The Interstate Wire Act of 1961, typically referred to as simply the “Wire Act,” was passed by Congress to combat organized crime.
The law is often attributed to then-Attorney General Robert F. Kennedy. The Wire Act gave law enforcement another weapon to put mobsters behind bars for longer sentences than previously possible under state laws.
The main objective was the Wire Act was to stop sports betting. The concern was that the integrity of contests could be compromised by the bookmaking black market. The enormous wealth created by illegal sports betting was giving organized crime power that the federal government looked to quash.
The Wire Act was only applied to sports betting for its first 40 years on the books. A 2001 Bush Administration Department of Justice opinion declared that it covered all forms of online gambling. This was an interesting position as the Wire Act specifically mentions only interstate betting on sports. Most legal experts outside the federal government disagreed with this interpretation.
In 2011, the US Department of Justice clarified this position. The prevailing opinion now states that only interstate sports betting is covered by the Wire Act.
There is a push by Sheldon Adelson and his company Las Vegas Sands to specifically outlaw most forms of online gambling. This is done under a federal bill known as “The Restoration of America’s Wire Act.” Many industry observers note that the bill restores nothing since the most widely accepted legal position is that online poker and online casino games were never covered by the Wire Act.
Professional and Amateur Sports Protection Act
The Professional and Amateur Sports Protection Act (PASPA) is a federal law that passed in 1992. The goal of the law was to stop the expansion of sports betting.
Major sports leagues pushed the bill after Oregon launched Sports Action, a parlay card system offered by its state lottery. Some Nevada interests were in the process of rallying off-track betting facilities to lobby state legislatures to expand sports betting when PASPA stopped that effort in its tracks.
PASPA exempts Delaware, Montana, Nevada and Oregon. These carve outs were created because the four states had existing sports betting statutes on the books. Oregon and Delaware had sports lotteries. Montana had sports pools. Nevada offered a full slate of sports betting.
New Jersey was given the opportunity to legalize sports betting within one year of PASPA’s enactment. The state legislature failed to do so.
Delaware’s sports lottery lasted just one year in 1976. The state looked to bring it back in 2009. The new law permitted a full menu of sports options identical to Nevada. The sports leagues challenged this state law in court, asserting Delaware could only offer NFL parlay cards, the only product permitted under state law when PASPA was enacted. The sports leagues prevailed.
New Jersey attempted to circumvent PASPA. Its first effort hoped to have a court declare PASPA unconstitutional. That failed in the courts when the New Jersey law was challenged. A second legal battle is headed to an en banc hearing in the Third Circuit Court of Appeals after the sports leagues once again prevailed in the lower courts.
New Jersey is hoping that its deregulation of sports betting will help it win this time around.
Unlawful Internet Gambling Enforcement Act
The Unlawful Internet Gambling Enforcement Act (UIGEA) passed Congress in September 2006. It was signed into law by President George W. Bush the following month. The UIGEA was attached to the unrelated Safe Port Act, a counterterrorism measure that was a must-pass form of legislation before the midterm election recess.
The UIGEA did not make any new forms of gambling illegal. It simply added additional punishment for payment processors that move money for illegal gambling sites. Horseracing and fantasy sports enjoy an exemption from the UIGEA.
There is some debate about the fantasy sports exemption. Some daily fantasy sports sites assert that this explicitly makes their business model legal. This is contrary to the language in the UIGEA that the federal law does not preempt states’ rights to regulate gambling within their borders.
States are afforded the option of specifically legalizing online poker, casino games and lottery ticket sales.
Illegal Gambling Business Act
The goal of IGBA was to stop illegal gambling syndicates. The maximum penalty under the IGBA is up to five years in prison and a $250,000 fine for individuals. Entities may pay a fine of up to $500,000.
The IGBA typically involves the violation of state gambling law by a large group, often members of organized crime. The IGBA is a way to add a federal punishment to state penalties when the situation warrants. Members involved in the actual gambling business may be charged with violating the IGBA.
The law does not apply to customers or vendors not involved in the actual illegal gambling business.
An illegal gambling syndicate of five or more people triggers an IGBA violation under one of two conditions. It must be in continuous operation for at least 30 days or have gross revenue of at least $2,000 in revenue in any single day.