By Josh Herndon
Beginning in 2011, businesses involved in ongoing non-sports-related interstate gambling had good reason to believe 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 case, based on a new opinion from the Department of Justice's Office of Legal Counsel.
On Nov. 2, 2018, the OLC issued an opinion titled Reconsidering Whether the Wire Act Applies to Non-Sports Gambling (www.justice.gov/olc/file/1121531/download) that reversed an opinion it issued in 2011 regarding the applicability and scope of Section 1084(a) of the Wire Act, 18 U.S.C. § 1084, to sports-related gambling. Section 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 2011 that the prohibitions in 1084(a) were limited to sports-related gambling. However, it determined in 2018 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 that satisfy the other elements of 1084(a) apply to non-sports-related gambling. 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 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 Jan. 15, 2019, 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 Jan. 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 little time remaining to bring their operations into compliance with 1084(a), as the 90-day window for doing so will soon slam shut. 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.
If your company processes payments for businesses that may be subject to 1084(a), make sure they know about this change so they can 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.
Josh Herndon is an attorney at the Global Legal Law Firm, whose attorneys are well recognized as top payments industry experts. Herndon works in the compliance field helping electronic payment companies avoid violating rules, as well as avoid being fined, arrested or sued from internal or external threats. He is also involved in litigation in the payments space. He can be reached at email@example.com.
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