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How Monday's Wire Act Decision Affects The Poker, DFS And Sports Gambling Industries

On Monday, the U.S. District Court for the District of New Hampshire held that the Interstate Wire Act applies only to "activities associated with sports gambling

On Monday, the U.S. District Court for the District of New Hampshire held that the Interstate Wire Act applies only to "activities associated with sports gambling" and not to the interstate sale of online lottery tickets. This decision calls into doubt the new, broader interpretation of the Wire Act adopted by the Trump administration in a November 2018 memorandum, which has since emerged as a source of grand controversy within the broader gambling community.

Not only does Monday's federal court decision benefit the New Hampshire Lottery Commission, but it also signals a big win for online poker operators. Meanwhile, the impact of the decision on the daily fantasy sports and sports gambling industries is far more nuanced.

Here is a closer look at how Monday's federal court decision affects online poker, sports gambling and daily fantasy sports:

For online poker operators, Monday's court decision represents just about the greatest win imaginable at this stage of litigation. Prior to the Trump administration's November 2018 memorandum, the U.S. states that had legalized online poker, including Delaware, New Jersey and Nevada, had taken steps to allow for interstate poker pools, which would have allowed licensed operators to offer contests across state lines. The Trump administration's broad interpretation of the Wire Act nevertheless called into doubt whether online companies that offered interstate poker contests could truly do so without violating the Wire Act. However, since poker is clearly not "associated with sports gambling," Monday's court decision clearly supports the legality of interstate poker compacts, paving the way for online poker's further growth on a national or semi-national basis.

For sports gambling operators, Monday's decision is legally neutral, but arguably undesirable for lobbying purposes. Despite some of what has been reported by the mainstream media, Monday's federal court decision does nothing to aid the legal position of the sports gambling industry. Under every conceivable interpretation of the Wire Act, including the one adopted on Monday by the U.S. District Court, interstate sports gambling clearly falls under the ambit of the Wire Act. Thus, while Monday's court decision seems to bless the legality of interstate poker compacts, it does nothing to support the legality of interstate sports gambling compacts.

Consequently, for now, sports gambling operators will need to continue to operate their activities on a within-state basis. And while the larger online sportsbooks can lobby Congress to overturn the Interstate Wire Act, these online sportsbooks are now more likely to need to pursue this endeavor alone, rather than with the help of online poker operators that no longer face the same level of risk associated with interstate gaming compacts.

For daily fantasy sports, Monday's decision remains ambiguous, but it's definitely not harmful. The big unanswered question by Monday's federal court decision is whether fantasy sports contests that include the prediction of player performances over multiple real-world sporting events constitute the "placing bets or wages on [a] sporting event of contest," which are behaviors subject to regulation by the Wire Act, even under Monday's court ruling.

Prior to the Trump administration's November memorandum, the answer to this question was presumably "no" as the fantasy sports carve-out under the Unlawful Internet Gambling Enforcement Act of 2006 seemed to help explain the fine-line demarcation between fantasy sports activities and "placing bets or wages on [a] sporting event of contest" in a manner that many industry experts would agree made sense.

The Trump administration's memorandum, however, seems to reject the notion that the UIGEA plays any role in helping to explain the outer contours of what constitutes "bets or wagers on any sporting event or contest" and, as a result, leaves the answer to this question more up to common sense than statutory clarity.

While the Trump administration's conclusion regarding the lack of relationship between the Wire Act and the UIGEA represents one of the more befuddling conclusions of the entire 23-page memo—a federal statute, of course, can help explain another statute, even when it does not explicitly alter it—Monday's court decision did not address the arguable overlay between the Wire Act and the UIGEA as it was irrelevant to the issue at hand. Thus, while Monday's decision did not include anything explicitly bad for DFS, it also did not serve as a strong prophylactic for the DFS industry, the same way that Monday's decision did for online poker.

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Marc Edelman (This email address is being protected from spambots. You need JavaScript enabled to view it.) is a Professor of Law at Baruch College’s Zicklin School of Business and the founder of Edelman Law, where he consults extensively on sports gaming and fantasy sports issues. He recently authored a new article in George Mason Law Review entitled, "Regulating Sports Gambling." Nothing in this article shall be construed as legal advice.

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Read 116 times Last modified on Thursday, 06 June 2019 11:31

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https://www.forbes.com/sites/marcedelman/2019/06/05/how-mondays-wire-act-decision-affects-the-poker-dfs-and-sports-gambling-industries/#524c32d653ac

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