Does Maryland need Congress's approval to join a multistate lottery like Lotto America?

Plain-English summary

A Maryland statute, State Government Article §9-111(b), lets the State Lottery Agency join a multistate lottery with another jurisdiction's approval from the Lottery Commission and the Legislative Policy Committee. Delegate Rosa Lee Blumenthal asked the Attorney General whether this kind of arrangement, like the six-state-plus-D.C. "Lotto America" agreement then in existence, would run afoul of federal anti-gambling law or require the U.S. Congress to sign off under the Constitution's Compact Clause, which bars states from entering agreements with each other "without the Consent of Congress."

The Attorney General concluded neither problem exists. On federal gambling law, the opinion found that although federal statutes generally ban interstate transportation, mailing, and broadcasting of lottery materials, and using wires to transmit bets, Congress carved out broad exemptions for state-run lotteries, and multistate lottery pacts like Lotto America only transfer prize-fund money and sales data between states, not bets from individual bettors, so they fall outside the narrower federal ban on interstate betting wire services. On the Compact Clause, the opinion applied the Supreme Court's rule that the clause only reaches agreements that threaten to increase state power at the expense of federal supremacy, not every cooperative arrangement between states. Because each state can already run its own lottery without threatening federal supremacy, and pooling prize money to offer bigger jackpots doesn't change that calculus, the opinion concluded a multistate lottery pact isn't the kind of "Compact" the Constitution requires Congress to approve.

Common questions

Does joining a multistate lottery like Powerball or Lotto America break federal anti-gambling law?
No, according to this opinion. Federal law generally exempts state-run lotteries from the statutes banning interstate transport, mailing, and broadcast of lottery materials, and the opinion found that multistate lottery pacts, which only move prize-fund money and sales figures between states rather than individual bets, don't trigger the separate federal ban on interstate betting wire services.

Does a state need Congress's permission before joining a multistate lottery pact?
No. The opinion concluded that the Compact Clause only requires congressional approval for agreements that threaten to increase state power at the expense of federal authority, and pooling lottery prize money between states doesn't do that, so it isn't a "Compact" in the constitutional sense.

Why doesn't pooling prize money with other states threaten federal supremacy?
The opinion reasoned that each state can already run its own lottery without threatening federal power, and creating a bigger combined prize pool, or even an administrative arm to run the joint game, doesn't change that so long as it doesn't enhance state power relative to the federal government.

Did any other state reach the same conclusion?
Yes. The opinion cited the Missouri Supreme Court's decision in Tichenor v. Missouri State Lottery Comm'n, which rejected a Compact Clause challenge to a multistate lottery on the same reasoning, along with prior opinions from the Maine and Oregon Attorneys General.

Did the opinion flag any other legal issue with the Maryland statute?
Yes, briefly. The opinion noted, without needing to resolve it, that the part of §9-111(b) requiring the Legislative Policy Committee's approval before Maryland could join a multistate lottery raised a separate "legislative veto" constitutional question the AG's office had flagged in other contexts, though it noted such provisions are generally severable from the rest of a statute.

Background and statutory framework

Multistate lottery pooling began in 1985 when Maine, Vermont, and New Hampshire formed the Tri-State Lotto to offer bigger prizes than any one state's lottery could fund alone. By 1987, Iowa, Kansas, Oregon, Missouri, Rhode Island, West Virginia, and the District of Columbia had formed a similar pact called Lotto America, which Maryland's SG §9-111(b) authorized the State Lottery Agency to consider joining. Federal law (18 U.S.C. §§1301-1304) generally bars interstate transport, mailing, and broadcast of lottery materials, but §1307 exempts state-run lotteries from most of that ban, and the opinion found neither the Tri-State Lotto nor Lotto America conflicted with the narrower remaining restrictions, since ticket sales stay within each participating state and only prize funds move between them.

The opinion separately analyzed 18 U.S.C. §1084, which bars using wire communications to transmit "bets or wagers" or related information, a provision Congress enacted to fight illegal sports bookmaking. Reading §1084 alongside its contemporaneous companion statute, 18 U.S.C. §1953 (interstate transport of wagering paraphernalia), and the traditional legal distinction between a "bet or wager" (an agreement to gain or lose based on an uncertain event) and a "lottery" (pooling funds for prizes distributed by chance), the opinion concluded §1084's reach is limited to gambling other than lotteries, and that multistate lottery communications, limited to ticket-sales totals and winning numbers between the states themselves, don't use wire facilities to transmit bets in the way the statute targets.

On the Compact Clause, the opinion applied the U.S. Supreme Court's controlling framework from United States Steel Corp. v. Multistate Tax Comm'n: although the clause's text could be read to require congressional consent for any interstate agreement, the Court has limited it to agreements "directed to the formation of any combination tending to the increase of political power in the States" that could encroach on federal supremacy (quoting Virginia v. Tennessee), a rule reaffirmed in Cuyler v. Adams and New Hampshire v. Maine. Because a bigger shared prize pool doesn't increase Maryland's or any partner state's political power relative to the federal government, and an administrative structure to run the joint game is "irrelevant" under Multistate Tax Comm'n unless it enhances state power at federal expense, the opinion concluded no Compact Clause problem exists, aligning Maryland with the Missouri Supreme Court's Tichenor decision and prior state AG opinions reaching the same result.

Citations and references

Statutes:

• §9-111(b) of the State Government Article (Maryland's authorization to join a multistate lottery)
• Article I, §10, clause 3 of the U.S. Constitution (the Compact Clause)
• 18 U.S.C. §§1301-1307 (federal lottery transport, mailing, and broadcast restrictions and state-lottery exemptions)
• 18 U.S.C. §1084 (interstate wire transmission of bets and wagers)

Cases:

• United States Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452 (1978) (Compact Clause reaches only agreements that threaten federal supremacy)
• Virginia v. Tennessee, 148 U.S. 503 (1893) (defining the scope of prohibited interstate compacts)
• Tichenor v. Missouri State Lottery Comm'n, 742 S.W.2d 170 (Mo. 1988) (rejecting a Compact Clause challenge to a multistate lottery)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1990/Volume75_1990.pdf (this opinion appears at printed pages 431-437 of the bound annual volume; Maryland's site does not publish a standalone PDF of this opinion)

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

STATE LOTTERY

Gambling -- Constitutional Law -- Compact Clause -- Multistate Lottery Agreement Does Not Violate Federal Gambling Laws and Does Not Require Congressional Approval

May 31, 1990

The Honorable Rosa Lee Blumenthal
Maryland House of Delegates

You have requested our opinion on several questions relating to §9-111(b) of the State Government Article ("SG" Article), which authorizes the State Lottery Agency to join in the operation of a multistate lottery. SG §9-111(b) provides as follows: "With the approval of the [State Lottery] Commission and the Legislative Policy Committee, the Director [of the State Lottery Agency] may enter into an agreement to operate a multi-state lottery with any other political entity outside the State that operates a lottery."

Specifically, you ask:

1. Is it a violation of federal gambling statutes to operate an interstate gambling wire service?

2. Would the establishment of an interstate compact to operate a multistate lottery require the ultimate approval of the United States Congress under Article I, §10, clause 3 of the United States Constitution (the "Compact Clause"), which provides that "[n]o State shall, without the Consent of Congress, ... enter into any Agreement or Compact with another State ..."?

3. Would the compact have to create an interstate authority to establish a banking exchange and an interstate communications service and to control the entire multistate operation, with participating representation by the several states?

4. Does the approval of the Legislative Policy Committee called for by SG §9-111(b) satisfy the Compact Clause's requirement for legislative approval of a multistate compact or agreement?

For the reasons stated below, we conclude as follows:

1. While a private interstate gambling wire service would be a violation of federal law, the State Lottery Agency's participation in a multistate lottery like that contemplated by SG §9-111(b) would not violate federal law.

2. The establishment of a multistate lottery agreement would not fall within the purview of the Compact Clause and therefore would not require congressional approval. In light of our conclusion in this regard, we need not address your remaining two questions.

I

Background

After almost a century of political and social disfavor, modern lotteries were reborn in 1963 with the advent of the state-run New Hampshire Sweepstakes. By 1974, 13 states, including Maryland, were operating lotteries. Currently, 27 states and the District of Columbia have authorized state-run lotteries to produce additional revenues for their state governments.

In 1985, the states of Maine, Vermont, and New Hampshire entered into an agreement to operate a Tri-State Lotto Game. The purpose of the agreement was to increase the prize pool, thereby making it possible to offer prizes larger than the states could offer individually and consequently increasing the attractiveness of the lottery.

The success of the Tri-State Lotto has served as an impetus to other states interested in pooling resources to provide a larger prize fund for winners of their state lotteries. On September 16, 1987, six states and the District of Columbia signed an agreement to operate a multistate lotto game to be called "Lotto America." The participating states are Iowa, Kansas, Oregon, Missouri, Rhode Island, and West Virginia. The authorization given by SG §9-111(b) permits the Maryland State Lottery Agency to explore the possibility of becoming a signatory to this type of agreement.

II

Federal Anti-Gambling Statutes

Current federal law prohibits various lottery-related activities. See 18 U.S.C. §§1301 (prohibiting the interstate transportation of lottery tickets or related material); 1302 (prohibiting the mailing of lottery tickets, material, or any publications advertising a lottery or any check or other instrument or money for the purchase of a lottery ticket), 1303 (prohibiting any Postal Service employee from knowingly delivering any such material); and 1304 (prohibiting broadcasting of any advertisement or information concerning any lottery). Under 18 U.S.C. §1307, however, state-run lotteries are exempt from many of these prohibitions.[1] This section provides, in relevant part:

    (a) The provisions of sections 1301, 1302, 1303, and 1304 shall not apply to --

    (1) an advertisement, list of prizes, or other information concerning a lottery conducted by a State acting under the authority of State law which is

    (A) contained in a publication published in that State or a State which conducts such a lottery; or

    (B) broadcast by a radio or television station licensed to a location in that State or a State which conducts such a lottery ...

    (b) The provisions of section 1301, 1302, and 1303 shall not apply to the transportation or mailing

    (1) to addresses within a State of equipment, tickets, or material concerning a lottery by that State acting under the authority of State law

Similarly, 18 U.S.C. §1953 prohibits the interstate transportation of "wagering paraphernalia," but specifically exempts the transportation of "equipment, tickets, or materials used or designed for use within a State in a lottery conducted by that State acting under authority of State law ...." 18 U.S.C. §1953(b)(4).

Some federal restrictions on state-run lotteries remain, for example, the interstate mailing of lottery subscription tickets is prohibited by 18 U.S.C. §1302 and is not exempt from that prohibition under 18 U.S.C. §1307(b). Nonetheless, states may engage in a wide range of lottery-related activities. Neither the Tri-State Lotto nor the recent Lotto America arrangement conflicts with federal law. The Lotto America agreement, for example, provides that ticket sales shall occur only within the boundaries of each participating jurisdiction; only prize funds are transferred between the states.[2]

With specific reference to your inquiry about "an interstate gambling wire service," 18 U.S.C. §1084(a) prohibits persons engaged in the business of betting or wagering from using "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, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers ...."[3] This provision was intended to suppress illegal bookmaking. See H.R. Rep. No. 967, 87th Cong., 1st Sess., reprinted in 1961 U.S. Code Cong. & Adm. News 2631.

The provisions of 18 U.S.C. §1084 thus appear to recognize the generally understood distinction between betting or wagering and lotteries: A bet or wager is an agreement between two or more persons that each will gain or lose according to the outcome of an uncertain event, typically a sporting event; while a lottery is a scheme for pooling funds from which to distribute prizes by pure chance among persons who pay consideration for an opportunity to win. See Opinion of the Justices, 385 A.2d 695, 700 (Del. 1978); 38 Am. Jur. 2d Gambling §§3, 5, and 6 (1968); 54 C.J.S. Lotteries §7 (1987). The legislative history of 18 U.S.C. §1084 is replete with references to private bookmaking on sporting events, but gives no indication of an intent to prohibit states from engaging in telephonic or similar communications regarding their own lotteries.

The House Report on 18 U.S.C. §1953, which was enacted at the same time as 18 U.S.C. §1084, indicates the same. The report noted that 18 U.S.C. §§1301 and 1305 already prohibited interstate transportation of lottery tickets; however, that prohibition did not apply to sports betting slips. H.R. Rep. No. 968, 87th Cong., 1st Sess., reprinted in 1961 U.S. Code Cong. & Admin. News 2634, 2635. Therefore, 18 U.S.C. §1953's prohibition against interstate transportation of wagering paraphernalia was enacted to close that loophole, "as part of the Attorney General's legislative program to combat organized crime and racketeering." Id. The contemporaneous enactment of 18 U.S.C. §1084 and 1953 and their closely related thrusts indicate that 18 U.S.C. §1084's references to "bets or wagers" limit that section's reach to gambling other than lotteries.

In any event, the multistate lottery arrangements under consideration do not involve the use of interstate wire communication facilities to transmit bets or information from or to individuals who play the lottery games; all communications would be between the participating states themselves and would be confined to information like the number and dollar value of tickets sold by each state and the winning numbers.[4] Hence, whatever the scope of 18 U.S.C. §1084, we believe that neither the existing multistate lotteries nor any that Maryland might join uses interstate wire communications in a prohibited way.

III

The Compact Clause

Article I, §10, cl. 3 of the United States Constitution provides, in pertinent part, that "[n]o State shall, without the Consent of Congress, ... enter into any Agreement or Compact with another State ...." "Read literally, the Compact Clause would require the States to obtain congressional approval before entering into any agreement among themselves, irrespective of form, subject, duration, or interest to the United States." United States Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452, 459 (1978).

However, the United States Supreme Court has held that the Compact Clause applies only to agreements "'directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.'" 434 U.S. at 468, (quoting Virginia v. Tennessee, 148 U.S. 503, 519 (1893)). See also Cuyler v. Adams, 449 U.S. 433, 440 (1981); New Hampshire v. Maine, 426 U.S. 363, 369-70 (1976). The Court has consistently pointed out that the Compact Clause was not intended to frustrate cooperative efforts between states but rather to guard against the "enhancement of state power at the expense of the federal supremacy ...." See Multistate Tax Comm'n, 434 U.S. at 470. See also Holmes v. Jennison, 14 Pet. 540, 573-74, 10 L. Ed. 579 (1840). The relevant inquiry, therefore, must focus on the "impact [of an interstate compact] on our federal structure." Multistate Tax Comm'n, 434 U.S. at 471.

The mere fact that a multistate lottery game will result in larger prizes and additional revenue does not increase the "political power" of the party states relative to that of the federal government. Similarly, the fact that a multistate agreement would create an administrative arm "is irrelevant if it does not impermissibly enhance state power at the expense of Federal supremacy." 434 U.S. at 472.

Each state, through appropriate legislation, may authorize a state-run lottery without threatening the just supremacy of the federal government, as shown by the federal statutes discussed above. Hence, it is difficult to see how the joint operation of a lottery by two or more states, in and of itself, interferes with that supremacy so that the Compact Clause is applicable.[5] The Supreme Court of Missouri, rejecting just such a Compact Clause challenge to a multistate lottery agreement, concluded that "[t]here is no threat to federal authority. Congress retains its power to regulate lotteries to the full extent of its delegated powers." Tichenor v. Missouri State Lottery Comm'n, 742 S.W.2d 170, 176 (Mo. 1988).

In light of our determination that a multistate lottery agreement does not constitute an interstate compact within the meaning of the Compact Clause, it is not necessary to address your final two inquiries.[6]

IV

Conclusion

In summary, it is our opinion that a multistate lottery agreement is permissible under federal laws and would not constitute an interstate compact requiring congressional approval under the Compact Clause.

                                              J. Joseph Curran, Jr.
                                              Attorney General

                                              Shelley S. Wasserman
                                              Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions & Advice

[1] In addition, the Charity Games Advertising Clarification Act of 1988, Pub. L. No. 100-625, 102 Stat. 3205 (1988), exempted from federal prohibition the advertising of a lottery, gift enterprise, or similar scheme conducted by a nonprofit or governmental organization or as a promotional activity by a commercial organization, if the scheme is legal in the state where conducted. See 18 U.S.C. §1307(a)(2). The effective date of that amendment was delayed to April 7, 1990, to afford the states time to enact their own laws to prohibit advertising private lotteries, if they chose to do so. H.R. Rep. No. 557, 100th Cong., 2d Sess. 3, reprinted in 1988 U.S. Code Cong. & Admin. News 4343, 4344.

[2] While 18 U.S.C. §1302 bars interstate mailing of money to purchase a lottery ticket, it does not prohibit the interstate mailing of money to pay a prize winner. Lottery states currently mail prize money regularly to winners who are not residents of the state conducting the lottery.

[3] Radio and television broadcasting facilities are not within the scope of 18 U.S.C. §1084. See 18 U.S.C. §1081 ("'wire communication facility' means any and all instrumentalities, personnel, and services ... used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission").

[4] See footnote 2 above and accompanying text.

[5] In accord with this conclusion are an April 4, 1984, opinion of the Attorney General of Maine and an April 23, 1986, opinion of the Attorney General of Oregon (Opinion No. 8177).

[6] We note, however, that the portion of SG §9-111(b) requiring Legislative Policy Committee approval of a decision to enter a multistate lottery agreement raises a serious constitutional question. We have repeatedly pointed out the questionable validity of such "legislative veto" provisions. See letter to Governor Schaefer from Attorney General Curran on House Bill 376 (May 24, 1990) (citing prior letters). However, legislative veto provisions are generally severable. Id.