First Circuit Finds Pre-Enforcement Challenge by State Lottery Commission to Justice Department’s Memoranda on Interstate Wagering Is Justiciable

In New Hampshire Lottery Comm’n v. Rosen, No. 19-1835 (1st Cir. Jan. 20, 2021), the panel holds that it had jurisdiction over New Hampshire’s challenge to the Department of Justice (DOJ) memoranda about enforcement of the Wire Act which, if implemented, might prevent the state from selling lottery tickets over the internet.

Section 1084(a) of the federal Wire Act criminalizes the use the use of interstate instrumentalities for “the placing of bets or wagers on any sporting event or contest.” Although the language appears to limit the prohibition to sports betting, starting in 2005 the DOJ began to interpret this section to ban interstate wagering of any kind. In 2009, in response to inquiries by New York and Illinois, the Criminal Division of the DOJ reaffirmed that section 1084(a) “would prohibit the use of the internet to transmit bets or wagers of any kind, even if the transactions originated and ended within a single state.” But in 2011, the DOJ reversed itself and – based on a letter opinion of the Office of Legal Counsel (OLC) –concluded that state lottery sales did not violate the Wire Act.

The present case begins in 2017, “when the Criminal Division asked OLC to reconsider its position, which OLC did in a formal opinion published in November 2018, superseding and replacing the 2011 Opinion.” The DOJ again reversed itself, finding “section 1084(a) unambiguous and its prohibitions plainly not limited to sports gambling.” The Attorney General nevertheless directed in a January 2019 memo that there be a ninety-day delay of enforcement, and further stated in an April 2019 memo that the question of whether the act applied to state lotteries on-line was undetermined and under review.

New Hampshire brought an action in federal district court seeking declaratory judgment about application of the Wire Act to its sale of lottery tickets through its iLottery system. The district court denied the government’s motion to dismiss and granted summary judgment to the plaintiffs.

The First Circuit affirms on the merits (only directing a small change to the final judgment). It also rejects DOJ’s standing, ripeness, and mootness challenges to federal jurisdiction.

The panel first holds that New Hampshire identified an injury-in-fact for standing.” It is uncontested that the plaintiffs use wire communication facilities for the interstate transmission of bets and wagers in the running of the New Hampshire lottery and iLottery platform. The 2018 Opinion, which adopted a broad reading of activities prohibited by section 1084(a), expressly mentions such lotteries, suggesting that Congress need amend the statute if it wishes to protect reliance interests, including those of the states.”

The panel also notes a “history of past enforcement against the same conduct” that also “supports a finding of injury in fact for pre-enforcement standing.” Indeed, “the lack of current prosecutions against state lotteries is not dispositive” of injury-in-fact. “As evidenced by DOJ’s other prosecutions of non-sports betting, ‘the record contains no realistic basis for a suggestion that the statutory provision . . . has fallen into desuetude.’ … Here, DOJ affirmatively warned a state that it believed selling lottery tickets over the internet violated the Wire Act and, in the leadup to the 2011 Opinion, provided similar advice to inquiring authorities from two states.”

The DOJ tried arguing that its continuing review (unresolved at the time of the appeal) of whether the Wire Act applies to state lotteries rendered the dispute not ripe. “The April 2019 Memo leaves in place all provisions of the 2018 Opinion and the January 2019 Memo, but grants a separate forbearance period to the enforcement of section 1084(a) against state lotteries, ‘until [DOJ] concludes its review,” from which date the plaintiffs will have only ninety days within which to comply . . . . A state-wide operation integrating over a thousand retailers and multi-state relationships to produce almost 100 million dollars in net revenue does not strike us as an operation that can be easily wound-up in ninety days.”

Finally, the panel holds that the April 2019 Memo did not moot the case. “The April 2019 Memo does not rescind the government’s adoption of the 2018 Opinion, nor does it offer the plaintiffs solace that the credible threat of prosecution has subsided . . . . The government refuses to disavow prosecuting state lotteries and their vendors for the conduct they currently engage in.”

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