DOJ Holds Its Ground in Casino City Case

8 December 2004

The U.S. Department of Justice's latest filing in the Casino City test case further clarifies the arguments to which both sides intend to adhere throughout the case.

The DOJ on Friday filed a reply brief in support of its motion to dismiss Internet portal site Casino City's attempt to obtain a declaratory judgment on its constitutional right to carry advertisements for online gambling companies. Built mostly as a reaction to Casino City's latest memorandum filed in November, the reply brief offers a more robust defense of the DOJ's actions while maintaining consistent arguments as to why the department believes the case should be dropped due to lack of ripeness and standing.

As with its original filing, the DOJ's first line of defense attempts to avoid a ruling on the case's merits by obtaining a decision that the Middle District Court of Louisiana lacks jurisdiction over Casino City's claims. The DOJ maintains that Casino City has not even alleged that it intends to engage in advertising that was proscribed by last year's so-called public service letters to parties in the media industry. It argues that the only advertisers who risk prosecution are those who accept ads from "Internet gambling and offshore sports book operations that accept bets from customers in the United States." Casino City, according to the DOJ, has not asserted that it places advertisements for any company that accepts bets from the United States. The DOJ points out that Casino City has stated only that it "places advertisements for offshore sports books and online casinos" and that it "has no control over the offshore sports books and online casinos that place advertisements, including the proceeds they generate."

The DOJ also states that the case should avoid a ruling on the merits because Casino City has not proved that it faces a credible threat of prosecution. To that end, the DOJ argues that Casino City "is only one of countless advertisers of Internet gambling," and that over a year has passed since the DOJ issued its public service letters, but still no prosecutions have been filed.

The claim that Casino City is only one out of a multitude of I-gaming advertisers is essentially the only new line of argument since the last filing; all other arguments met tough rebuttals in Casino City's last filing. The "one out of many" approach is cast into doubt when one considers that if any advertiser has anything to fear, surely it is Casino City, which is after all the largest gambling portal site in the United States that accepts such ads.

Although in its previous filing the DOJ's arguments for inappropriate jurisdiction constituted the bulk of the document, these arguments are now relegated to only a few pages. Most experts agree that these attempts will fail because they have already been handily refuted by Casino City and because traditionally the rules of standing and ripeness are relaxed in Freedom of Speech of cases. And although the DOJ persists in claiming that Casino City has not made the necessary assertion that some of its advertisers accept bets from the United States, there can really be no doubt that some of the advertisers take U.S. play.

When addressing the merits of the case, the DOJ turns to a set of arguments that seem to contradict some of the facts it sets forth in arguing that the court lacks appropriate jurisdiction. Setting aside its earlier claim that Casino City does not accept advertising from prohibited companies and therefore need not fear prosecution, the DOJ argues from an assumption that some of Casino City's clients do indeed engage in activity that is illegal in the United States.

According to the defendant, there is no constitutional right to advertise illegal activity (which the DOJ argues online gambling to be). Although Casino City demonstrates that online gambling providers are licensed and regulated by governments around the world, the DOJ firmly holds that these companies are illegal everywhere in the United States. (An immediately noticeable contradiction is that earlier the DOJ argues that Casino City has nothing to fear since it does not accept bets from companies that accept bets from the United States; now the DOJ acknowledges that the companies that advertise for Casino City do engage in what it considers illegal activity.)

This DOJ's argument is a response to Casino City's claim that its advertising of I-gaming is supported by the first prong of the Central Hudson Test, which is invoked when content-based commercial speech is being disputed. Casino City referenced a 1997 Supreme Court ruling 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.

But the DOJ counters, "Internet gambling operations that accept bets from U.S. customers are violating the law, and Internet advertisements of such operations thus 'concern illegal activity.' The fact that these criminal businesses may be operating legally in other countries with the help of Casino City's advertisements in no way mitigates the seriousness of such violations, or Casino City's complicity in the them."

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's last filing referenced the Greater New Orleans Broadcasting decision, pointing out that that the court cannot recognize the reasons for restricting I-gaming advertising as self-evident. The DOJ's rebuttal, however, counters that the Supreme Court has on three occasions ruled that the government does have a substantial interest in reducing even legal gambling.

The DOJ may be trying to deliberately mix up two different issues. In its last motion to dismiss, the DOJ stated that mere advertising does not constitute aiding and abetting, an admission that could be viewed as a victory for the I-gaming industry because it extends beyond advertising on the Internet. But the DOJ begins its latest filing by asserting that the aiding and abetting statute (18 U.S.C. Section 2) can be applied because advertising illegal activity is not constitutionally protected. In this filing, the admission has been relegated to a mere footnote. In effect, the questions of whether the advertising of I-gaming is a crime and whether it is constitutionally protected are being presented in ways that make them difficult to distinguish. Many activities (smoking for example) are not constitutionally protected, but that does not make them illegal. Casino City will have to prove that the same is true of advertising online gambling services.

Click here to view the DOJ's reply brief in support of its motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6).

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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