlawful by the U.S. Department of Justice (DOJ) because of its interpretation of the Wire Wager Act (also referred to as the “Wire Act”).
…it is asserted here that the Wire Act should not be enforced with respect to operators who conduct intrastate wagering in compliance with the UIGEA’s intrastate wagering exception. To enforce the Wire Act against operators in such circumstances would be inconsistent with the purpose of the Wire Act — which is to assist states in the enforcement of their laws.
The term “unlawful Internet gambling” is defined in the UIGEA as: to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Inter- net where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.
the UIGEA excludes from “unlawful Internet gambling” (and thus excludes from the scope of the UIGEA overall), among other things, “the placing, receiving or otherwise transmitting a bet or wager” where each of the following is true:
(i) the bet or wager is initiated and received or otherwise made exclusively within a single State;
(ii) the bet or wager and the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and placed in accordance with the laws of such State, and the State law or regulations include–
(I) age and location verification requirements reasonably designed to block access to minors and persons located out of such State; and
(II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with such state’s law or regulations;
(iii) the bet or wager does not violate any provision of(I) the Interstate Horseracing Act of 1978(15 U.S.C. 3001 et seq.);(II) chapter 178 of title 28 (commonlyknown as the “Professional and Am-ateur Sports Protection Act”);(III) the Gambling Devices Transporta-tion Act (15 U.S.C. 1171 et seq.); or(IV) the Indian Gaming Regulatory Act(25 U.S.C. 2701 et seq.).
The UIGEA also provides that “[t]he intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is ini tiated, received or otherwise made.”
…bets and wagers initiated and received in the same state, where such bets and wagers are expressly authorized by and placed in accordance with that state’s laws or regulations, and where they meet the other requirements set forth above, do not constitute unlawful Internet betting or wagering under the UIGEA.
The DOJ’s failure to clarify its interpretation of and enforcement policy with respect to the Wire Act in light of the UIGEA creates confusion as to what intrastate Internet gambling is permitted, and this is of particular concern to states that may wish to authorize intrastate Internet gambling in accordance with the intrastate exception in the UIGEA.
THE CONFLICT BETWEEN THE WIRE ACT AND THE UIGEA’S INTRASTATE WAGERING EXCEPTION
The DOJ claims the Wire Act is applicable to all types of betting, not only sports betting.
The DOJ has argued that the Wire Act applies to all types of wagering that involve wire transmissions in interstate or foreign commerce. Some judges have upheld this view. Others have held that the Wire Act applies only when the underlying wagering
pertains to sporting events or contests.
The exemptions in § 1084(b), which cover only information relating to reporting or wagering on sporting events or contests, suggest strongly that the Wire Act was intended to apply only to sports wagering it strains credulity that the prohibitions in § 1084(a) would ban transmissions assisting in wagering of any and all types, while § 1084(b) would exempt from those prohibitions wagering-related transmissions between two states where the underlying wagering is legal, only when the underlying wagering related to sporting events or contests.transmissions assisting in non-sports wagering would never be exempted from the prohibitions, this interpretation would suggest that, in passing the Wire Act, Congress was more concerned with non-sports wagering, such as wagering on lotteries, casino games and other games of chance, than with wagering on sports events. This position is simply not tenable.
In 2001, in the case of In re MasterCard International Inc., the U.S. District Court for the Eastern District of Louisiana construed the Wire Act and held that it was applicable only to wagering on sporting events or contests. The court stated:
[A] plain reading of the statutory language [ofthe Wire Act] clearly requires that the objectof the gambling be a sporting event or contest. Both the rule and the exception to the rule expressly qualify the nature of the gambling activity as that related to a “sporting event or contest.” See 18 U.S.C. §§ 1084(a) & (b). A reading of the case law leads to the same conclusion.
As the plain language of the statute and case law interpreting the statute are clear, there is no need to look to the legislative history of the Act as argued by plaintiffs. However, even a summary glance at the recent legislative history of Internet gambling legislation reinforces the Court’s determination that Internet gambling on a game of chance is not prohibited conduct under 18 U.S.C. § 1084.
On appeal in 2002, a three-judge panel of the Fifth U.S. Circuit Court of Appeals affirmed the district court, stating:
The district court concluded that the Wire Act concerns gambling on sporting events or con tests and that the Plaintiffs had failed to allege that they had engaged in Internet sports gambling. We agree with the district court’s statutory interpretation, its reading of the relevant case law, its summary of the relevant legislative history, and its conclusion.
However, a recent case in the U.S. District Court for the District of Utah (in the 10th U.S. Circuit 19)
did not follow the Fifth Circuit’s holding in the MasterCard case. In United States v. Lombardo the court wrote:
Having carefully examined the language of the [Wire Act] as well as the cases above, the Court concludes that § 1084(a) is not confined entirely to wire transmissions related to sports betting or wagering.
The phrase “sporting event or contest” modifies only the first of these three uses of a wire communication facility.
Admittedly, the language of the statute limits the prohibition on the transmission of actual bets or wagers to those on sporting events or contests. This could lead to the conclusion, as it apparently did in the MasterCard case, that when the phrase “bets or wagers” is used in the second and third prohibited uses, it is actually referring to the “bets or wagers on any sporting event or contest” language found in the first prohibited use. However, this conclusion would essentially require the Court to find that the failure to include the phrase “sporting events or contests” in the second and third prohibited uses was an inadvertent mistake of
Surprisingly, the judge in Lombardo found the Wire Act sufficiently unambiguous to preclude application of the rule of lenity, even though his in terpretation was directly contrary to that of the three judge panel of the Fifth Circuit.
A magistrate judge for the U.S. District Court for the Eastern District of Missouri arrived at an interpretation of the Wire Act that was similar…
Asserting that the Wire Act is not limited to sports bet- ting, the magistrate judge wrote:
This court respectfully disagrees with the MasterCard cases. . . . Although not a model of legislative drafting, the [Wire Act] was meant to include both sports betting and other types of betting or it would not have twice specifically repeated the phrase “transmission of information assisting in the placing of bets or wagers” as applying only to “any sporting event or contest”.
The statute is couched in the disjunctive and creates two distinct offenses: (1) the use of a wire communication facility for the interstate or foreign transmission of (a) bets or wagers or (b) information assisting in the placing of bets or
wagers on a sporting event or contest; or (2) the use of a wire communication which entitles the recipient to receive money or credit as a result of (a) bets or wagers or (b) information assisting in the placing of bets or wagers. . . .
In conclusion, based on the language of the statute, the legislative history, the logical interpretation of the statute and the available case law, the court finds that § 1084(a) is not limited to sports betting but includes other kinds of gambling as well.
Like the judge in Lombardo, the magistrate judge in Kaplan found the Wire Act sufficiently unambiguous so as to preclude application of the rule of lenity.
…her interpretation of the Wire Act was materially different from that of the judge in Lombardo. lthough the judges in Lombardo and Kaplan each found the Wire Act to be unambiguous, their findings in this regard are surprising, given that they did not agree as to its meaning with each other, let alone with the Fifth Circuit panel. It is obvious that the Wire Act is subject to different interpretations by different persons educated in the law. Only when conducting such non-sports-related Internet gambling in the states within the Fifth Circuit can they be comfort able that the Wire Act does not apply.
…if the Lombardo reasoning were followed by the courts in a state where a state lottery, pursuant to express legal authorization, offered play of its (non-sports) games via the Internet, then the lottery could be in violation of the Wire Act if it sent or received the following sorts of Internet communications between two points within the state, if such communications were deemed to be sent in interstate or foreign commerce:
- Communications that contain information assisting in the purchase of a ticket or a right to participate in a wagering game, and
- Communications that entitle the recipient tor eceive money or credit as a result of a wager.
If, however, the MasterCard reasoning were followed by the courts in that state, then the Wire Act would not apply, and the lottery could not violate the Wire Act except to the extent its games were based on sporting events or contests.
The Wire Act appears to prohibit electronic wagers transmitted between two points in the same state, when routed through other states, even if the wagering is legal in the state in which the wagers are initiated and received.
If the DOJ is correct that the Wire Act applies to all types of wagering and not only to wagering on sporting events and contests, then the applicability of the Wire Act to intrastate wagering becomes paramount. This is because the Wire Act then could prohibit the conduct of state-authorized intrastate non-sports wagering, even though conducted in accordance with the UIGEA’s intrastate gambling exception. In this regard, the DOJ has long been of the view that a transmission is in “interstate or foreign commerce” for purposes of the Wire Act if the transmission is routed across state or national boundaries, even though the transmission begins and ends in the same state.
David Nissman, writing for the criminal division of the DOJ, asserted that it would violate federal law if the U.S. Virgin Islands were to make available Internet casino gambling to persons located on the island. In his letter to the chair of the U.S. Virgin Islands Casino Control Commission, he stated:
As you know, the Department of Justice believes that federal law prohibits all forms of Internet gambling, including casino-style gambling, occurring within a state, common wealth, territory, or possession of the United States and the Criminal Division [of the DOJ] has asked me to send you this letter. While several federal statutes are applicable to Internet gambling, the principal statutes are Sections 1084 and 1952, of Title 18, United States Code.
. . . [W]e believe that the acceptance of wagers by gambling businesses located in the Virgin Islands from individuals located either outside of the Virgin Islands or within the Virgin Islands (but where the transmission is routed outside of the Virgin Islands) would itself violate federal law. . .
In addition, on Apr. 5, 2006, in testimony with respect to the Goodlatte bill, a predecessor bill to the bill that became the UIGEA, a DOJ representative testified that the DOJ objected to language in the Goodlatte bill that, had the bill become law, would have amended the Wire Act and clearly permitted intrastate Internet wagering if authorized by the state. He testified:
[The Goodlatte bill] also permits “intrastate” wagering over the Internet without examining the actual routing of the transmission to determine if the wagering is “intrastate” versus “interstate”. Under current law, the actual routing of the transmission is of great importance in deciding if the transmission is in interstate commerce. The Department [of Justice] is concerned that these two proposals would weaken existing law.
The Goodlatte bill, and its provisions amending the Wire Act—which, among other things, would have made irrelevant under the Wire Act the inter mediate routing of electronic wagering transmis sions—did not pass the Senate, and the Wire Act was not amended.
Although no reported case is directly on point, the DOJ’s position is supported by case law. In Yaquinta v. United States…
In West Virginia at the time, pari-mutuel wagering on horse races at licensed race tracks was lawful, but off-track wagering on such races was not. The defendants argued that the congressional intent expressed in the Wire Act was not to make criminal the use of an interstate wire transmission facility to carry messages beginning and ending in the same state “no matter how many other States the electrical impulses, carried by the wires, traversed,” but rather was to prohibit certain interstate wire transmissions that began and ended in different states. The court rejected this argument, stating that “the intermediate crossing of a State line provides enough of a peg of interstate commerce to serve as a resting place for the congressional hat, if that will serve the congressional purpose.” The court thus held the Wire Act applicable to the wire transmissions at issue.
The 10th U.S. Circuit Court of Appeals reached a similar conclusion in United States v. Kammersell…
In that case, the defendant was charged under 18 U.S.C. § 875(c), which prohibits the transmission “in interstate or foreign commerce [of] any communication containing any threat to kidnap any person or any threat to injure the person of another,” and at issue was whether a threatening “instant message” between two points in Utah, but routed through other states, constituted a transmission “in interstate or foreign commerce.” The 10th Circuit affirmed the lower court’s holding that the transmission was in interstate commerce, notwithstanding the fact that the transmission originated and was received in the same state. The court stated that the defendant’s threat “was unquestionably transmitted over interstate telephone lines,” and thus fell “within the literal scope of the statute and [gave] rise to federal jurisdiction.”
Thus, based on the reasoning in Yaquinta and Kammersell, the DOJ appears to be correct in its view that the wire transmission by a gambling business of wagers and/or information assisting in wagering between points in the same state, but where the transmission is routed out of the state, constitutes an interstate transmission for purposes of the Wire Act. Accordingly, even if the underlying wagering were authorized by the state in which such transmissions began and ended, if the interstate nature of such transmissions was known to the transmitting business, such transmissions likely would be unlawful under the Wire Act (assuming the type of underlying wagering was covered by the Wire Act) unless they fell within the exemptions in Wire Act § 1084(b)—i.e., unless the transmissions were for news reporting of sporting events or contests or were of information assisting in wagering on sporting events or contests and sent between states in which wag wagering on such sporting events or contests was legal.
It would be contrary to the purpose of the Wire Act to use it to prohibit electronic wagers transmitted between two points in the same state, even if routed through other states, if the underlying wagering were conducted in compliance with the UIGEA intrastate wagering exception
There has been no reported case of enforcement of the Wire Act against gaming operators transmit ting wagers or information assisting in the placing of wagers, between points in the same state, where the underlying wagering was expressly authorized by the laws of the state. This is not surprising, because to do so would be contrary to the intended purpose of the Wire Act.
As stated by the court in Yaquinta, the purpose of the Wire Act is: to assist the various States . . . in the enforce- ment of their laws pertaining to gambling, bookmaking, and like offenses and to aid in the oppression of organized gambling activi- ties by prohibiting the use of . . . wire communication facilities which are or will be used for the transmission of certain gambling in- formation in interstate . . . commerce. . . .
[T]he objective of the [Wire] Act is not to assist in enforcing the laws of the States through which the electrical impulses traversing the telephone wires pass, but the laws of the State where the communication is received.
Further support for this can be found in the House Judiciary Report explaining the Wire Act exemption of § 1084(b):
For example, in New York State parimutuel betting at a racetrack is authorized by State law. Only in Nevada is it lawful to make and accept bets on the race held in the State of New York where parimutuel betting at a racetrack is authorized by law. Therefore, the exemption [§ 1084(b)] will permit the transmission of information assisting in the placing of bets and wagers from New York to Nevada.
Clearly, in determining the applicability of the exemption, one looks only at the points where the wagering-related communications begin and end. The intermediate routing of the communications is not relevant for such purpose. Thus, it would defy common sense if the DOJ were to apply the Wire Act to prohibit wire transmissions between points in the same state, where such transmissions constituted wagers expressly authorized by that state’s laws and otherwise complied with the intrastate exception of the UIGEA, solely because the transmissions were routed outside of the state. Had the underlying wagering in Yaquinta been legal, it seems unlikely that the prosecution would have been brought, and if it had been brought, it seems unlikely that the court would have found the defendants guilty under the Wire Act, even if the wagering-related information constituted actual bets and wagers (as opposed to mere information assisting in the placing of bets and wagers). If the underlying wagering had been legal in West Virginia, there would have been no need to assist the State in the enforcement of its laws, and using the Wire Act to prohibit communications that began and ended in that State, and assisted in wagering authorized by that State, would not have served the purpose for which the Wire Act was enacted.
Moreover, use of the Wire Act to prohibit intrastate wagering (except for the routing of transmissions) expressly authorized by a state would actually thwart that state’s laws, directly contrary to the stated purpose of the Wire Act. The Wire Act should not be used toward such ends inconsistent with its intended purpose
In summary, there is a conflict between the Wire Act and the intrastate wagering exception to “unlawful Internet gambling” in the UIGEA. Wagering activities excepted from “unlawful Internet wagering” under the UIGEA may nevertheless constitute violations of the Wire Act. More specifically, it appears that intrastate Internet wagering expressly authorized by the laws of a state and otherwise conducted in accordance with the UIGEA’s intrastate wagering exception could violate the Wire Act if
1.) the wagering relates to sporting events or occurs in a jurisdiction in which the Wire Act is deemed to apply to all types of wagering,
2.) the transmissions constituting the wagers are routed out of the state.
The stated purpose of the Wire Act, however, is to assist each state in the enforcement of its laws, and it would be inconsistent with this purpose if the Wire Act were used to prohibit intrastate Internet wagering specifically authorized by a state’s laws and otherwise conducted in accordance with the UIGEA’s intrastate wagering exception. Such use of the Wire Act would not assist the state in the en- forcement of its laws but, to the contrary, would actively thwart the state in that effort. Accordingly, the Wire Act should be enforced in connection with intrastate Internet wagering only in circumstances where the underlying gambling is illegal in the state in which the wagering-related transmissions are initiated and received.