Michigan Leading Multi-State Joint Defense Of Legality Of US Lotteries

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When you consider that the 47 lotteries in the U.S. combined to raise more than $80 billion in gross revenues in 2017, it should be no surprise that so many state attorneys general have asked a federal court for relief from what is seen as a threat to its very existence.
Michigan Attorney General Dana Nessel on Friday was joined by peers in more than a dozen states — including Ohio, Virginia, North Carolina, Tennessee, Maryland, and the District of Columbia — in filing an amicus, or “friend of the court,”  brief to the U.S. First Circuit Court of Appeals.
Lottery supporters gained an emphatic victory in mid-2019 when a U.S. District Court judge ruled with the plaintiff, the New Hampshire Lottery, by finding that the Department of Justice erred earlier that year in declaring that the Federal Wire Act of 1961 applied beyond just interstate sports betting.
That legal opinion by the DOJ has roiled officials with state lotteries, multi-state lotteries, online poker and casino advocates and others in the gaming industry because of what has become an ambiguous legal environment for such activities.
Treading on some of the same legal ground that New Jersey and Pennsylvania did in their own amicus briefs last week, Nessel noted that the various U.S. lotteries “support public education, college scholarships, environmental protection, senior citizens, first responders, and infrastructure projects, among other things.”
“Their actions show that they do not comprehend what is at stake if this Court reinstates the…. [DOJ] Opinion…..  Doing so would cause governments nationwide a catastrophic loss of revenue, precipitating the reduction or elimination of vital public services.”

What sort of lottery games are at risk?

Nessel said the DOJ “contending that even intrastate wire communications may violate the Wire Act’s prohibitions on transmissions … would require lotteries to revert to using antiquated systems to transmit data.”
While most states are partners in Mega Millions, Powerball, or both, the point made by lottery officials is that not even traditional retail lottery ticket purchases are  clearly permitted under the opinion. That’s because the technology of ticketing includes servers and other infrastructure that is located in other states.
Therefore, Nessel wrote, “reinstating the Opinion would force the lotteries to choose whether to discontinue activities generating vital public funding or potentially face criminal liability.
“Even if the DOJ did not understand how government-operated lotteries work — for example, not comprehending that they rely on wire transmissions for even traditional brick-and-mortar ticket sales — the DOJ plainly understood that its opinion was applying to government-operated lotteries and affecting their conduct.  If the DOJ had reservations about the Wire Act’s application, it could have resolved them in the Opinion. Of course, during this litigation, the DOJ has rejected every basis raised for concluding that the Wire Act does not apply to government-operated lotteries and their vendors.”
The Michigan filing goes further down the original rabbit hole of what the Wire Act was intended to prohibit than New Jersey or Pennsylvania did.

Depends what the definition of ‘is’ is

Just a few of the ‘headlines’ of a long section provide a hint of the complexity of the case:
– “The two clauses of [the Wire Act]  state prohibitions in only one prepositional phrase each, and each prepositional phrase must be read as a whole.”

– “The absence of commas in the first clause does not support applying the last-antecedent rule.”

– “Consistency and context require applying the sports gambling modifier to all four prohibitions.”

“Your Honor, May We Have a Minute…..(or 10)”

While Pennsylvania attorneys sought five minutes of oral argument before a First Circuit panel sometime this year, Michigan — with its army of 16 states and D.C. — has asked for 10 minutes.
(The states previously not mentioned above that also have teamed with Michigan in the brief are Arkansas, Colorado, Connecticut, Delaware, Idaho, Kentucky, Maryland, Minnesota, North Carolina, Ohio, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, and Wisconsin.)
Finally, it is striking to see the following sentence in the Michigan brief — and how it makes one wonder why such ancient history remains so legally relevant in the internet era: “In 1961, [U.S.]  Attorney General Robert F. Kennedy proposed the legislation to fight organized crime, which relied in part on gambling to fund its operations.”

Still more briefs offer new angles

Another brief was filed by the iDevelopment and Economic Association, or iDEA, which is a Washington, D.C.-based trade group that represents players in online poker, online casino gaming, and other sectors of the iGaming community. Its parallel argument references the economic harm to its members should DOJ not stand down in the controversy — or be forced to do so by the courts.
Online gaming in New Jersey in 2019, notes iDEA attorney Jeff Ifrah, generated $483 million in revenue and $73 million in tax revenue. A special emphasis was noted about the DOJ threat to the online poker pact among New Jersey, Delaware, and Nevada being under siege.
And since iDEA gained oral argument time at the District Court level, it seeks 10 more minutes before the Third Circuit.
International Game Technology, better known as IGT, also entered the fray with its own brief last week. And, it, too, wants 10 minutes of oral argument — if the Coalition to Stop Internet Gambling gets its wish for 10 minutes by the court.
IGT is the king of lotteries, serving as the primary lottery contractor in 25 states and providing “equipment and services for 12 more lotteries. So this is the brief that most thoroughly dissects CSIG’s arguments in the case.
IGT attorney Jonathan Cohn writes that “the [language]  construction the Coalition advances is equal parts unprecedented, unsupported, and unwise. No court has ever ruled that the states are subject to criminal liability under general provisions of federal gaming law.”

New Hampshire Strikes Back

All of the amicus briefs back the New Hampshire Lottery’s request for oral argument, which seems likely.
New Hampshire attorneys in their 97-page response “brief” point to how as it offered the reversed opinion on the meaning of the Wire Act, “it did so without a single vote in Congress, or ever having brought a single prosecution.”
Ironically, opponents of online gaming of many forms buttressed New Hampshire’s current argument, the attorneys note, by introducing several bills in Congress in the 1990s that “would cover all types of gambling, not just sports betting.” Under the new DOJ opinion, then, such Congresspersons were wasting their time.
After the issue became muddled in the 2000s by other DOJ declarations on gaming, attorneys representing New York State and Illinois asked for a formal clarification on whether those states could sell online lottery tickets.
In 2011, the DOJ appeared to clear the air with a formal opinion that only sporting event wagers across state lines were prohibited by the Wire Act — opening the door for online lotteries, online poker, and other forms of online casino games now offered in states such as New Jersey and Pennsylvania.
The lotteries currently appear to be safe only until June 30, which is the expiration of a DOJ “forbearance period” of “prosecutorial discretion.” And even that extension may not leave lotteries exempt from prosecution for activity in 2019-20 that continued after the formal broadening of the Wire Act by DOJ.
Greek tragedy reference: Lottery attorneys write that they “should not be forced to choose between the Scylla of investing resources into a business that may someday expose them to prosecution, and the Charybdis of abandoning the venture altogether despite their belief that the activity is lawful.”
(Legendary attorney Ted Olson, who added the takedown of the PASPA sports betting law to his arsenal with the U.S. Supreme Court’s ruling, is credited as “Counsel of Record” for the New Hampshire brief along with longtime colleague Matthew McGill.)
One of the powerful weapons in New Hampshire’s arsenal is a 2014 ruling in the First Circuit that concluded “the Wire Act applies only to wagers on any sporting event or contest, that is, sports betting.”
Federal Judge Paul Barbadoro ruled that the statement was not binding on this case because it wasn’t crucial to that outcome. But in layman-ese, it sure won’t hurt.
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John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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