New Hampshire Lottery Defeats Trump in Case that Bolsters Online Gambling
During the final morning of President Donald Trump’s term, Judge William Kayatta Jr. of the U.S. Court of Appeals for the First Circuit in Boston rejected an interpretation of the Wire Act that could have made state lotteries illegal and threatened the viability of online gambling. Some believe the interpretation reflected lobbying efforts by groups sympathetic to brick-and-mortar casinos and to the recently deceased casino magnate—and Trump backer—Sheldon Adelson.
The ruling is a decisive victory for the New Hampshire Lottery Commission and, by extension, the 48 states and territories that operate lotteries. Under the leadership of Executive Director Charlie McIntyre, the New Hampshire lottery filed a federal lawsuit in 2019. It faced the daunting task of convincing judges that the U.S. Attorney General’s office misunderstood the law.
The Justice Department could petition the U.S. Supreme Court to hear the case, but that department is now under the leadership of President Joe Biden and Attorney General-nominee Merrick Garland.
“Hopefully,” McIntyre told Sportico in a post-ruling interview, “this brings finality to the issue. I never doubted for a moment we were right, and because we couldn’t reach agreement with the Justice Department, we had to seek redress in the courts. Ultimately, some fights just need fighting.”
The case centered on how the federal Wire Act, signed into law by President John F. Kennedy in 1961, ought to be understood in a world with online transactions. The Act prohibits individuals and businesses from using wire communications (such as bank wires, telephones, and, nowadays, the Internet) to transmit, across state lines, wagers on sporting events or information relating to wagers. In fact, the Act criminalizes such activity.
Until 2017, the Act was interpreted to only apply to sports gambling. A plain reading arguably supported this conclusion. Consider the instrumental role played by the phrase “sporting event or contest” in the Act:
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.
In 2018, the Office of Legal Counsel at the Justice Department disagreed with this conventional interpretation. It reasoned that the Act contemplates sports bets as well as—notice the “or” following “any sporting event or contest”—other transmissions of wire communications involving wagers, such as lotteries.
This more expansive view troubled some states, particularly those with successful lotteries. Banks, states recognized, might no longer accept and process lottery transactions that have, or could have, elements that cross state lines.
New Hampshire’s lottery is a useful example. Although the lottery requires physical, in-person purchases, aspects of lottery transactions go beyond the Granite State’s borders. Internet-based systems, for instance, are used for the routing of data. The lottery also utilizes out-of-state backup servers as well as websites and social media to reveal results, advertise and educate consumers.
Profits from the New Hampshire lottery are earmarked for the state’s education trust fund. As noted by Judge Kayatta, the lottery contributed $82.7 million to the fund in fiscal year 2018.
The New Hampshire lottery has warned the state might withdraw from multi-jurisdictional games if lottery activity constituted illegal conduct. One popular game is Powerball, the loss of which would deprive the state of an estimated $40 million dollars a year.
McIntyre led a legal challenge joined by one of the lottery’s vendors, NeoPollard Interactive. They were successful at the district court level and faced review by the First Circuit. Writing on behalf of himself and Judge Sandra Lynch, Judge Kayatta devoted pages of analysis on how to correctly read the Wire Act’s phraseology and syntax. The court ultimately concluded each reference to “bets or wagers” means “bets or wagers on any sporting event or contest”.
McIntyre surmised that the real winner is New Hampshire’s education system. “Now I don’t have to worry about being charged for doing my job,” he said, “and we can continue raising badly needed funds for education. “
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