The Wire Act

The “wire” in the Interstate Wire Wager Act of 1961, 18 U.S.C. Section 1084 (or as it is simply called, The Wire Act), may have originally been telephones (given the technology back then), but further court interpretations have expanded the coverage of the Wire Act to apply to internet operators.  The original purpose of the Wire Act – before the internet was invented — was to help cut off one of organized crime’s main sources of revenue, the interstate transfer of bets and wagers through telecommunications.  As the result of the tremendous growth of the Internet, the Act was applied to any online or internet gambling.

The Wire Act says that “Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”

Effect of Wire Act

There were some limitations on the Wire Act’s reach or applicability. For example, it applies to those who are “in the business of betting or wagering” in interstate or foreign commerce—that is, it went to those who operated online gambling businesses (i.e., taking bets on sports events by phone) across borders, not the casual bettor or customer of a bookie. This came out of the Act’s purpose: to shut down one of organized crime’s major revenue sources. The Act was not used against the individual players placing bets.

The Act also had a “safe harbor,” or provision taking some betting transactions out from under the Act’s prohibition. If the betting information, etc., was transmitted from one place where it was legal to another place where it was also legal, then it was not prohibited under the Wire Act. This again came from the Act’s purpose: to reduce or eliminate illegal gambling, not state-approved gambling. Legal gambling was not provided by organized crime. That’s why Off-Track Betting (OTB), where state-licensed shops could take bets on distant horse races, was not barred by the Wire Act. Since states authorized the OTB operations, the transmission of betting-related information was legal.

However, while there were some limitations on the Act’s applicability, in other ways, its reach expanded beyond the Act’s drafter’s original intentions. For many years, the language in the Act — “the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers” — was read very broadly or expansively, so that the Wire Act was considered to make all online, internet, or remote gambling in the United States illegal, since you can’t gamble online or remotely without the transmission of information about the bet or wager.

In addition to the Wire Act, Congress passed other special laws that have applicability to on-line gambling, such as the Unlawful Internet Gambling Enforcement Act (UIGEA).   Despite the reach of the Wire Act, online gambling is only legal if it complies with the Unlawful Internet Gambling Enforcement Act.

Justice Department interpretation

In 2011, on President Obama’s watch, the Justice Department changed its position and put out a statement that in its opinion, the Wire Act applied only to sports wagering or betting and not other forms of gambling. Without the threat of Justice Department action, states were free to begin allowing online poker and casino-style games, as a number of states (i.e., New Jersey) have done. The Wire Act has not formally been changed: the law still says what it says, and only the current interpretation has changed. The Justice Department could reverse itself again and take the position that the Wire Act does bar all online gambling.

At least one Federal Circuit Court of Appeals (the Fifth Circuit, covering parts of the Midwest) has concluded, in-line with the Justice Department’s 2011 statement, that the Wire Act does only apply to sports betting. The U.S. Supreme Court, however, has not yet weighed in on the subject. Until the Supreme Court issues a definitive ruling, it’s not impossible that the former interpretation could be reinstated and upheld. It therefore could be the case that the Wire Act does ban all internet gambling, since the issue has not been put to the test in final ruling.

Case Studies in Online Gambling: Exploring the Implications of the Wire Act

Case Study 1: The Expansion of the Wire Act

BetNow, a prominent online gambling platform, finds itself entangled in a legal battle due to its involvement in facilitating interstate transmission of bets and wagers. The court’s interpretation of the Wire Act has broadened its coverage to encompass online gambling, leading to potential repercussions for BetNow’s operations. We examine the legal arguments and implications of this expansion, shedding light on the challenges faced by online gambling businesses in navigating the intricacies of the Act.

Case Study 2: Limitations and Safe Harbor Provisions

PokerStars, a leading online poker platform, operates interstate online poker games. Despite the restrictions imposed by the Wire Act, PokerStars manages to operate within the safe harbor provision. We analyze the legal intricacies surrounding this provision and its impact on PokerStars’ ability to offer its services to users across state lines. This case study emphasizes the importance of understanding the nuances of the Act for individuals and businesses engaged in online gambling.

Case Study 3: The Justice Department’s Interpretation

DraftKings, a popular online sports betting platform, operates under the assumption that the Wire Act only applies to sports wagering. However, a surprising turn of events occurs when the Justice Department reverses its 2011 statement, asserting that the Act encompasses all forms of online gambling.

DraftKings, along with other similar platforms, now faces legal uncertainties and potential consequences for their operations. We examine the implications of this reinterpretation and its impact on the online gambling industry as a whole.

Case Study 4: Uncertain Legal Landscape

FanDuel, a well-known online casino and sports betting platform, faces a dilemma regarding its nationwide operations. While the current interpretation of the Wire Act allows FanDuel to operate legally, there is a possibility of the Supreme Court issuing a different ruling. FanDuel closely monitors legal developments and stays abreast of any potential changes that may affect its operations.

This case study highlights the importance of adaptability and vigilance in an ever-evolving legal landscape, urging online gambling companies to navigate the uncertainties with caution.

Summary

As of December 2018, the date of publication, interstate online sports betting is illegal under the Wire Act—which is why that states who are now instituting sports betting are only doing so within their own borders and are not taking bets from players outside the state. Other online gambling appears to be legal under the Wire Act, but we can’t yet be 100% certain that it will always remain legal.

Our article on “States That Allow Gambling” breakdowns the types or forms of gambling that are currently legalized in the state.