Key questions from New Hampshire Lottery's case against the DOJ's Wire Act Opinion
How much influence have stakeholders had in the proceedings and what is to follow now the case is closed?
As Donald Trump exited the White House for the final time on January 20, 2021, the industry hit a key turning point in its evolution as the New Hampshire Lottery (NHL) defeated the Department of Justice’s (DOJ) latest Wire Act Opinion. The badly written statute first came to the fore in 1961 as a way of prohibiting interstate bets being placed over wire communications (mainly telephone) and it has haunted the sector ever since. In 2011, though, the DOJ deemed that the Wire Act only covered sporting contests and states like Nevada, New Jersey, and Delaware soon launched igaming. Then, in 2018, the DOJ switched stance, declaring that the law applied to all forms of gambling and not just sports wagering.
But, thanks to the persistence of a number of leading industry stakeholders and supporters, the black cloud and lingering sense of existential dread surrounding the Wire Act have finally been lifted and released igaming and online poker from their proverbial shackles. “To be on the other side of it and see it has been successful, I think it will really send a message to the federal government to stay out of our way,” industry lawyer and iDEA Growth trade body representative Jeff Ifrah reflects, having worked as an intervenor for the case.
Court proceedings date back to 2018 when the Trump Administration’s DOJ determined that the Wire Act did indeed prohibit both online sports betting and non-sports gaming such as casino games, poker, and lotteries. With widespread support from across the sector, including state regulators, the NHL commenced the second case in history to challenge the Wire Act. “The most interesting element was developing the strategy and trying to figure out what court to file in, so what region of the United States has the best-case law? And what if we could find some sort of precedent that could help us?” Ifrah explains.
“The notion that you can just go after them because they issued an opinion that you don’t like is unusual because normally you have to wait for them to basically sue you and then as a defence you can say, ‘I don’t think that this actually applies,’” he continues. New Hampshire eventually proved an ideal state to initiate proceedings as the lottery’s argument in favor of ilottery and igaming highlighted the huge loss of state funds that the act supported.
“This was the first time throughout my litigation history that we [the industry] haven’t been looked at as the bad guy. Here was a case where we were aligned with the state interests. And it’s so fascinating to go into court and be aligned with a state party, a public party,” Ifrah notes. But the defence certainly wasn’t lucky in all aspects, as influential land-based casino figures fought in favor of the Wire Act and maintained the support of Trump’s administration throughout. Ifrah believes it is no coincidence that the final ruling was issued just as Trump’s presidency ended. “To [pass the final decision] after that administration has left, I have to believe that someone made a conscious decision to do it that way,” he hints.
The consensus among sector commentators and stakeholders is that the DOJ will not appeal the decision, meaning the struggle is well and truly behind the sector. Distinguished fellow of gaming law at UNLV Boyd School of Law Anthony Cabot suggested the ruling was “likely the end of the line for the anti-gambling proponents.” He adds: “Even if [the Biden Administration did make an appeal], the Supreme Court is unlikely to entertain one. This may have been the last hurdle for states considering legalized online casino wagering,” Cabot added in a LinkedIn post.
States that had placed regulatory developments on hold are now free to move forward. Previously, regulators in Pennsylvania and West Virginia had both expressed interest in either legalizing online poker or joining the interstate liquidity pool alongside New Jersey, Nevada, and Delaware. “We see a pathway for more growth in states like Indiana, which has introduced a bill, and other states that would put igaming on the ballot now that they see the effect it creates in places like New Jersey, Michigan, and Pennsylvania,” comments 888’s head of US Yaniv Sherman.
Additionally, Ifrah suggests that US gambling mecca Nevada is already pushing through legislation for igaming in the state. “We’ve heard about gaming in Nevada for quite some time now. I think now with the major operators on the Strip all having a digital agenda, I don’t see that as a major surprise,” says Sherman.
All to play for
888 has held off on going all in with online poker in the States due to the uncertainty around the Wire Act, but Sherman insists that this is about to change, particularly now it has signed an extension with Caesars to continue to provide its platform for the World Series of Poker. Having revamped its in-house Poker 8 platform last year, a stateside rollout is planned for the first half of this year.
Although the operator has not yet made any significant impact in sports or online casino in the States, Sherman expects that a widespread adoption of online poker regulations and the addition of more states to the interstate liquidity network could change this. “It’s an opportunity for 888 to have a bigger slice of a smaller pie as it’s a much less competitive vertical. And the other opportunity is around cross-selling because poker is a very effective gateway for other casino games,” Sherman says.
Unlike sports and igaming, where clear market leaders have already been established, there is all to play for in poker, and the competitive landscape for the vertical could look very different to other verticals. Outgoing Entain CEO Shay Segev told analysts that BetMGM would seek to play a significant role in the US online poker space, having already established itself a 20% market share for casino in New Jersey.
“When you look at the sports landscape right now, you see a clear one and two, and now everyone’s fighting for three and four. In poker it is very much the same,” Sherman explains. “I see this as sort of a three-horse race. We’re focused on it, but I think the others are slightly more focused on sport and casino. I would say that it will be much less competitive than the other two verticals.”
Beyond poker and igaming, the Wire Act Opinion will clear a path for payments in the industry, an area the US has a great deal to improve on. Previously many banks had refused to partner with payment processors and onboard gambling businesses until the murky statute was resolved.
A collective sigh of relief can be heard across all facets of the gambling space now they can push on with their plans, and expectations for the year are looking wildly optimistic with continued sports betting and gaming growth. But perhaps most important is the capacity this win has to remind the federal government that this is no longer an industry of underground and illegal activity.