The Federal Wire Act is a federal law that effectively bans online sports betting with US-based sportsbooks. It is one of two major federal gambling laws in the United States, the others being the UIGEA act. The Federal Wire Act is interesting in that its scope has changed since the original inception of the law. This page was created to cover all aspects of the Federal Wire Act law including its history, how the law has changed and what impacts it has on the US sports betting industry.
History Of The Federal Wire Act
The Federal Wire Act was passed back in 1961 under the name Interstate Wire Act. At the time of its passing, organized crime ran an illegal sports wagering racket, primarily through wire transmission. The law aimed to cut off all forms of illegal bets being placed through wire communications. By clamping down on the communication channels3, the US government would stop the mob from sending and receiving any wagers on sports. To be clear, the law blocked transmissions of bets and gambling information between states.
The Federal Wire Act’s Reach
Below is an excerpt from the Federal Wire Act:
“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…”
Regarding the implications of the Federal Wire Act, the law’s original language marks several points. For starters, the law targets the business side of sports betting. Sports wagering outfits are restricted from taking any bets from American bettors. The law does not target individual bettors. At the time of the law’s passing, the mob was the organization being targeted.
Another interesting component of the language is the inclusion of the word “information”. This means that knowledge related to sporting events is also prohibited from being transmitted via wire communication. For example, someone could not transmit the results of a horse race to a location where the results have not come out yet. This was a common problem back in the 50s and 60s and helped give the mob an edge on the industry.
The wording of “any sporting event or contest” leaves little to the imagination as far as which aspects of gambling the law applied to. However, some lawmakers perceived that “contest” could technically be applied to other forms of gambling. Most members of Congress knew the law was intended for sports betting at the time of its enactment, however, those who perceived it to encompass all forms of gambling would end up using that loose wording to push their agenda.
Confusion With The Federal Wire Act
The Federal Wire Act was pretty straightforward for the first few decades of its tenure. When online gambling began to take off, things began to get cloudy. The confusion led to the Fifth Circuit judges to provide a clarification statement on the law in 2002. They ruled that the Federal Wire Act did in fact cover online sports betting, however they could not seem to reach an agreement on whether casino games fell under its reach.
Online gambling was addressed several years later by the Unlawful Internet Gaming Enforcement Act, or UIGEA. The combination of the UIGEA and the Federal Wire Act restricted most online gambling activity in the United States. Despite the presence of the UIGEA, some lawmakers still argued that the wording of the Federal Wire Act could be pointed at online casino gambling. This forced the US Department of Justice to step in.
US Department Of Justice Issues Formal Opinion
Amidst all the confusion surrounding the Federal Wire Act, including its regulatory restrictions, the US Department of Justice stepped in to issue a Formal Opinion in 2011. They stated that the law only applies to US-based online sports betting, freeing up other online gambling forms. Their decision reshaped the American online gambling industry and opened doors to possible online gambling expansion.
Modern Effects Of The Federal Wire Act
After the US DOJ’s Formal Opinion, the scope of the Federal Wire Act became clear. The law specifically restricts US-based sportsbooks from accepting wagers. It does not target individual bettors, but rather the institutions facilitating sports wagering. There are legal US online sports betting options in the form of offshore sportsbooks, but only if the sportsbooks in question are legally sanctioned and regulated. The Federal Wire Act has no mention of it being illegal to place bets with a licensed offshore sportsbook.