Gibson, Dunn & Crutcher Gibson, Dunn & Crutcher offices in Washington, D.C. (Photo:  Diego M. Radzinschi/ ALM)

The U.S. Justice Department's abandoning of a 2011 opinion that had permitted certain forms of internet gambling drew a legal challenge Friday from an online lottery company, which said the government's abrupt reversal was “deeply flawed” and the product of a lobbying campaign by a prominent Las Vegas casino magnate.

The company, NeoPollard Interactive LLC, represented by the law firm Gibson, Dunn & Crutcher, filed the lawsuit in U.S. District Court for the District of New Hampshire. The New Hampshire Lottery Commission, represented by the state attorney general's office, filed a related challenge against the Justice Department. NeoPollard serves as the technology and service provider of the New Hampshire state iLottery system.

The lawsuits put a spotlight on a recent—and rare—decision by the Justice Department's legal counsel office to reverse an earlier memo that said the federal Wire Act only made online sports betting unlawful, not online lotteries.

A Wall Street Journal report in January said the change of position tracked a legal memo offered by lawyers for Sheldon Adelson, the Las Vegas casino titan. The Justice Department in the report denied there was any undue outside pressure compelling the legal counsel's office to reverse its position in the earlier memo, which was published in 2011.

The day after the new legal opinion's public release, on Jan. 15, Deputy Attorney General Rod Rosenstein issued a memo saying the Justice Department would wait 90 days before enforcing the broader interpretation of the Wire Act to give businesses that relied on the 2011 opinion “time to bring their operations into compliance with federal law.”

The Gibson Dunn team—including partner Matthew McGill and former U.S. solicitor general Theodore Olson, a leading appellate lawyer at the firm—asked a New Hampshire federal judge to reject the DOJ's new interpretation and declare that the Wire Act applies only to sports gambling. The lawsuit named newly confirmed Attorney General William Barr as a defendant.

Rod Rosenstein, deputy attorney general (Photo: Diego M. Radzinschi/ ALM)

“The text, structure, and history of the Wire Act make clear that its prohibitions extend only to gambling on sporting events,” the Gibson Dunn lawyers wrote in the complaint. The firm is working with Michael Delaney of the Manchester, New Hampshire, firm McLane Middleton.

The lawsuits contend that the Justice Department's move has thrown into question the legality of online lottery ticket sales in several states, including Michigan and New Hampshire, where it provides internet gambling technology. Those states, along with several others, began offering online gambling products after the Justice Department determined in 2011 that the Wire Act, a federal law that had lone been used to target online gambling, applied only to sports betting.

The New Hampshire attorney general's office noted that two federal appeals courts—the U.S. Court of Appeals for the First Circuit, which covers New Hampshire, and the U.S. Court of Appeals for the Fifth Circuit—have both held that the Wire Act applies strictly to sports betting, not online lotteries.

“As a result of the OLC's erroneous change in position, gaming activities long thought to be lawful are now under threat of imminent criminal and civil prosecution,” NeoPollard's lawyers wrote in the complaint. “This includes not only making lottery products available to consumers for purchase via personal computers and mobile devices, but also traditional lottery sales via brick-and-mortar retail sales agents.”

For Olson, who headed the OLC under the Reagan administration, Friday's lawsuit marked his latest argument in support of online gambling. Olson was a leading attorney supporting New Jersey's effort to legalize sports betting, in a case that led the Supreme Court last year to strike down a 1992 law that effectively banned commercial sports gambling in most states.

 

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