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HEADLINE: Business Sues US Department of Justice Over Efforts to Stop Online Gaming Ads

BODY:
   On August 9, 2004, Casino City Inc. filed a lawsuit against the U.S. Department of Justice in the U.S. District Court for the Middle District of Louisiana. The complaint seeks a declaratory judgment that advertising online casinos and sportsbooks is constitutionally protected commercial free speech under the First Amendment of the United States. n1

   n1 Casino City, Inc. v. U.S. Department of Justice, U.S. Dist. Ct., M.D.La., C.A. No. 04-557-B-M3.(available at http://Online.CasinoCity.com/FirstAmendment).

   The background to the suit, as explained by the plaintiff, is that in June 2003 the Department of Justice sent letters to a variety of organizations, including the National Association of Broadcasters, the Magazine Publishers of America, the Independent Press Association, and the National Newspaper Association. The letters requested the organizations warn their members that individuals accepting such advertisements might be prosecuted.

   Several months later the Department of Justice issued subpoenas to a variety of media outlets, internet portals, public relations firms, and other companies seeking detailed information on the purchase and placement of online casino and sportsbook advertisements. n2

   n2 See Casino City Files Against U.S. Department of Justice to Establish First Amendment Right to Advertise Online Casinos and Sportsbooks, Aug. 9, 2004 (http://Online.CasinoCity.com/FirstAmendment).

   As a result of the Justice Department actions, which the media has reported widely, popular internet portals, including Google and Yahoo have recently stopped accepting advertising for online casinos and sportsbooks. Some people in the online gambling industry perceive the Justice Department's actions as a form of blackmail based on the belief of a few government officials rather than established legal principles.

   Casino City's parent corporation has been involved in the gaming industry for years. In 1995, it created the original gaming portal site, CasinoCity.com.
Casino City, Inc. operates the website and is the most popular such site on the web concerning online casinos and sportsbooks, land-based casinos, gaming strategy, and news. It belongs to a network of websites including Online.CasinoCity.com devoted to online gaming, and www.CasinoCityTimes.com covering gaming news and offering visitors thousands of article on gaming strategy.

   The complaint by Casino City brings into focus the legality and appropriateness of the Justice Department's warnings that entities and individuals placing advertisements for offshore sportsbooks and online casinos may be violating various state and federal laws, including 18 U.S.C. § 1084, 1952, and 1955, and the warning that the individuals or entities that accept and place such advertisements may be aiding and abetting illegal activities, a Class E felony, pursuant to 18 U.S.C. § 2.

   According to the complaint, the Justice Department's letter and its issuance of subpoenas have created a fear of prosecution within the advertising community, resulting in a chilling effect upon the exercise of free speech. In particular, the complaint alleges that a number of internet advertising portals based in the U.S. have stopped accepting advertising of legal casino and sports betting. n3

   n3 Complaint, supra note 1, at 12.

   Some of Casino City's revenues come from the sale and running of advertisements on its informational internet sites for lawful overseas companies that offer online casino or sportsbook gambling. The sale and placement of the advertisements is not illegal under Louisiana law. The complaint avers that the advertisements are not misleading and concern lawful activity. n4

   n4 Id. at 14, 15.

   According to the complaint Casino City does not conduct or participate in online casino or sportsbook activities. It does not knowingly accept, in payment for operating online casino or sportsbook advertisements, proceeds that come from illegal bets, deposits or wagers placed by persons located in the U.S.
or anywhere worldwide. The complaint contends Casino City has "taken reasonable steps to ensure that such proceeds are not received." n5

   n5 Id. at 16.

   The complaint cautions that the advertisements that Casino City sells and runs are of the same content and nature as those that the Justice Department warned may constitute the offense of aiding and abetting. n6 The complaint contends that the U.S. does not have a substantial interest sufficient to justify imposing on the exercise of free speech resulting from its action and threatened actions and that such threatened actions would not effectively serve any purported government interest. Finally, the complaint argues the government action is not narrowly drawn to effectuate any purported government interest.
n7

   n6 Aiding and abetting would violate 18 U.S.C. § 1084, 1952 and/or 1955.

   n7 Id., 18.

   Most likely, the U.S. government will argue that the case may not be ripe for decision insofar as the plaintiff has not been prosecuted. It is likely to argue that it does have a substantial interest to regulate online gaming, especially from abroad and that such regulation does serve effectively the government interest. The U.S. government has made a number of these arguments recently in the World Trade Organization case brought by Antigua & Barbuda against it, in which the WTO ruled in favor of Antigua & Barbuda.

   Casino City is represented by Greenberg Traurig, P.A. Tallahassee, Florida and Taylor, Porters, Brooks & Phillips, L.L.P. At Greenberg Traurig the attorneys working on the case include Barry Rich, , who has successfully argued three cases before the U.S. Supreme Court, Laureen Galeoto, and Patrick O'Brien, who is an expert on internet-gaming law. n8

   n8 Bradley Vallerius, Media Firm Challenges DOJ Ad Policy, Interactive Gaming News, Aug. 9, 2004.

   Among the firms that have stopped accepting online gaming advertisements are Google and Yahoo. While the Justice Department takes the position that it is illegal for internet gaming businesses to accept bets or wagers from U.S.
citizens under various state and federal laws, including the federal Wire Act, the gaming industry argues that such laws apply to taking bets on sporting events over the internet and not to other forms of internet gaming, such as online poker playing. n9

   n9 Alexei Alexis, DOJ Faces Suit Over Efforts to Stop Online Gambling Ads, Daily Rep. For Exec., Aug. 16, 2004, at A-10.

   In almost every session of Congress over the last ten years or so, bills have been introduced and some have come close to enactment to ban some types of online gaming activities. In the current Congress the House has passed H.R.
2143 that would ban the use of credit cards, wire transfers, and similar financial instruments to fund illegal internet gambling. Similar legislation (S. 627) is pending in the Senate. n10 Efforts of the U.S. government to criminally prosecute online gaming, especially from abroad, while allowing wholesale other forms of online gaming from the U.S., has been the subject of various judicial and legislative attacks. Interestingly, until now international organizations have not made their voices felt on some of the basic policy issues.

   n10 Alexis, supra.

   The lawsuit is the first to challenge the aggressive federal government effort against advertisements for online casinos. The offshore casino industry has been waiting for a test case, since they do about one-half their business with U.S. customers. If they cannot advertise in the U.S., their visibility and business is expected to decline significantly. n11

   n11 Matt Richtel, Lawsuit Claims Free Speech for Online Casino Ads, N.Y. Times, Aug. 23, 2004, at C3, col. 1.

   On August 3, two California residents, including one man who lost $$100,000 gambling on the internet, brought an action against several major internet portals, including Yahoo, Google, AltaVista and Ask Jeeves, charging that they conspired to commit illegal acts by publishing advertising on behalf of casinos.
n12

   n12 Id.

   With the inability of Congress to act on internet gaming, the ball or shall we say the "mouse" is in the judiciary's courts.

Copyright 2004 International Enforcement Law Reporter
International Enforcement Law Reporter

October 2004

BYLINE: by Bruce Zagaris

SECTION: CYBERCRIME; Vol. 20; No. 10

LENGTH: 1406 words

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