PROVIDENCE, R.I. (September 16, 2022) — A Rhode Island federal judge found in favor of the world’s largest gambling and lottery services company, which sought a judgment declaring that the Wire Act applies only to bets related to sporting events or contests and not to such gaming activities as the firm’s, which may take place via the internet or across state lines.
C.A. No. 21-463 WES
The First Circuit has definitively decided that the Wire Act of 19611 does not reach nonsports betting, and IGT PLC and IGT GS Corp. seek a declaratory judgment to that effect.
The DOJ moved to dismiss the case, arguing that the threat of future prosecutions was too speculative an injury to confer Article III standing. The Court disagreed and granted the plaintiffs’ motion for summary judgment.
In 2017, the DOJ Criminal Division asked the OLC to reconsider its position on the Wire Act, and the OLC reverted to its pre-2011 position, concluding that the Wire Act reached non-sports betting, like lotteries and internet-connected slot machines.
The district court held that the threat of prosecution was significant enough to confer standing and that the Wire Act only criminalizes sports betting. It entered a declaratory judgment and ordered the OLC to rescind its opinion.
The First Circuit upheld the district court’s order as to the standing and its interpretation of the Wire Act but vacated the relief granted under the APA, concluding that declaratory relief was an adequate remedy under the circumstances.
The DOJ announced two separate forbearance periods after the 2018 OLC Opinion was first challenged in the NHLC litigation. The first forbearance period expired on August 20, 2021.
The Court concludes that the DOJ’s memoranda are the better reading of the law, and therefore the non-lottery forbearance period ran on December 1, 2020. The Court may consider whatever evidence has been submitted in the case.
IGT has standing to sue the government for violating the Wire Act because the government has not brought prosecutions after the non-lottery forbearance period ran out and because NHLC II makes a successful prosecution of IGT impossible in the First Circuit.
A plaintiff must have a personal stake in the outcome of the controversy to invoke federal court jurisdiction.
In the right circumstances, a threatened prosecution of criminal law may be sufficient to constitute an Article III injury in fact. However, the threat must be sufficiently real to provide standing.
A court will consider the likelihood of enforcement of a law, whether the threat of enforcement is realistic and credible, whether the threat is based on a history of like prosecutions, and whether the threat is accompanied by an unequivocal statement disavowing the right to prosecute.
When a third party’s actions are a precondition of prosecution, and it is speculative as to whether that precondition will occur, a threat of prosecution is too speculative.
The Court has little difficulty concluding that IGT has the standing to bring this case, despite the DOJ’s attempts to distinguish the case from NHLC II. The Court must also assure itself that the matter is ripe, which requires considering fitness and hardship.
In NHLC II, the court noted that the plaintiffs were openly engaging in conduct branded as criminal by the DOJ’s adoption of the 2018 OLC Opinion. In this case, IGT is also running afoul of the DOJ’s latest interpretation of the Wire Act.
The DOJ argued that IGT’s continued violation of the law implied that even IGT did not think a prosecution was imminent. However, the First Circuit disagreed, finding that the DOJ had warned several states that selling lottery tickets over the internet violated the Wire Act.
The court compared the DOJ’s warnings to the DEA’s warnings in Hemp Council and concluded that the DOJ’s warnings to New York and Illinois were credible because the DOJ had prosecuted seventeen cases involving nonsports betting under the Wire Act between 2005 and 2011.
The DOJ contends that the existence of NHLC II as a precedent distinguishes IGT’s situation from that of the NHLC plaintiffs, because NHLC II prevents any threat of IGT’s successful prosecution anywhere in the First Circuit, including in Rhode Island.
The DOJ’s argument that IGT faces no threat of successful prosecution in this District (or, for that matter, in any other District within the First Circuit) misses the mark. The relevant test is whether IGT faces a realistic threat of prosecution, not whether it faces a successful prosecution.
The court found that the plaintiffs did not have standing to sue because it was too speculative that they would return to the far-flung locations, and the DOJ had not provided any authority for its contention that this general proposition changes when the injury is a threatened prosecution.
The Supreme Court has held that the Declaratory Judgment Act confers unique and substantial discretion on federal courts in deciding whether to declare the rights of litigants. The court considers a broad array of factors in guiding the exercise of this discretion.
The court must determine whether a declaratory judgment is appropriate as a prudential matter and whether a declaratory judgment will serve a useful purpose in clarifying and settling the legal relations in the issue.
A declaratory judgment can be issued that affects parties beyond the geographical confines of the district in which it enters, and the DOJ’s shift in positions has created substantial uncertainty for IGT’s business.
A state-wide operation integrating over a thousand retailers and multi-state relationships to produce almost 100 million dollars in net revenue cannot be easily wound-up in ninety days.
The Court decides that granting relief to IGT is appropriate, as it will serve a useful purpose in clarifying and settling the legal relations in the issue, and will afford significant relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.
The Court finds that the Wire Act applies only to “bets or wagers on any sporting event or contest” and grants Plaintiffs’ Cross-Motion for Summary Judgment.
The First Circuit upheld the scope of the relief in NHLC II, noting that both parties understood this.
SOURCE: Courthouse News Service.