USA Federal Wire Act of 1961 Explained

Icon to depict federal wire actThe Federal Wire Act is a country-specific gambling law enacted in the USA in 1961 to combat the growth of mafia influence over sports betting. At the time, the organized crime syndicates played a big role in sports betting manipulation and point shaving to further fund their racketeering.

However, the Act has been re-interpreted for other purposes over time by various lawmakers, administrations, and departments. Therefore, clarification is needed to fully understand what this U.S. legislation intended at the time of its creation, as well as, its effects on present-day offline and online gambling.

The Creation of the Federal Wire Act

America’s telephonic network began expanding during the 1950’s which presented the mafia with opportunities to utilize telephones, along with telegrams, to send sports betting information domestically between states and U.S. owned territories. In response, then-US Attorney General Robert F. Kennedy imposed the United States Federal Government to draft a bill to end the mafia illegal bookmaking market.

This bill was the Interstate Wire Act later renamed the Federal Wire Act. The bill which was signed by then-US President John F. Kennedy would effectively prohibit sports betting information regarding sports events and contests from being transmitted by wired communication facilities. The creators of the bill-turned-law only intended it to apply to sports betting activities and wagers that relied on transmissions via telephone and telegram.

What Happened When the Wire Act Became Law?

Once the Wire Act was signed and passed it became an official Federal law of the U.S.A. and effectively curbed the further growth of the mafia’s illegal sports racketeering ring. The Federal Wire Act did not take aim at bettors but rather the organizations which took bets, as those were predominately operated by organized crime families.

Due to the language of the Act and its intention to curb illegal sports gambling which profited the mob, the Federal Wire Act regulated US-based bets and wagers made over the phone and other wired communication services in relation to sports events and contests, which clearly excluded lotteries, casino games, and other games of chance.

This meant mob-run betting businesses could not send or receive bets or wagering information anywhere within the US or between its owned and occupied territories. The Act strengthens local state and territorial laws by enforcing punishments on organized bookmaking through fines or imprisonment. Offshore licensed gambling businesses were not targeted due to limited jurisdiction.

The First Modern Interpretation of The Federal Wire Act

The US Federal Wire Act was revisited by the Department of Justice 40 years later under the Bush Administration in 2001. This was done to determine the eligibility of internet betting from any source within the jurisdiction of the Wire Act. The DOJ asked for clarification on the Act and it was determined in a fifth lower circuit court that the Federal Wire Act applied to internet gambling.

Note, the court was not certain if online gambling applied under the Federal Wire Act. Many legal experts criticized the judgment of the court and DOJ for such an old law could not be applicable to the global internet before it was even created during the writing of the law.

However, the court’s ruling permitted the DOJ’s response that all forms of US-based internet betting were illegal in the United States. Later, this allowed lawmakers to spearhead a bill to specifically criminalize all forms of online gambling but it lost traction. Legislators then passed a similar bill deriving language from the Federal Wire Act which was snuck into an unrelated anti-terrorism bill.

The similar bill became the UIGEA. While it did not criminalize online gambling it provided prohibitions for financial institutions to process transactions for gambling purposes. These two factors incited fear in online hosts and forced nearly all gambling operators previously serving Americans to pull out of the market and drop their players immediately.

The Second Modern Interpretation of the Federal Wire Act

After New York requested clarification, the US DOJ revisited the Wire Act in 2011 and reinterpreted the USA online gambling law. They determined in the DOJ Formal Opinion Memorandum that the Federal Wire Act pertained only to domestic online sports gambling. This allowed legitimate domestic online casinos and online poker sites licensed through individual state governments to legally enter the U.S. gaming market.

Delaware, New Jersey, and Nevada have all launched online casino and poker sites while Pennsylvania, and Michigan have presented laws to legalize these domestic online casino and poker operations. The Wire Act currently prohibits domestic interstate sports wagering. Offshore online betting operators remain legal platforms to bet and participate on.

States rushing to legalize sports wagering to reap lucrative tax revenue. Of course, consumers enjoy the convenience of the internet and mobile access and several states have included online and mobile betting services within their existing or proposed legal sports betting bills and several online and mobile sportsbooks have already launched.

The Movement to Ban All Online Gambling

The Restoration of America’s Wire Act (RAWA) is a bill that has gained the support of casino billionaires and anti-gambling legislators' support and monetary backing. Slowly they have pushed this bill to completely outlaw all online gambling access to Americans, domestic and foreign. However, this would greatly hurt states already invested in their online gambling industries.

Little attention has been given to this movement, but it is slowly growing as more individuals who are opposed to gambling see states legalize online gaming before their eyes. This may not become an issue if a majority of states legalize sports betting before the bill gains more traction, as profits from taxes will stimulate state economies and improve the welfare of the people, few individuals will support RAWA then.