A Closer Look at Casino City's Appea

23 June 2005

Casino City's primary goal in appealing its declaratory judgment case to the U.S. Court of Appeals for the Fifth Circuit is to obtain a ruling that the company does indeed present a First Amendment Issue. In February 2005 the Casino City case was dismissed by the Department of Justice at the district court level because the court declared that the company failed to present a case or controversy and that it does not have standing to present the case. The district court dismissed the case without even granting Casino City a hearing. The company's recent appeal charges that the district court's decision is erroneous, and although the arguments presented to the Court of Appeals are quite similar to those presented to the district court, they are now reinforced by a myriad of case law examples in which plaintiffs were objectively chilled from exercising free speech but were found to have standing.

What Casino City Must Prove

Casino City's brief posits that the standard for determining whether a declaratory judgment case presents an actual controversy is found in Article III of the U.S. Constitution. To satisfy Article III, a plaintiff must establish that it faces a realistic danger of sustaining a direct injury as a result of the regulatory action in question (In this case the regulatory action in question is the DOJ letters to advertisers, followed by subpoenas, warning advertisers that the advertising of online gambling services is tantamount to aiding and abetting an illegal activity and therefore a punishable offense). The plaintiff need not wait for criminal prosecution before seeking relief. Declaratory judgment cases that involve a First Amendment challenge, such as this one, have more relaxed standards; in these cases the plaintiff needs only to demonstrate that the challenged conduct would result in a chilling effect on protected First Amendment activity.

To establish standing to present its case, Casino City must prove that it has faced either actual or imminent injuries that are traceable to the challenged action and that the injuries could be redressed by a favorable decision. A threat of criminal prosecution is a sufficient injury to raise a case when criminal statutes are involved, but again, cases involving First Amendment challenges have more relaxed standards. In these cases injury can exist if a plaintiff alleges an intention to engage in proscribed activity and faces a threat of credible prosecution or if a plaintiff is chilled from exercising its freedom of expression.

Arguments and Support

To assist its argument that it has been the victim of a chilling effect, Casino City has invoked eight distinct cases where the threats of enforcement authorities concerning the censorship of First Amendment activity have consistently been deemed to chill protected speech. In five of the eight cases the threats were not directly issued to the plaintiff. These five cases are extremely relevant because the district court ruled that Casino City faced no threat of injury because it never directly received a letter or subpoena from the DOJ. Casino City argues that it's fear of prosecution does meet the objective standard test for determining standing because the company falls within the class of entities threatened by the DOJ's warnings and because it is similarly situated to the companies that did receive subpoenas. The company therefore believes it has standing to bring a First Amendment claim because the regulatory authority's (DOJ's) threats have chilled the exercise of free speech. The case law presented by Casino City demonstrates that such threats can objectively chill the speech of entities other than those to whom the threats were not directly given.

The district court also ruled that Casino City did not face a reasonable fear of injury or prosecution because more than a year had passed since the DOJ issued its threatening letters, yet no company had ever been prosecuted for running online gambling advertisements. Casino City contests that despite the lack of prosecutions, the DOJ's actions have still created a reasonable fear of prosecution that has lead search engines to cease accepting I-gaming advertisements. Also, the DOJ has not disavowed its intent to prosecute these companies that advertise for I-gaming. Casino City maintains that it is in a similar predicament to these firms-- it could either endure self-censorship or continue to accept advertisements at the risk of prosecution. Some of the case law examples invoked by Casino City provide analogous situations where although no one had been prosecuted, threats issued by public officials had served as instruments of regulation that were not consistent with the law.

Another reason for the dismissal of the Casino City case in February was the district court's ruling that the company lacks standing because it failed to allege that it intends to engage in activity prohibited by a statute. To combat this decision, Casino City refers to cases which demonstrate that the plaintiff does not have to actually engage in unlawful activity to be entitled to standing. Although the company still has not stated in its brief that it aids and abets illegal activities, it insists that the advertisements it runs fall squarely in the category of advertisements that the DOJ has expressly stated "may be aiding and abetting illegal activities." Casino City argues that the fact that the DOJ has issued the warning that such advertisements could lead to prosecution is sufficient to chill Casino City's right to free expression.

Casino City also attempts to prove that it has indeed suffered actual injury by showing how the DOJ's letters cost the company a substantial contract. In 2003 the company had been in discussions to run advertisements for its website on A&E's History Channel and on the History Channel website, but following the DOJ's threats A&E became too scared to accept the deal. Casino City says it thereby suffered a loss of income and significant economic damage.

Other Considerations

A significant portion of the Casino City brief discusses the company's claim for violation of its First Amendment Rights, but in all likelihood these issues will not receive much in-depth attention by the Appeals Court. The main focus of the Appeals Court will be to determine whether or not the district court has issued a correct ruling. If the Appeals Court inevitably finds that the district court has erred in finding that Casino City lacks standing and failed to present an actual case or controversy, then the case will probably return to the district court for a judgment on the merits of the case.

Casino City has also requested the opportunity to present oral arguments because "the appeal addresses a significant question regarding a developing area of First Amendment law and commercial speech and because of the gravity of the constitutional questions." Casino City's lead attorney, Barry Richard, has the reputation of an extremely eloquent orator.

Click here to view Casino City's appeal.

Bradley Vallerius

Articles by Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials. Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

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