During the past few years, more states have moved toward online lottery operations and even expanded online gaming offerings, which are more similar to online casino games than traditional lottery offerings. The push to expand lottery operations began in 2011 when the United States Department of Justice (DOJ) issued an opinion from its Office of Legal Council (OLC), which said the DOJ was changing the traditional interpretation of the Wire Act, so that only sports betting was prohibited online, not other forms of wagering. NACS has long held that this interpretation is inaccurate and that the Wire Act applies to all forms of gaming, including state lotteries.
When the Wire Act was passed in 1961, it was intended to curb the proliferation of organized crime that used the nation’s wire system to accept and transmit wagers. These criminal organizations were using wires to offer bogus lottery-type games, among other things. As the internet advanced, the federal government held that the Wire Act applied to it as well, which meant all online forms of gambling were illegal.
In 2011, the OLC issued a dramatic reinterpretation of the Wire Act in response to a handful of state lotteries that wanted to expand their reach and saw the internet as a likely avenue to do so. The OLC reinterpreted the Wire Act, despite the decision being contradictory to various laws passed by Congress since the Wire Act’s 1961 passage. These laws built on the interpretation that online gaming was illegal, with one of the laws being the Unlawful Internet Gambling Enforcement Act passed in 2006.
The push to expand traditional state lottery offerings was boosted again in 2018 when the United States Supreme Court held that a federal law that prevents most states from offering sports betting is unconstitutional. This ruling has allowed more states to legalize sports betting. And, despite the clear prohibition of sports betting by the Wire Act, some states have looked for ways to bring sports betting online. The DOJ dealt a blow to lottery and sports betting expansion in early 2019 by reversing its 2011 interpretation, and the DOJ now interprets the Wire Act to prevent all forms of gaming on the internet.
Many states have sought to either challenge or in some cases outright ignore this decision by the DOJ. For example, Pennsylvania is one of a few states that argues that as long as all of the lottery system hardware is located physically within the Commonwealth, they are not engaging in interstate commerce and can offer any form of online gaming they choose. This goes against the established legal precedent that says once something is online it is inherently interstate.
NACS has long advocated that the Wire Act applies to all forms of gaming, including state lotteries.
Another approach was taken by New Hampshire. The state has sued the DOJ, arguing that the OLC interpretation of the Wire Act endangers popular multistate lottery games, such as Powerball and Mega-Millions. The lawsuit does not explain how those games were legal prior to 2011 when the OLC first raised doubts about the application of the Wire Act to lotteries. The New Hampshire case took an interesting and unexpected turn when, during oral arguments, the federal judge hearing the case brought up the possibility that the Wire Act may not even apply to states at all. The lawyers representing New Hampshire hadn’t broached that topic but seemed to enthusiastically agree that the Wire Act shouldn’t apply to states. The DOJ legal team was unable to provide a succinct argument as to why the Act does in fact apply to states, as well as private entities. At press time, the two sides of this case were preparing briefs for the judge on this question, so the outcome remains in doubt.
NACS believes that the Wire Act applies to all states, as well as private entities, and the OLC reversal back to its established precedent in no way threatens the existence of traditional multistate lottery games. Those games existed prior to 2011 without any challenge. The Wire Act is a consumer-facing law, which does not impact the “back office” operations of such multistate games. Lotteries have always been free to communicate with each other about winning numbers and prize amounts without fear of violating federal law.
And it is worth noting that when state lotteries advocated for the 2011 DOJ opinion, they clearly believed that the Wire Act applied to them. It has always been assumed to do so.
NACS will continue to monitor developments on the case in New Hampshire and other online lottery developments. Online lotteries present many policy problems, such as gambling addiction and underage gambling, as these issues are mitigated by requiring in-person transactions. Keeping lotteries off the internet is not only the best interpretation of the law but also the best policy, and NACS will continue to advocate on this stance.