In January 2019, the U.S. Department of Justice published an opinion declaring that the agency interprets the federal Wire Act, which prohibits certain types of betting businesses in the U.S., to apply to gambling activities outside of sporting events and contests. This essentially reverses the Department of Justice’s opinion in 2011 that the Wire Act only applies to sports gambling. Therefore, businesses involved in interstate gambling activities of any type, such as lotteries and casino games, can expect increased enforcement activity from the U.S. Department of Justice and the potential for additional Wire Act penalties going forward.

By way of background, gambling activities in the U.S. are subject to laws at the federal and state level. The Wire Act is one of multiple federal gambling laws, along with the Unlawful Internet Gambling Enforcement Act, the Illegal Gambling Business Act, and others. The Wire Act prohibits persons involved in gambling businesses from knowingly using wire communication facilities to engage in certain betting activities over state lines, such as transmitting bets, wagers or related information or payments. Convictions under the Wire Act may result in fines of up to $500k for organizations and prison terms of up to 2 years.

Whether courts will agree with the Department of Justice’s latest opinion that the Wire Act applies to non-sports gambling is not clear. In 2002, the U.S. Court of Appeals for the Fifth Circuit found that the Wire Act applies only to sports gambling (In re Mastercard Int’l, Inc., Internet Gambling Litig., 132 F. Supp. 2d 468, 480 (E.D. La. 2001), aff’d, 313 F.3d 257 (5th Cir. 2001)). But district courts in Utah and Missouri have subsequently and separately concluded that the Wire Act does not only apply to sports gambling (United States v. Lombardo, 639 F. Supp. 2d 1271, 1281 (D. Utah. 2007) and United States v. Kaplan, No. 06-CR-337CEJ-2 (E.D. Mo. Mar. 20, 2008)).

In any case, the Department of Justice has secured Wire Act convictions against businesses in connection with non-sports gambling in the past. For example, the Department of Justice successfully prosecuted a group of individuals in 1999 for taking bets in “mirror lotteries”, whereby outcomes were determined by the results of legitimate state lotteries (United States v. Vinaithong, 1999 U.S. App. LEXIS 6527).

In light of the Department of Justice’s recent pivot, businesses involved in online and other gambling activities that cross over U.S. state or territorial borders, particularly businesses that relied on the Department of Justice’s 2011 opinion on the Wire Act, should assess whether and to what extent their activities may need to be changed or limited to avoid enforcement by the Department of Justice.

Contributor: Jonathan Tam


Lothar has been helping companies in Silicon Valley and around the world take products, business models, intellectual property and contracts global for nearly 20 years. He advises on data privacy law compliance, information technology commercialization, interactive entertainment, media, copyrights, open source licensing, electronic commerce, technology transactions, sourcing and international distribution at Baker McKenzie in San Francisco & Palo Alto.