Wire Act Opinion Could Cost States $220 Million in Lottery Proceeds
The new opinion by the U.S. Justice Department on the federal wire act has put states with online lotteries in danger of losing at least $220 million in annual lottery profits according to an analysis by the Associated Press. Interstate lotteries such as Powerball and Mega Millions could also be affected. The opinion is currently being challenged in court by New Hampshire.
States with online lotteries could lose $220 million annually under a new opinion on the federal wire act issued by the Department of Justice which called into question the legality of online gambling.
The DOJ—due to a federal case challenging the opinion brought by New Hampshire—was expected to clarify its opinion on whether the wire act applies to lotteries. However, the DOJ simply filed a brief in the case saying that New Hampshire has failed to prove its lottery is immune from the law and repeated a promise to not prosecute lotteries until it reviews the issue.
Now resigned Deputy Attorney General Rod Rosenstein had said in a memo that the DOJ would not apply the opinion to lotteries while it conducts the review. The federal judge in the case has already ruled that the promise was not enough to derail New Hampshire’s challenge.
The new opinion—which reversed a 2011 DOJ opinion that the wire act applied only to sports betting—said the wire act applied to all forms of online gambling and gambling where information is transmitted across state lines. Interstate lotteries such as Powerball and Mega Millions could also be affected.
Seven states now sell lottery tickets online and others offer residents internet-based lottery subscription services, according to the AP.
Lotteries, as well as online gaming sites, could see information transmitted across state lines and games that are played in multiple states, like Powerball and Mega Millions, transmit data to a central database out of state, according to the North American Association of State and Provincial Lotteries.
“It’s like trying to run a business and not knowing the rules about it,” said David Gale, the association’s executive director told the wire service. “That clarity is the important thing to us now as far as the DOJ issue goes.”
New Hampshire has been supported by several states with online lotteries in their case and several other states with online gaming—including New Jersey and Pennsylvania—have said they too will challenge the opinion in court.
Data gathered by the AP, show states stand to lose over $220 million in net profits annually if the Justice Department targets single tickets sold online or more than $23 billion if the agency takes a broad interpretation that would prohibit all lottery-related activities that use the internet.
Six of the seven states that sell lottery tickets online, including Michigan and Pennsylvania, expect to provide a combined $224 million to a variety of programs during the fiscal year that ends June 30. In Michigan, money goes to public education while Pennsylvania dedicates all proceeds to programs that benefit older residents.
Figures for Georgia’s online lottery sales were not provided to the AP and not included in the analysis.
Questions about information crossing state lines also affects online gaming—now legal in Nevada, Delaware, New Jersey and Pennsylvania—as well as states considering or offering online sports betting.
Delaware’s lottery director, Vernon Kirk, told the wire service he’s worried about how the department’s legal opinion is interpreted because of the potential loss of revenue. He said exactly how much revenue is in jeopardy depends on how it’s enforced.
“I can’t bring myself to believe they’d stop Powerball and Mega Millions,” he said. “It’s beyond my comprehension they’d allow that to happen but that’s what the law is saying, any betting data that crosses state lines is not allowed. And those are some of the larger revenue sources for Delaware, especially when the jackpots are high.”