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Issues with technology, Wire Act delays launch of sports betting app

Complexities with network servers and compliance with the federal Wire Act has delayed the launch of a sports betting app at the Hollywood Casino in Charles Town, state Lottery Director John Myers said Tuesday.

Myers had announced on May 23 that Lottery technology and security staff had completed all testing of the sports betting app, to be operated by DraftKings, and that the Lottery would be issuing a letter of approval, allowing a soft launch of the mobile betting app as early as the last week of May.

At the time, Myers said it appeared the DraftKings app would be in compliance with the Wire Act, a 1961 law intended to crack down on organized crime by making it illegal to use “wire communication” to transmit bets or wagers across state lines, because the company’s network server for processing wagers is located within the state.

By law, players using Lottery-approved sports wagering apps must also be inside the state at the time they place their bets.

On Monday, meanwhile, a federal judge issued a long-awaited ruling clarifying that the Wire Act applies only to sports betting, overturning much of a federal Department of Justice opinion issued in January that would have broadly applied the Wire Act to other types of online wagering. That would have included apps available in some states that allow players to buy lottery tickets online, and also raised concerns that multi-state lotteries such as Powerball and Mega Millions could be challenged in court.

“They ruled basically that lotteries are not included, but they did specifically address sports betting as being under the Wire Act,” Myers said Tuesday of the ruling in federal District Court in New Hampshire.

While Myers said the Lottery is confident that the location of DraftKings’ network server for wagers complies with the Wire Act, the wagering process requires accessing a second network server, known as the wallet server, to verify that the player has sufficient funds in his or her online account to place the bet. Currently, DraftKings’ wallet server is located in New Jersey.

While that technically does not involve transmitting a bet across state lines, Myers said DraftKings is acting out of an abundance of caution.

“I don’t know that they’re 100 percent confident from their side,” he said.

Given that New Jersey is a much larger and more lucrative market for mobile sports betting, he said consolidating the wallet server function in West Virginia was not an option, requiring the company to construct a second network server within the state.

“It could be football season before they get that built,” Myers said, adding, “It looks like it’s certainly going to be delayed.”

He said the Lottery’s IT staff will be working with DraftKings to facilitate that process.

“I have to err on the side of caution,” Myers said. “I don’t want any West Virginia citizen or any employees here to get into trouble.”

Asked for comment, a DraftKings spokesperson issued a statement saying, “DraftKings has been taking part in the required testing phase. We do not have any firm date yet on next steps, including a soft launch or full public launch in West Virginia.”

While the sports wagering app will be licensed to Hollywood Casino, once it launches, it will be able to be downloaded from anywhere in West Virginia.

In December, Mardi Gras and Wheeling Island casinos became the first in the state to launch sports betting apps.

However, Delaware North, parent company of the two casinos, abruptly shut down the BetLucky app as well as the casinos’ on-site sportsbooks on March 6, after its gaming technology provider became embroiled in a legal dispute with a third-party software provider over ownership of proprietary software used to operate both systems.

Delaware North subsequently indicated it could be months or longer before the casinos can relaunch sports betting with a new vendor.

Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220 or follow @PhilKabler on Twitter.

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