Judge Says N.H. Lottery Commission Suit May Proceed, But Odds of Success Unknown
A federal judge has turned down a request by the U.S. Department of Justice to dismiss a lawsuit brought the New Hampshire Lottery Commission.
Thursday’s ruling comes in a case that centers on a surprise opinion released by the DOJ in November 2018 that could have broad implications for all lottery games.
The opinion from the Office of Legal Counsel stated that the 1961 Wire Act, which was passed to block illegal gambling operations run by the mob, should apply to lottery games, as well as sport wagering. That decision reversed a 2011 opinion that exempted state run lottery, and cleared the way for the launch of internet sales of games of chance. New Hampshire launched its own online platform in 2017, and forecasts approximately $5 million in profits during the next fiscal year.
Citing its potential impact on state revenues, the New Hampshire Lottery Commission filed a lawsuitseeking to have the judicial branch overrule the Office of Legal Counsel opinion and declare lotteries exempt from the Wire Act. The state contends that the new interpretation of the Wire Act potentially exposes Lottery Commission employees and its contractors to a “credible threat of prosecution,” said Anthony Galdieri with the New Hampshire Attorney General's office, which is representing the state Lottery Commission, on Thursday.
The DOJ sought to have the lawsuit dismissed, arguing that it had no intention at this time of bringing legal action against New Hampshire. After four hours of arguments on Thursday, Judge Paul Barbadoro ruled from the bench that the Lottery Commission’s lawsuit may proceed.
The case is attracting the attention of lottery commissions throughout the country, as well as casinos, convenience stores, and the contractors who operate the back-end systems of lotteries. Michigan, New Jersey and Pennsylvania submitted amicus briefs in the matter.
Complicating matters further is a memo released earlier this week by Deputy Attorney General Rod Rosenstein that states the Department of Justice is now reviewing the November 2018 opinion.
Lottery officials warn that courts could broadly interpret the new opinion to prohibit popular multi-state games, including Powerball and Mega Millions, that raise billions of dollars annually, since those drawings rely on communication between states. Even New Hampshire’s traditional state lottery now relies on interstate communications, as computer servers that power the system are located in multiple states.
Judge Barbadoro expressed frustration during Thursday’s arguments--but not with the plaintiffs or the defendants. Rather, he called the original 1961 statute a “mess.” There was lengthy debate about the placement of commas in the statute, and what its drafters meant by the word “for” in certain sentences.
In addition to ruling in favor of the Lottery Commission, the court requested that the DOJ submit within 14 days a memorandum detailing its position on if the Wire Act should apply to states and the vendors they rely on to carry out lottery games.
Aware that New Hampshire lawmakers use Lottery Commission revenue estimates to craft the state budget, Barbadoro made clear his intention to issue a ruling as quickly as possible, though that is unlikely to come before May.
He also repeated more than once that the case operated in such a gray area of the statute that it would likely end up in the hands of the U.S. Supreme Court.
After the hearing, New Hampshire Lottery Commission Executive Director Charley McIntyre said there was pressure on all parties to move quickly on the issue.
“I want to be able to report to the people I report to under the dome how much we are going to make in the next two years," he said. "It’s millions and millions of dollars of funding, so I’d like to know the number.”
McIntyre also said he believes a driving force behind the Trump Administration’s sudden reversal last November is casino magnate Sheldon Adelson, a key financial backer of the president.
“I think he is the reason it is being pushed,” McIntyre said.
Adelson is reportedly backing the group The Coalition to Stop Internet Gambling, which also filed an amicus brief in the case, siding with the federal government.