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Non-Sports-Related Interstate Online Gambling Reversal

Don’t let the window for bringing your business into compliance slam shut on you!

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Originally published in The Green Sheet, April 22, 2019

Beginning in 2011, businesses involved in non-sports-related interstate ongoing gambling had good reason to believe that certain prohibitions pertaining to the knowing use of a wire communication facility to place bets or wagers, assist in placing bets or wagers, and/or transmit information assisting in placing bets or wagers did not apply to them. However, that is no longer the based on a new opinion that the Department of Justice's ("DOJ") Office of Legal Counsel ("OLC") recently issued.

On November 2, 2018, the OLC issued an opinion (the "2018 Opinion") that reversed an opinion it previously issued in 2011 (the "2011 Opinion") with respect to the applicability and scope of Section 1084(a) ("1084(a)") of the Wire Act, 18 U.S.C. § 1084, to sports-related gambling. 1084(a) 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 OLC determined in the 2011 Opinion that the prohibitions in 1084(a) were limited to sports-related gambling. However, the OLC determined in the 2018 Opinion that the prohibitions in 1084(a) are not limited to sports-related gambling. Rather, the OLC determined in the 2018 Opinion that only one specific prohibition in 1084(a) - which criminalizes "the transmission . . . of . . . information assisting in the placing of bets or wagers on any sporting event or contest," is limited to sports-related gambling.

The OLC also determined in the 2018 Opinion that the other prohibitions in 1084(a) apply to non-sports-related gambling that satisfy the other elements of 1084(a). Those prohibitions include the knowing use of a "wire communication facility" for "the transmission in interstate or foreign commerce of bets or wagers" by someone "engaged in the "the business of betting or wagering". In other words, the OLC has essentially determined in the 2018 Opinion that non-sports-related online interstate gambling is now illegal under 1084(a).

Related to the 2018 Opinion, the United States Deputy Attorney General recently issued a memorandum on January 15, 2019 (the "Memorandum") advising DOJ attorneys that they should adhere to the 2018 Opinion, which is the DOJ's operative position on the meaning of 1084(a). However, the Memorandum also advised DOJ attorneys that, as an exercise of discretion, they should refrain from applying 1084(a) in criminal or civil actions to persons who engaged in conduct that violated 1084(a) in reliance of the 2011 Opinion prior to January 15, 2019 (the date of the Memorandum), and for 90 days thereafter. The Memorandum notes that the 90-day window will give businesses that relied on the 2011 Opinion time to bring their operations into compliance with federal law. However, the Memorandum also emphasized that the 90-day window is an "internal exercise of prosecutorial discretion", and that the 90-day window is not a safe harbor for violations of 1084(a) or the Wire Act.

Businesses with operations that may be subject to 1084(a) have only very little time remaining to bring their operations into compliance with 1084(a), as the 90-day window for doing so will soon slam shut. Those businesses that fail to bring their operations into compliance with 1084(a) will soon be in violation of federal law for engaging in activities that would not have violated federal law only a few short months ago. Businesses with operations that may be subject to 1084(a) should consult an attorney as soon as possible to determine what is necessary to bring their operations into compliance with 1084(a) before the window for doing so slams shut.