US SPORTS BETTING
Justice’s Office of Legal Counsel (OLC) issued an opinion rejecting the notion that a 2006 federal wagering law’s exclusion of intermediate routings should inform how the Wire Act is interpreted. The unmistakable inference left from this section of the 2018 OLC Opinion is a warning that DOJ prosecutors might interpret intermediate routings to fall within the reach of the Wire Act. While prosecutors have yet to bring a prosecution based on an Internet intermediate routing, the risk of prosecution arising from this sweeping interpretation chills innovation and deters risk-averse entities like large financial institutions from entering the industry. The legal question is thus an important one, and it is the subject of this article. In our view, as explained below, a careful textual analysis of the Act provides a clear answer—the Wire Act can and should be read to exclude intermediate routings.
THE WIRE ACT’S PROHIBITIONS The Wire Act, 18 U.S.C. § 1084(a), prohibits use of
interstate communication technology in the U.S. to place bets on sporting events. Notably, this law was written three decades before the invention of the Internet, and the Supreme Court has never weighed in on whether or how this law applies to communications over the Internet. However, among the lower courts that have faced the issue, the Act has been held applicable to communications over the Internet.
The Act provides that [w]hoever being engaged in the business of betting or wagering knowingly uses a wire communication facility [1] for the transmission in interstate or foreign commerce of [i] bets or wagers or [ii] information assisting in the placing of bets or wagers on any sporting event or contest, or [2] for the transmission of a wire communication which entitles the recipient to receive money or credit [i] as a result of bets or wagers, or [ii] 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. The first subpart of this provision prohibits wagering entities from using wires “for the transmission in interstate or foreign commerce” to transmit “bets or wagers” and also “information assisting in the placing of bets or wagers” on sporting events. The second subpart prohibits the same where the wire transmission “entitles the recipient to receive money or credit.”
THE WIRE ACT’S SAFE HARBOR The Act, however, creates a safe harbor exemption for
interstate transmissions assisting in placing bets where sports betting on the event is legal in both the transmitting and receiving jurisdictions. Id. § 1084(b). The safe harbor provides that
[n]othing in this section shall be construed to prevent . . . the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.
Id. (emphasis added). Thus, where sports betting on a particular event is legal in both jurisdictions, betting entities may transmit information across those jurisdictions to assist each other in placing bets on that event.
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In contrast, the safe harbor exemption has not, thus far, been interpreted by federal courts to extend to communications placing or receiving a bet on a sporting event. In United States v. Ross, the district court addressed what constitutes the transmission of a bet versus the transmission of information assisting the placing of bets. It held that an offer to accept a bet constitutes a transmission of a bet rather than information assisting in placing bets.
THE UNAVOIDABLE RISK OF INTERMEDIATE ROUTING Thus, on one reading, the Wire Act prohibits communications placing bets across state lines. Given that many states since 2018 have passed laws authorizing sports-wagering activities within their borders over mobile devices, it is necessary to understand whether the Wire Act’s prohibitions also extend to communications that originate in and are destined for the same state, but experience intermediate routing through another state. To date, this issue has not been addressed through binding regulation or case law.
The question matters because there is a non-trivial risk that Internet-based communications of licensed sports-wagering enterprises operating in a state where
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