The U.S. Supreme Court’s 2018 decision in Murphy v. NCAA, declaring that certain provisions of the Professional and Amateur Sports Protection Act (PASPA) violated the Constitution’s “anti-commandeering” clause, is a potential boon for legal sports betting in the U.S.
However, even after PASPA’s demise, the Federal Wire Act continues to criminalize interstate sports wagering—a fact only strengthened by the Department of Justice’s (DOJ) most recent interpretation of the law (18 USC § 1084).
The Wire Act prohibits the use of wire communications facilities—including the Internet—to transmit wagers, or information assisting in the placing of wagers, in interstate or foreign commerce. While an exception to this prohibition exists for information assisting in the placing of sports wagers if the information is both transmitted and received in a state or country where sports wagering is legal, no exception exists for the wagers themselves. The interstate transmission of sports wagers via “wires” is prohibited. But in an opinion issued in 2011, the DOJ stated that the Wire Act applied only to interstate sports wagering. Non-sports-related gambling activities, such as online lotteries, were not prohibited. However, in a new opinion dated Nov. 2, 2018, the DOJ reinterpreted the Wire Act, concluding that it applies to all forms of interstate gambling activities, not just sports wagering.
Thus, despite Murphy, the Wire Act continues to limit sports wagering activity to purely intrastate operations. This means that all wagers must be initiated, received, accepted and processed within a single state in which such wagering activity is legal. Arguably, under the DOJ’s current interpretation of the Wire Act, the servers and other technical equipment used by sports wagering operators must be located in the same state. The problem here is that the modern Internet was not designed to be confined by borders. This gives rise to the issue of intermediate routing—sometimes referred to as the “errant electron” problem. That is, because packets of information on the Internet typically travel via the most efficient means existing at the time of the transmission, it is possible that wagers or gambling-related information will travel across state lines, if only temporarily, before returning to the state of initiation and acceptance. This interstate aspect of the wagering process, albeit fleeting, may technically violate the Wire Act, and therein lies the problem.
Whether such intermediate routing actually violates the Wire Act depends on how the relevant U.S. attorneys—and, ultimately, the courts—enforce the prohibition. In Nevada, the state’s gambling regulators seem to recognize that legal intrastate sports wagers do not lose their legal status just because related transmissions may have been routed through nearby states. Further, the Nevada Gaming Commission has adopted regulations that would allow for interstate sports wagering, should such activity become legal under federal law. Yet, it is unknown if legislatures and regulators in other jurisdictions will adopt the same view. And, importantly, the DOJ’s view is even less clear.
In the only reported court decision arguably on point, the court assessed whether the Wire Act applied to the use of a wire to carry information assisting in wagering on horse races, where the messages were initiated and ended in West Virginia—where the activity was legal under state law—but were routed through Ohio—where it was not. In United States v. Yaquinta, a federal grand jury charged several bookmakers with conspiracy to violate the Wire Act. The defendants moved to dismiss the indictment, arguing that the Congress did not intend to criminalize the use of an interstate wires to transmit messages within West Virginia, no matter how many states the “electrical impulses, carried by the wires,” traversed. The district court disagreed, holding 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.”
All things considered, it would now seem that to apply § 1084 to a business model—that was established long after the Wire Act itself—and, that accepts online sports wagers received in a single state in which such activity is legal, regardless of any intermediate routing, is not only illogical, but inconsistent with the overall purpose and intent of the statute.