Casino City Files Counter-Response in Advertising Test Case

21 November 2004

Casino City responded Thursday to the U.S. Justice Department's motion to dismiss the company's case for a declaratory judgment as to whether its online portal has the constitutional right to advertise online gambling services. Though its initial filing in August was brief, Thursday's memorandum is an in-depth 28-page document that attempts to expose inconsistencies and contradictions in the DOJ's position.

In its response filed Oct. 29, the Justice Department angled to avoid a ruling on the case's merits by launching technical arguments against Casino City's ability to file such a case.

According to the DOJ, Casino City faces no risk of prosecution. Part of the DOJ's defense rests on the fact that its public service letter advising media associations against advertising for I-gaming states only that such advertising may constitute aiding and abetting illegal activity. The DOJ believes that that claim, combined with the fact that no such letter was sent to Casino City and that no prosecutions have been filed in the last year, is grounds to dismiss the case. The DOJ even maintains that Casino City failed to allege that it engages in or plans to engage in the type of advertising that has been advised against, meaning in a sense, that Casino City's advertisement of offshore gambling sites is not even illegal.

As Free Speech attorney Lawrence Walters described it, "The whole theme that the government is trying to pursue here is that Casino City has nothing to worry about because under their own allegations in the complaint, they claim to be advertising only legal activities."

The response filed today by Casino City's legal team led by Patrick O'Brien and Barry Richard, emphasizes the relaxed rules of standing and ripeness that apply to First Amendment cases.

Casino City's response states, "The gravamen of the DOJ's argument is that there is no standing by Casino City (or implicitly by any other party within the class to which the DOJ communications and subpoenas were directed) because the DOJ has not yet prosecuted anyone of the subject of advertising and because Casino City has not been directly threatened with prosecution. If, in fact, the DOJ does not intend to effectuate such prosecutions, its actions are particularly troublesome from a constitutional standpoint. If successful with this posture, the DOJ would be able to effectively immunize itself from judicial review of any course of conduct designed to stifle free speech."

Contrary to what the DOJ alleges, Casino City's defense team argues that the company has succeeded in alleging requisite intent to engage in conduct proscribed by the DOJ. Pointing to precedent cases, the plaintiff claims that it already engages in activities that the DOJ's letter advised against and that it plans to continue to carry such advertising.

"The DOJ's argument that Casino City has failed to allege the requisite intent to engage in conduct that is proscribed is just plain wrong," the company's legal team stated. "It is clearly alleged that Casino City places advertisements for offshore sports books and online casinos. While Casino City takes reasonable steps to ensure that proceeds it receives do not come from U.S. bettors, Casino City does not control the offshore sports books and online casinos that place advertisements. The DOJ makes no exception for Casino City, as it clearly warned that placement of advertisements for these companies is proscribed, period."

The DOJ's Motion reads, "Even if Casino City is advertising for businesses that accept bets from U.S. customers, it still fails to allege the requisite intention to engage in a course of conduct that is prohibited by statute…. Under the precedent in this circuit, to establish aiding and abetting liability under 18 U.S.C. SEC 2, the government must show the defendant was: "(1) associated with the criminal venture; (2) participated in it as something [the defendant] wished to bring about; and (3) sought by his action to make it succeed."… Casino City does not allege that the statutory criteria for aiding and abetting apply to its relationship with its customers, and the DOJ letter on which Casino City relies states only that such advertisements may constitute aiding and abetting, and that advertisers should consult counsel."

Casino City's attorney O'Brien believes this is a major admission on behalf of the DOJ, which hugely favors the industry. Says O'Brien, "The DOJ asserts that even if Casino City accepts ads from illegal sportsbooks and casinos which accept wagers from U.S. bettors, it would still not be commiting a crime, because mere advertising does not constitute aiding and abetting. This is a major admission by DOJ, and would apply to all forms of advertising - Internet, broadcast and print."

When, as in this case, content-based commercial speech is being disputed, the courts turn to the four-pronged Central Hudson Test to resolve the matter once the technical arguments have been dismissed.

The first part of the Central Hudson Test holds that for commercial expression to be protected by the First Amendment, it must concern lawful activity and not be misleading. Casino City's argument that the activity is legal hinges on the fact that I-gaming is government-licensed in the jurisdictions from which its advertisers operate. Taking quotes from a 1997 Supreme Court decision, Casino City states that once in "cyberspace, located in no particular geographical location," these advertisements become, "available to anyone, anywhere in the world, with access to the Internet," including places where the advertised activities are expressly legal and places where the advertised activities might be prohibited.

An important thing to note, according to the plaintiff, is that unlike radio or television communications, the Internet is a much less invasive channel because "the receipt of information over the Internet requires a series of affirmative steps more deliberate and directed than merely turning a dial."

Precedent Supreme Court law dictates that because the Internet is not a scarce expressive commodity, as is radio and television, the DOJ cannot assert that the advertisements placed by Casino City concern per se illegal conduct.

Casino City then cites the case of Greater New Orleans Broadcasting, in which the court ruled that media agencies in Louisiana could legally advertise out-of-state lotteries, despite the fact that the lotteries were not legal in Louisiana.

The second prong of the Central Hudson Test seeks to determine whether the purported government interest to restrict the disputed activity is substantial. Casino City again defends its case by pointing to the Greater New Orleans Broadcasting decision, which reads, "The Solicitor General identifies two such interests: (1) reducing the social costs associated with "gambling" . . . and (2) assisting States that "restrict gambling" . . . within their own borders. . . . We can accept the characterization of these two interests as 'substantial,' but that conclusion is by no means self-evident."

In none of its arguments has the DOJ asserted its grounds for having a strong interest in prohibiting the advertising of I-gaming. The "protection of social costs" argument cannot be accepted by the court as self-evident, and if the DOJ hopes to call the Central Hudson Test into play, it will have to construct a sound rationale to defend its desire to limit the use of online gambling services.

One important thing to note is that a crucial piece of Casino City's response deals with the fact that the Internet provides more freedoms of communication than do traditional channels like radio, television and print. The emphasis on the Internet being a means of communication that is different than all others could prove quite successful, but it would hardly do much to secure the freedom to promote I-gaming services anywhere else besides on the Internet.

Click here to view Casino City's memorandum in response to the government'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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