US SPORTS BETTING
mobile sports wagering is allowed will be routed through other states. Further, if licensed sports-wagering operators cannot safely use the Internet to receive bets and issue payouts within a single state, they must take a number of complicated and expensive steps to reduce the risk of intermediate routing. Moreover, the continuing legal uncertainty deters risk-averse market participants such as large financial institutions from entering the industry. In light of the recent dramatic state trend toward legalization of sports betting and the attendant shift in moral and social acceptance of such conduct, there is a growing tension between state laws permitting sports wagering within their borders and the legal uncertainty emanating from the Wire Act. This question accordingly must be addressed and regulatory clarity provided to allow the sports-wagering industry to innovate and grow.
THE BETTER READING OF THE WIRE ACT IS THAT IT DOES NOT EXTEND TO INTERMEDIATE ROUTINGS The Wire Act’s provisions do not directly address the issue of intermediate routings, likely because the Act was drafted three decades before the Internet was invented. There is also no case law to date addressing whether intermediate routing of Internet communications falls within the scope of the Wire Act. If this question were to make its way before courts or regulators, its resolution would likely turn first and foremost on consideration of the statutory text.
The better reading of the Act is that its prohibitions do not extend to intermediate routings of bets or information assisting in the placing of bets, even if those intermediate routings travel through states prohibiting sports wagering. This conclusion is grounded in a close textual analysis of this provision.
Specifically, the first subpart of this Act prohibits wagering entities from “knowingly” using wires “for the transmission in interstate or foreign commerce” to transmit (1) “bets or wagers” and also (2) “information assisting in the placing of bets or wagers” on sporting events. The safe harbor, by its express terms, excludes
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intermediate routings falling within the second category. The question, however, remains whether intermediate routings of intrastate bets and wagers placed over the Internet should also be excluded from the scope of Section 1084(a).
To answer that question, one must assess the meaning of the phrase “knowingly uses a wire communication facility for transmission in interstate or foreign commerce,” which modifies the first clause. The question is whether this phrase includes Internet communications originating in and destined for the same state, but which are intermediately routed through other states. The textual analysis ultimately turns on the significance of the Act’s inclusion of the words “knowingly” and “for.” The term “knowingly” imports a “knowing” mens rea requirement into the statute. The question remains whether that knowledge requirement only modifies “uses a wire communication facility for the transmission . . . of bets or wagers” or also modifies the requirement that the “transmission [be] in interstate or foreign commerce.” The text makes clear that the knowledge requirement modifies the interstate transmission element for two primary reasons.
First, the grammatical structure of the clause suggests that the term “knowingly” modifies every element of this clause. The first clause of Section 1084(a) provides: “[w] hoever being engaged in the business of betting or wagering knowingly [a] uses a wire communication facility [b] for the transmission in interstate or foreign commerce [c] of bets or wagers” is guilty of an offense. No one contests that the defendant must know that the wire communication is being used for the transmission of “bets or wagers,” which requires extending the term “knowingly” to the last element of the provision. There is no reason to think that Congress would have intended the term “knowingly” to modify the most immediate element (use of a wire) and the most remote element (to place a bet or wager) but not the intermediate element (for the transmission in interstate commerce). Such a construction would be arbitrary and should be rejected. Second, this narrower reading is bolstered by Congress’s inclusion of the word “for” in the interstate
wpadington/Adobe Stock
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