This U.S. Federal gambling law prohibits the operation of interstate betting activities in the United States. The Federal Wire Act, also known as the Interstate Wire Act of 1961, specifically made it illegal for illicitly run US-based sports gambling businesses to utilize any form of wire communications to send or accept betting information and wagers from across state lines or foreign US-owned territories.

Jan 15, 2021 The U.S. District Court Judge in New Hampshire rejected the Wire Act’s attempt to broadly cover intrastate online gambling and stated that the “Wire Act applies only to transmissions related to bets or wagers on a sporting event or contest” and he set aside the 2019 OLC opinion. Jan 27, 2021 The Wire Act was specifically created to assist the states in enforcing their respective sports betting laws and bookmaking laws as an effort to suppress criminal syndicates’ illegally organized sports gambling practices, including fixed bookmaking and matchmaking rackets.

The Federal Wire Act officially amended Chapter 50 of Title 18 of the United States Code of Laws. The law has since been interpreted by the DOJ to include interstate online communications; hence its effective prohibition of interstate online sports betting in the US. For this reason, it is important that players and operators understand the specific laws concerning gambling implemented in countries they choose to participate and practice gaming-related activities in.

History of the Federal Wire Act

Then-US attorney general Robert F. Kennedy, who was emboldened by the presence of his brother John F. Kennedy as the US president, suggested to Congress passing a law which would prohibit interstate gambling. His suggestion led to a newly crafted bill which was introduced in the US Senate as SB 1656. This bill would be later known as the Federal Wire Act. SB 1656 was included in eight bills presented to Congress that year. The Federal Wire Act as proposed by Robert F. Kennedy would help the US Justice Department effectively slow down the sportsbook activities of criminal organizations operating within the United States and its territories. The Wire Act was signed on September 13^th, 1961 by then-US President John F. Kennedy.

What is the Federal Wire Act?

The Federal Wire Act is a law that was designed to curb the illegal bookmaking activities of organized crime syndicates. Its language included and punished domestic businesses and bookies who accepted bets over the telephone or telegraph. This Act was created to specifically address the ongoing and growing issue of organized interstate racketeering and number-fixing which demonstrated to be profitable to criminal organizations and Mafia families. The Federal Wire Act proved to be successful as it severely damaged the 1960’s era mobsters from generating revenue from illegal bookmaking activities. The Act’s language minimized the mobs reach within the nation and cut their connection from U.S. territories.

What Does the Federal Wire Act Regulate?

The Federal Wire Act regulates the use of wire communication networks by domestic state-based sports betting operations. The Act effectively bans any US-based sportsbooks using wired communications to communicate between states as an attempt to destroy illegal crime networks that profit from game-fixing, racketeering, and wager collecting. While this effectively worked in the 1960’s, the Act was not prepared for the invention of the internet nor capable of foreseeing online gaming markets. A law later on known as PASPA would come to regulate domestic brick and mortar sports betting operations and activities for 25 years before its removal from the U.S. lawbooks.

Does The Federal Wire Act Effectively Prohibit Sports Betting In The US?

The Act gave local state law enforcement more strength to apply stricter punishment to mobsters by imposing longer sentences than previously possible under existing state legislation. The Federal Wire Act cut the flow of wealth provided through illegal bookmaking and number fixing to criminal organizations without effecting casual bettors. The Act was not designed to attack players from the U.S.A. but rather to strike unlicensed gambling services that used wired communicates to collect bets and pay out winnings from and to domestic players, respectively. Therefore, the Federal Wire Act was actually an anti-organized crime law not anti-gambling legislation, as while the law is relevant to gambling it also has nothing to do with gamblers.

It is stated in the Federal Wire Act, those caught in violation “shall be fined or imprisoned for no more than 2 years or both”. This improved the Justice Department’s ability to combat the unlicensed illegal sports betting industry which was at the time run by the Mafia and smaller local bookies. The laws enacted by the U.S. Congress and President Kennedy were known as the 1960’s Interstate Anticrime Acts which empowered the Federal Government to take a more effective role in the fight against organized crime and racketeering. At the time, the Mafia manipulated Labor Unions, shook down businesses, and ran unlicensed gambling rings.

The Act’s language was intended to assist territories and states in enforcing their respective laws on illegal bookmaking. However, as time came to show, the language in the Federal Wire Act could be circumvented by illegal figures through its exclusion of the internet as a wired communication facility. For this reason, in 2001 the Department of Justice under the Bush administration declared the Federal Wire Act of 1961 intended to expand its regulatory prohibition to all forms of US-based online gambling. However, in 2011 the DOJ officially clarified its position that the Federal Wire Act only outlawed US-based intrastate online sports betting operations, and had no application regarding state-regulated online casinos, online sportsbooks, poker sites or other online gambling initiatives allowed by state law.

In 2018, after the repeal of PASPA, the issue of the Federal Wire Act’s relevancy to online sportsbooks was brought into question. It was clarified that the Federal Wire Act only restricted -USbased interstate wagering on sports. Meaning that the Wire Act makes it illegal for any domestic state-regulated online sportsbook to accept bets outside fo their state. This allows state-approved sportsbook the capability to offer wagering online to any bettor residing in or visiting their state without violating the Federal Wire Act.

FAQ’s

DOES THE FEDERAL WIRE ACT AFFECT ONLINE GAMBLING IN THE UNITED STATES?

The Federal Wire Act was once interpreted as federal legislation that could regulate all forms of online gambling, specifically in the 1990’s dot-com era. However, this stance was challenged when the DOJ released a formal opinion on their interpretation of the Federal Wire Act. According to the DOJ’s 2011 statement, the Federal Wire Act only applied to US-based online sports betting and did not apply to casino or poker online gambling nor extend its jurisdiction beyond the United States and its declared territories.

In 2018 following the repeal of PASPA, the Wire Act was once more considered due to the major changes in the US sports betting market. The Wire Act now only restricts interstate online betting, which means that state-regulated online sportsbooks are not permitted to accept bets across state lines or from sources outside of the United States. This is a stark contrast from the law’s previous application which effectively prohibited all US based online sportsbook activity.

DOES THE FEDERAL WIRE ACT MAKE ONLINE SPORTS BETTING ILLEGAL FOR US RESIDENTS?

No. The Federal Wire Act does not criminalize offshore online gambling as it only outlaws interstate wagering through state-regulated online sports betting. For this reason, states are not permitted to accept bets from outside of their state. If an individual state decides to accept out of state wagers, they would immediately face legal actions and injunctions by sports leagues or the federal government for their violation of this law.

DOES THE FEDERAL WIRE ACT APPLY TO OFFSHORE ONLINE SPORTSBOOKS?

No, the Wire Act only has prohibitive jurisdiction concerning betting activities between states within the United States and its territories. Outside of the U.S., governing jurisdictions are free to regulate and license online sportsbooks and offer their betting services to whomever they choose.

The US does not have any federal law on the books that outlaws offshore gambling, therefore, US players are free to access offshore betting destinations. However, the states of Washington and Connecticut do have state laws in place to prohibit residents from engaging in any type of online betting including both US based and/or offshore gambling.

ARE THERE PENALTIES FOR US RESIDENTS WHO BET ON SPORTS ONLINE?

Under the Federal Wire Act, it is only a crime to accept bets outside of a state’s jurisdiction or operate a sportsbook on US soil that is unregulated and unlicensed. However, nowhere in the law does it place prohibitions on bettors from the U.S.A. wagering on sports at legally licensed online sportsbooks.

ARE THERE ANY LEGISLATIVE PUSHES TO REWRITE THE FEDERAL WIRE ACT?

Before 2011, the DOJ improperly used the Federal Wire Act to prosecute countless individuals and businesses under the general interpretation of the Wire Act. Since the rise of the internet, the anti-gambling leaning members of Congress intended to use the Wire Act to rid the Internet of casino-style gambling.

In 1996, then-US Senator of Arizona Jon Kyl introduced a bill called the Crime Prevention Act that included an amendment to the Wire Act to encompass the Internet under its prohibitive jurisdiction.

In 1996, then-US Representative Tim Johnson of South Dakota introduced his own bill to take a jab at online gambling called the Computer Gambling Prevention Act.

In 1997, Senator Jon Kyl tried once more to introduce another anti-internet gaming legislation by the name of the Internet Gambling Prohibition Act which would make all contests, sports games, or games of chance classified as a bet or wager thus illegalizing its online forms.

In 1999, after his previous attempt in 1997, Senator Jon Kyl tried to reintroduce the same legislation.

In 2002, then-US Representative Bob Goodlatte of Virginia introduced his own prohibitive bill called the Combating Illegal Gambling Reform and Modernization Act which would classify bets and wagers to include all gambling activities and games of chance.

Wire Act Sports Betting Tips

All of these attempts to pass anti-internet gambling legislation failed and due to the DOJ’s clarification regarding the application of the Federal Wire Act, few states and government entities were able to prosecute legitimate online businesses and social bettors.

However, in the past few years a new bill has gained momentum and is aimed to outlaw most forms of online gaming. In 2014, Sheldon Adelson the world’s wealthiest casino owner who has a great distaste for regulated online gambling is the primary supporter and push behind this bill.

RAWA also known as the Restoration of America’s Wire Act which would ban domestically regulated online gambling and immediately criminalize and shut down multiple state-regulated online gaming industries across the US. RAWA could effectively ban online lottery sales, online poker, online sportsbooks, online casinos and online bingo, exemptions include online horse race wagering and daily fantasy sports contests.

Two of the more prominent sweats in the gaming community these past few months haven’t come on a casino floor or sportsbook. Instead, they’ve unfolded in a much more subdued environment: the legal arena.

The first was the Supreme Court’s decision in May 2018 to overturn PASPA (Professional and Amateur Sports Protection Act).

The outcome of the landmark Murphy vs. NCAAcase gave the long-awaited green light for states to begin considering the legalization of sports betting, both in brick-and-mortar locations and online.

Then most recent — which came to fruition Monday — was far less welcome. The Department of Justice followed through on what was a rumor for weeks.

The DOJ issued a revision, in the form of this memo, to the 2011 Obama-era DOJ opinion, which stated that the Wire Act of 1961 only applied to sports betting.

New interpretation redefines assumptions

The news sent shock waves through a segment of the online gaming realm.

A quick refresher on what the Wire Act intends to prohibit is in order.

The law criminalizes the utilization of a wire communication facility:

• To transmit “bets or wagers;” or,
• “Informationassisting in the placing of bets or wagers on any sporting event or contest.”

Additionally, it’s considered illegal to use the transmission of wire communications to provide an individual with any form of remuneration for either:

Wire Act Sports Betting Online

• “Winningbets or wagers;” or,
• “For information assisting in the placing of bets or wagers.”

One of the key distinctions of either provision: They apply only to interstate transmissions of any degree.

The decision on PASPA helped usher in legal, single-game sports betting in a state other than Nevada for the first time. However, given the Wire Act’s limitations, wagering remains fenced in within each jurisdiction.

Geo-fencing technology helps ensure as much on both the customer and operator side of sportsbooks.

Meanwhile, between the DOJ’s 2011 opinion and Monday’s memo, other forms of online, money-based gaming, e.g., casino games including poker, were tacitly deemed to be out of the Wire Act’s reach based on the previously cited wording.

The same held for online lottery sales.

Multiple states, activities potentially affected

The new reading of the Wire Act shoots down that assumption.

It notes that only one provision of the law singles out sporting events as the subject of the prohibition. The rest, it emphasizes, can be assumed to apply to all forms of money-based gaming.

The 2011 interpretation had led to New Jersey, Pennsylvania, Nevada and Delaware establishing online gaming markets.

Eventually, it also resulted in New Jersey, Nevada and Delaware establishing ongoing, shared liquidity with their online poker player pools.

Given that state lines are crossed in a manner of ways during business transactions under the latter arrangement, it’s precisely the type of activity this reinterpretation now places into legal jeopardy.

And Georgia, Illinois, Kentucky, New Hampshire and Michiganall offer online ticket sales for Mega Millions, which features a national player pool.

Such activity is now also believed to be outside the law; that is if this latest interpretation is actively enforced as such.

Uncertainty on enforceability abounds

And that is indeed the tipping point.

In the wake of Monday’s announcement, the optimistic view has been to point out the Trump Administration’s DOJ’s similar “walk-back” of an Obama-era memo offering guidance on more lenient enforcement when it came to marijuana-related transgressions.

The current DOJ’s communication on the matter last November directed US Attorneys “to use previously established prosecutorial principles” when enforcing marijuana-related federal law. As with online gaming, the release of that communication prompted initial concerns in a newly legalized and regulated market that remains only a handful of states in size.

However, there has been no subsequent tangible effect on that industry. States that had taken the step of legalizing the activity in some form remain unencumbered by the ruling.

A similar scenario could play out with this Wire Act “redux.”

One vastly important legal component at play — that even the DOJ memo acknowledges — is it represents an opinion and therefore does not carry the force of the law. It further concedes that the opinion could certainly be nullified via a court challenge.

Indeed, there’s already a precedent for such. Both the 1st and 5th Circuit Court of Appeals have previously ruled the Wire Act to strictly encompass sports betting.

So, is there any potential liability for intrastate sports betting?

Sports betting’s limitations under the Wire Act were already clarified under the prior interpretation of the law.

Thus, for the moment, the industry appears far less impacted by the potential fallout of this decision.

Yet, given the avalanche of uncertainty regarding the exact ramifications of the DOJ’s memo — particularly pertaining to what degree it will be deemed legally enforceable — there is still some apprehension.

For example, one significant open question: Whether any leg of an intrastate sports betting transaction digitally crossing state lines constitutes a Wire Act violation.

A strictly literal application of the law may conclude as much. In such a scenario, full intrastate solutions, especially with payment processing, may have to be found.

Intersection with proposed federal sports betting legislation?

Then, there’s one other intriguing angle to the entire discussion that involves another branch of the federal government – the Legislative.

The bipartisan Sports Wagering Market Integrity Act of 2018, introduced this past December by Sens. Chuck Schumer (D-NY) and Orrin Hatch (R-UT), interjects the federal government into the sports betting legislative arena as well.

However, it does so while acknowledging “each State may decide whether to permit sports wagering and how to regulate sports wagering.”

Rather than to impose any prohibitions, one of the stated intentions of the bill is to allow Congress to “provide law enforcement with additional authority to target the illegal sports wagering market.”

The latter wording is especially relevant in the wake of the latest developments. Any potential restrictions on regulated sports betting stemming from the latest interpretation would work at cross-purposes with the bill by once again driving the US sports bettor to offshore, unregulated sportsbooks.