Casino City Drops First Amendment Case Against DOJ

30 January 2006

The United States Court of Appeals for the Fifth Circuit has this week accepted Casino City's motion to dismiss its declaratory judgment case against the U.S. Department of Justice. Launched in August 2004, Casino City's case sought a ruling from the U.S. court system as to whether certain actions taken by the DOJ to discourage online gambling advertisements violate the First Amendment of the U.S. Constitution.

Casino City's President Michael Corfman explained that the seemingly long period of silence coming from the Justice Department with regard to online gambling advertisements played a large role in his decision.

"Casino City initially filed suit against the DOJ because their attack targeting media advertising the online gaming industry had directly impacted some of our promotional activities," stated Corfman. "We felt that by taking action, we would help curtail those attacks, directly benefiting the industry as a whole as well as ourselves. We believed our original objective had been accomplished at the time we filed for dismissal."

Following the DOJ's threat of aiding and abetting charges to the National Association of Broadcasters and others in June 2003 and the subsequent issuance of subpoenas in September 2003 to a number of media agencies to deliver information to a grand jury investigation, the DOJ had done little to antagonize online gambling advertisers any further. After two years in which very few media agencies faced aiding and abetting charges, and with advertisements returning to many forms of media (albeit in the form of ads for .net and .info sites rather than for .com sites), a victory in the risky and costly case for Casino City was beginning to look only slightly beneficial to the interactive gaming industry.

Corfman stated, "In it's original motion to dismiss our case in the District Court, the DOJ conceded that advertising online gambling sites accepting bets from U.S. citizens did not constitute aiding and abetting an illegal activity unless the advertiser was also associated with the online gambling venture. We felt this admission by the government was a major victory. Given that the Department of Justice seemed to have also ceased targeting advertisements for online gaming, we felt there was little to be gained by continuing to press our case."

Obtaining any further success out of the legal action was beginning to look a bit doubtful to the company however. The Appeals court heard oral arguments on the case on December 7th, 2005, during which they asked several questions of Casino City attorney Barry Richard but asked not a single question of the attorney for the Justice Department. Casino City had also already seen its case dismissed by the first Court that presided over it—the U.S. District Court for the Middle District of Louisiana.

"During the appeal hearing it became clear we were really breaking new ground with the case, and the nature of First Amendment rights on the Internet," Corfman said. "The DOJ has argued that online gambling has to be legal everywhere before you can advertise it, and we have argued that if online gambling is legal anywhere we should be able to advertise it. While the DOJ's position is clearly too restrictive, based on the court's questions at the hearing, we did not feel confident that the court was necessarily ready to take the leap to our position. First Amendment rights are extended a small step at a time, and we were trying to take such a large step that we were concerned the court might not take that step with us."

Casino City filed a consented motion for voluntary dismissal of the case on January 17th, and the motion was granted on January 26th. The case has been dismissed with prejudice, meaning Casino City cannot bring the case before the Court again. Both parties have agreed to bear their own costs and fees.

It what may or may not turn out to be more than coincidence, three days after Casino City filed its motion to dismiss the case, the DOJ revealed that Sporting News had agreed to a $7.2 million settlement to drop charges it faced for running online gambling advertisements. Catherine Hanaway, U.S. attorney for eastern Missouri, has stated that the Sporting News settlement is only one of many settlements that have already taken place.

If what Hanaway says is true, it would indicate that the DOJ has silently pursued action against advertisers all along without the online gambling industry being aware of it, which begs the question of whether it has chosen not announce the other settlements due to the fact it was still defending its actions through the Casino City case.

But then again the decision to announce the Sporting News settlement might also have seemed timely to the DOJ considering that it occurred two weeks before the Super Bowl, a time when North American-facing sportsbooks need advertising exposure more than any other.

Or it may prove the case that the Sporting News case is simply an isolated incident and that no other charges are pending or being pursued by the DOJ. At any rate, it seems that only time will tell.

Click here to view Casino City's Motion to Dismiss.

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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