Page 12 - 2019 Sheppard Mullin LA Games Conference Materials

Historically, some of the most important federal gambling laws are those provided immediately below. Other federal gambling statutes are primarily enforcement statutes and do not define what constitutes gambling.3
• The Unlawful Internet Gambling Enforcement Act (“UIGEA”) – The last new federal gambling legislation, enacted in 2006, UIGEA is primarily an enforcement statute. It forbids financial institutions from processing payments associated with certain illegal gambling activity. The act itself does not define what constitutes unlawful gambling, but instead generally refers to activities that are deemed illegal gambling under other federal or state law.
Federal gambling law remained static after the enactment of UIGEA until two important changes occurred. The first relates to the interpretation of the Wire Act. The second was the declaration of PASPA as being unconstitutional.
• The 1961 Wire Act (“Wire Act”) – This law prohibits use of most interstate telecommunications mediums for transmitting bets or wagers, or information assisting in placing bets or wagers, on any sporting event or contest. Until 2011, this had been interpreted by the DOJ to prohibit all forms of gambling across state lines (i.e., sports events and any other contests). However, in December 2011, the Department of Justice (DOJ) issued a memo that declared that the scope of the Wire Act is limited to sports betting. As a result, states became free to legalize online gambling (other than sports betting). A number of states have done so and others are in the process of doing so.
However, in January 2019, the Department of Justice (DOJ) issued an opinion (DOJ Opinion) that reversed its 2011 Memo. The DOJ Opinion concludes that the 2011 opinion was wrong! It now opines that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting. It also concludes that the 2006 enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) did not alter the scope of the Wire Act.
The Wire Act of 1961 prohibits persons involved in the gambling business from transmitting several types of wagering-related communications over the wires. The prohibitions are found at 18 U.S.C. § 1084(a), which states:
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.
The DOJ Opinion indicates that Section 1084(a) consists of two general clauses, each of which prohibits two kinds of wire transmissions, creating four prohibitions in total. The first clause bars anyone in the gambling business from knowingly using a wire communication facility to transmit “bets or wagers” or “information assisting in the placing of bets or wagers on any sporting event or contest.” The second clause bars any such person from transmitting wire communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.”
3 For example, the Travel Act and the Illegal Gambling Business Act are both primarily enforcement statutes and require a finding of a violation of a state law as a predicate to their applicability. The Travel Act prohibits using any facility in interstate or foreign commerce with the intent to promote, manage, establish, carry on, or facilitate unlawful activity. The Illegal Gambling Business Act prohibits financing, owning, or operating an illegal gambling business.
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