United States District Court, D. New Hampshire
New Hampshire Lottery Commission, et al.
William Barr, in his official capacity as Attorney General of the United States of America, et al.
Francis Charles Fredericks, Esq. Anthony Galdieri, Esq.
Matthew D. McGill, Esq. Michael A. Delaney, Esq. Theodore B.
Olson, Esq. Steven A. Myers, Esq. Matthew J. Glover, Esq.
Alain J. Ifrah, Esq. Andrew J. Silver, Esq. Claude M. Stern,
Esq. Demetrio F. Aspiras, III, Esq. Derek L. Shaffer, Esq.
Avram D. Frey, Esq. Gillian A. Woolf, Esq. Lawrence S.
Lustberg, Esq. Meghal J. Shah, Esq. Thomas R. Valen, Esq.
Donald S. McGehee, Esq. Mark G. Sands, Esq. Melinda A.
Leonard, Esq. Peter S. Cowan, Esq. A Michael Pratt, Esq.
Christopher B. Chuff, Esq. Joanna J. Cline, Esq. Patrick J.
Queenan, Esq. Robert R. Lucic, Esq. Brian W. Barnes, Esq.
Charles J. Cooper, Esq. David H. Thompson, Esq. J. Joel
Alicea, Esq. Michael J. Tierney, Esq. Nicole Frazer Reaves,
Esq. Stephen N. Zaharias, Esq.
MEMORANDUM AND ORDER
Barbadoro United States District Judge.
Wire Act of 1961 criminalizes certain gambling activities
that use interstate wires. In 2011, the Justice
Department's Office of Legal Counsel (“OLC”)
issued a formal opinion declaring that the Wire Act only
punishes activities associated with sports gambling. Last
year, the OLC changed its mind. It now asserts that the Act
also covers lotteries and other forms of gambling that do not
Hampshire Lottery Commission has long offered lottery games
such as Powerball that necessarily use interstate wires.
Fearing that these games, which produce substantial revenue
for the State, will be deemed to be criminal activities under
the OLC's current interpretation of the Wire Act, the
Commission filed a complaint in this court seeking both a
declaratory judgment that the Act is limited to sports
gambling and an order under the Administrative Procedure Act
setting aside the OLC's new interpretation. One of the
Commission's vendors also filed a complaint that has been
joined with the current action, seeking declaratory relief.
me are the Government's motion to dismiss for lack of
standing and the parties' cross-motions for summary
judgment. As I explain below, I agree with the plaintiffs
that they have standing to sue. Based on the text, context,
and structure of the Wire Act, I also conclude that the Act
is limited to sports gambling. Accordingly, I deny the
Government's motions and grant the plaintiffs'
motions for summary judgment.
The relevant portion of the Wire Act provides:
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.
18 U.S.C. § 1084(a).
1084(a) consists of two clauses. The first clause makes it a
crime for anyone engaged in the business of gambling to use 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.” Id. The second
clause prohibits “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.”
question this case presents is whether the limiting phrase
“on any sporting event or contest” in §
1084(a)'s first clause modifies all references to
“bets or wagers” in both clauses or only the
single reference it directly follows in the first clause. If,
as the OLC concluded in 2011, the sports-gambling modifier
limits each reference to “bets or wagers, ” then
both clauses apply only to sports gambling. On the other
hand, if the OLC's current interpretation is correct,
then § 1084(a)'s first clause prohibits the
interstate transmission of both sports and non-sports bets or
wagers but punishes the interstate transmission of
information only if the information assists in the placing of
bets or wagers on sports. It also follows from the OLC's
current interpretation that § 1084(a)'s second
clause is unconstrained by the sports-gambling modifier.
path that leads to both OLC opinions begins in 2009, when New
York and Illinois asked the Department of Justice whether
in-state sales of lottery tickets via the internet would
violate the Wire Act if those sales caused information to be
transmitted across state lines. The Department referred the
matter to the OLC for a formal opinion. In 2011, the OLC
responded by concluding that “interstate transmissions
of wire communications that do not relate to ‘a
sporting event or contest,' 18 U.S.C. § 1084(a),
fall outside of the reach of the Wire Act.” See
Virginia A. Seitz, Whether Proposals by Illinois and New York
to Use the Internet and Out-of-State Transaction Processors
to Sell Lottery Tickets to In-State Adults Violate the Wire
Act, Memorandum Opinion for the Assistant Attorney General,
Criminal Division, U.S. Dept. Just. 1 (Sept. 20, 2011)
(“2011 OLC Opinion” or “2011
Opinion”), Doc. No. 2-4.
arrived at this conclusion by first determining that the
phrase “on any sporting event or contest” in the
first clause of § 1084(a) applies to the transmissions
of both “bets or wagers” and “information
assisting in the placing of bets or wagers.” 2011 OLC
Opinion at 5. Noting that the statutory text could be read
either way, the OLC explained that it was “difficult to
discern” why Congress would forbid the interstate
transmission of all types of bets or wagers but only prohibit
the transmission of information assisting in the placing of
bets or wagers that concern sports. Id. The more
reasonable inference, according to the OLC, was that Congress
intended that the prohibitions “be parallel in
the OLC concluded that the phrase “on any sporting
event or contest” also modifies the references to
“bets or wagers” in § 1084(a)'s second
clause. Id. at 7. The OLC explained that the
references to “bets or wagers” in the second
clause are best understood as shorthand references to
“bets or wagers on any sporting event or contest”
as described in the first clause. Id. The 2011
Opinion also relied heavily on the Act's legislative
history to confirm its interpretation of the section's
limited scope. See Id. at 6-10.
2018, the OLC reversed course and released a new opinion
concluding that “the prohibitions of 18 U.S.C. §
1084(a) are not uniformly limited to gambling on sporting
events or contests.” See Steven A. Engel, Reconsidering
Whether the Wire Act Applies to Non-Sports Gambling,
Memorandum Opinion for the Acting Assistant Attorney General,
Criminal Division, U.S. Dept. Just. 23 (Nov. 2, 2018)
(“2018 OLC Opinion” or “2018
Opinion”), Doc. No. 2-5. The OLC now reasoned that the
plain text of § 1084(a) unambiguously requires that all
but one of the section's prohibitions apply to gambling
generally. See Id. at 7, 11.
based its new reading on the syntactic structure of §
1084(a). Relying heavily on a canon of statutory construction
commonly referred to as the “rule of the last
antecedent, ” the OLC concluded that the use of the
sports-gambling modifier in the section's first clause
applies only to the prohibition on the interstate
transmission of “information assisting in the placing
of bets or wagers” and not the transmission of
“bets or wagers” themselves. Id. at 7-8.
then concluded that the use of the sports-gambling modifier
in § 1084(a)'s first clause should not be carried
forward into the section's second clause. Id. at
11. The two clauses are distinct “[a]s a matter of
basic grammar” and “[i]t would take a
considerable leap for the reader to carry that modifier both
backward to the first prohibition of the first clause, then
forward across the entire second clause, ” the OLC
acknowledged its earlier concern that this reading of §
1084(a) would produce anomalous results. Id. at
14-15. It concluded, however, that it was obligated to give
the section the meaning suggested by its syntactic structure
because the anomalies identified in the 2011 Opinion did not
rise to the level of “patent absurdity.”
January 15, 2019, the Deputy Attorney General instructed
federal prosecutors to adhere to the OLC's 2018 Opinion.
See Applicability of the Wire Act, 18 U.S.C. § 1084, to
Non-Sports Gambling, U.S. Dept. Just. (Jan. 15, 2019)
(“Enforcement Directive”), Doc. No. 2-6. As an
exercise of prosecutorial discretion, however, they
“should refrain from applying Section 1084(a) in
criminal or civil actions to persons who engaged in conduct
violating the Wire Act in reliance on the 2011 OLC Opinion
prior to the date of this memorandum, and for 90 days
thereafter.” Id. The grace period was intended
to allow time for businesses “to bring their operations
into compliance with federal law.” Id. On
February 28, the Deputy Attorney General extended that window
through June 14, 2019. See Additional Directive Regarding the
Applicability of the Wire Act, 18 U.S.C. § 1084, to
Non-Sports Gambling, U.S. Dept. Just. (Feb. 28, 2019), Doc.
Hampshire Lottery System
Lottery Commission offers multiple types of lottery games.
Those games include instant ticket and draw games that offer
tickets for sale at brick-and-mortar retailers,
multi-jurisdictional games such as Powerball and Mega
Millions that permit tickets to be purchased either in stores
or through the internet, and “iLottery” games
that sell tickets exclusively through the internet. Each game
involves the use of interstate wire transmissions.
Lottery Commission contracts with a vendor, Intralot, Inc.,
to provide a computer gaming system (“CGS”) to
manage the games and a back-office system (“BOS”)
to manage inventory and sales data. Its CGS and BOS servers
for traditional retailer-based lottery games are located in
Barre, Vermont, with a disaster recovery location in
retailers employ lottery terminals that connect the retailer
to the CGS and BOS systems via the internet, a cellular
network, or a satellite connection. The terminals send and
receive different types of data based on the type of game.
For example, in an instant ticket game, a player purchases a
pre-printed ticket and scratches it to reveal the result. The
lottery terminal then communicates with the CGS to activate
the ticket, validate the result, and record the sale and
payment of prizes. Draw games require players to purchase
sets of No. for a future draw. The retailer requests a wager
transaction from the CGS through the terminal. The CGS
generates a wager in the system and sends the information to
the terminal. In both types of transactions, the data travels
between a lottery terminal in New Hampshire and CGS servers
in Vermont and Ohio.
Lottery Commission also offers a variety of
multi-jurisdictional games, including Powerball, Mega
Millions, Tri-State Lotto, and Lucky for Life. Like the
in-state games, ticket sales for these games typically occur
through communications between lottery terminals in New
Hampshire and CGS servers in Vermont and Ohio. For verification
purposes, bets for multi-state games are then sent from those
CGS locations to two independent control system servers in
New Hampshire over the internet. The Lottery Commission also
shares sales and transaction data with member states over the
internet. Finally, once a jackpot is won, the participating
lotteries transfer their portions of the jackpot to the
jurisdiction that sold the winning ticket. This is typically
done via a wire transfer or an automated clearing house
September 2018, the Lottery Commission also began to offer
e-instant and draw games, including Powerball and Mega
Millions, via its internet platform or
“iLottery.” NeoPollard Interactive LLC, its
vendor, operates a separate CGS with servers located in New
Hampshire. The system uses geo-location data from a
player's computer or mobile device to ensure the player
can only make a bet or wager while physically located in New
Hampshire. Although all financial transactions and bets must
begin and end in New Hampshire, the Commission states that it
cannot guarantee that intermediate routing of data or
information ancillary to a transaction does not cross state
the way in which these systems operate, the Lottery
Commission contends that the implementation of the 2018 OLC
Opinion may result in the suspension of all lottery sales by
the Commission, resulting in an annual loss of over $90
million in state revenue.
Lottery Systems and “iGaming” in Amici States
State of New Jersey, the Commonwealth of Pennsylvania, and
the Michigan Bureau of State Lottery have filed amicus briefs in
support of the plaintiffs. They describe the impact the 2018 OLC
Opinion would have on their respective state-run lotteries.
The lottery systems in those states are substantially similar
to New Hampshire's, including the types of games offered
and their reliance on interstate wires.
addition, New Jersey and Pennsylvania have legalized some
forms of online gambling or “iGaming.” Those
states permit state-licensed private companies to offer
online casino and poker games to players within the state.
New Jersey also has a shared agreement with Delaware and
Nevada allowing online poker players from those states to
Lottery Commission filed its complaint and a concurrent
motion for summary judgment on February 15, 2019. The
Commission seeks both a declaratory judgment that the Wire
Act does not extend to state-conducted lottery activities and
an order setting aside the 2018 OLC Opinion pursuant to the
Administrative Procedure Act (“APA”), 5 U.S.C.
§ 701 et seq. Later that day, NeoPollard Interactive
LLC, the vendor that supports New Hampshire's iLottery
system, and its 50% owner, Pollard Banknote LTD (collectively
“NeoPollard”) filed a complaint and a concurrent
motion for summary judgment. NeoPollard seeks a judgment
declaring that the Wire Act is limited to gambling on
sporting events. I consolidated the NeoPollard action with
the Lottery Commission action on February 22, 2019.
Government responded by filing a motion to dismiss the
complaints pursuant to Rule 12(b)(1), because the plaintiffs
lack standing to sue, and Rule 12(b)(6), because the
complaints fail to state viable claims for relief. With the
parties' consent, I converted the Government's
request for relief pursuant to Rule 12(b)(6) into a Rule 56
motion for summary judgment.
Government has challenged the plaintiffs' standing to
sue. I address the Government's standing argument first
because a court lacks subject matter jurisdiction unless the
plaintiffs have Article III standing. See Pollard v. Law
Office of Mandy L. Spaulding, 766 F.3d 98, 101 (1st Cir.
2014). I then turn to the parties' cross-motions for
summary judgment, which raise two issues: (1) whether the
Lottery Commission's APA claim fails because the 2018 OLC
Opinion is not “final agency action, ” and (2)
whether the Wire Act is limited to sports gambling. I
conclude by considering the scope of the remedy.
Government argues that the plaintiffs lack standing because
they do not face an imminent threat of prosecution. I
plaintiffs, as the parties invoking the court's
jurisdiction, bear the burden of establishing standing.
Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158
(2014). The level of proof required to meet this burden
depends on the stage of the proceedings. Lujan v. Defs.
of Wildlife, 504 U.S. 555, 561 (1992). At summary
judgment, the plaintiffs must support their standing with
specific evidence in the record. Id.; accord
Clapper v. Amnesty Int'l USA, 568 U.S. 398, 412
(2013). Because the jurisdictional facts are not in dispute
in this case, the plaintiffs' standing turns on a pure
question of law.
in Article III's case-or-controversy requirement, the
constitutional core of standing requires a showing that a
plaintiff “(1) suffered an injury in fact, (2) that is
fairly traceable to the challenged conduct of the defendant,
and (3) that is likely to be redressed by a favorable
judicial decision.” Spokeo, Inc. v. Robins,
136 S.Ct. 1540, 1547 (2016). An injury in fact must be
“concrete and particularized” and “actual
or imminent, not conjectural or hypothetical.” Lujan,
504 U.S. at 560 (internal quotation marks and citations
omitted). “The imminence requirement is met ‘if
the threatened injury is “certainly impending” or
there is a “substantial risk” that the harm will
occur.'” Massachusetts v. U.S. Dep't of
Health & Human Servs., 923 F.3d 209, 222 (1st Cir.
2019) (quoting Driehaus, 573 U.S. at 158).
establish an imminent injury in the context of a
pre-enforcement challenge to a criminal statute, a plaintiff
must demonstrate that he faces a threat of prosecution
because of his present or intended conduct. “[J]ust how
clear the threat of prosecution needs to be turns very much
on the facts of the case and on a sliding-scale judgment that
is very hard to calibrate.” N.H. Hemp Council, Inc.
v. Marshall, 203 F.3d 1, 5 (1st Cir. 2000). Courts have
variably described the requisite likelihood of enforcement as
“sufficiently imminent, ” “credible,
” “substantial, ” and
“realistic.” See Driehaus, 573 U.S. at
159, 164 (“sufficiently imminent, ”
“credible, ” and “substantial”);
Holder v. Humanitarian Law Project, 561 U.S. 1, 15
(2010) (“credible”); Babbitt v. United Farm
Workers Nat'l Union, 442 U.S. 289, 298 (1979)
(“credible” and “realistic”); Hemp
Council, 203 F.3d at 5
demonstrates where different types of pre-enforcement claims
fall on the imminence spectrum. At the “clearly
credible threat” end of the spectrum are
pre-enforcement claims brought after an enforcer has actually
threatened the plaintiff with arrest or prosecution. See,
e.g., Steffel v. Thompson, 415 U.S. 452, 459 (1974)
(protester had standing to bring pre-enforcement claim
challenging constitutionality of state criminal trespass law
after being warned to stop handbilling and threatened with
arrest and prosecution). Further along the spectrum, but
still satisfying the imminence requirement, are cases where a
plaintiff has engaged in behavior that a statute arguably
makes unlawful, the plaintiff intends to continue to engage
in the allegedly unlawful behavior, and though the
enforcement process has not yet begun, the risk of future
prosecution is substantial. See Driehaus, 573 U.S. at 161-66;
see also Humanitarian Law Project, 561 U.S. at 15-16
(plaintiffs faced credible threat of prosecution where there
was history of prosecution under challenged law and
“Government ha[d] not argued . . . that plaintiffs will
not be prosecuted if they do what they say they wish to
do”); Babbitt, 442 U.S. at 302 (plaintiffs' fear of
prosecution credible where, inter alia, “State ha[d]
not disavowed any intention of invoking the criminal penalty
provision” against entities that violate the statute).
At the far end of the spectrum, where a threat of prosecution
cannot be considered imminent, are cases in which “an
unambiguous disclaimer of coverage by the prosecutor”
would likely eliminate the threat of prosecution. Hemp
Council, 203 F.3d at 5.
plaintiffs in this case easily satisfy the imminence
requirement. First, they have openly engaged for many years
in conduct that the 2018 OLC Opinion now brands as criminal,
and they intend to continue their activities unless they are
forced to stop because of a reasonable fear that prosecutions
will otherwise ensue. Second, the risk of prosecution is
substantial. After operating for years in reliance on OLC
guidance that their conduct was not subject to the Wire Act,
the plaintiffs have had to confront a sudden about-face by
the Department of Justice. Even worse, they face a directive
from the Deputy Attorney General to his prosecutors that they
should begin enforcing the OLC's new interpretation of
the Act after the expiration of a specified grace period.
Given these unusual circumstances, the plaintiffs have met
their burden to establish their standing to sue.
Government challenges this conclusion by arguing that the
likelihood that the plaintiffs will face prosecution under
the Wire Act is low, because the 2018 OLC Opinion does not
explicitly conclude that state agencies, state employees, and
state vendors are subject to prosecution under the Act. I
reject this argument because the record tells a different
worth remembering that the 2011 OLC Opinion responded to a
request from two states for an opinion as to whether they
could sell lottery tickets online without violating the Wire
Act. In concluding that the Wire Act did not apply to
non-sports gambling such as lotteries, the 2011 Opinion did
not even hint at the possibility that states would be exempt
from the Act's proscriptions. Had the OLC believed that
states were excluded from the Act's coverage, it could
have responded to the states' request by simply informing
them that they were not subject to the Act. To infer from the
OLC's silence on this point that it might conclude in the
future that state actors are not subject to the Wire Act
requires an unwarranted speculative leap. This is especially
true given the fact that a Department of Justice official
warned the Illinois lottery in 2005 that the ...