Evaluating the DOJ's Response to Casino City

5 November 2004

The U.S. Department of Justice (DOJ)'s response to Casino City's request for a declaratory judgment on its right to advertise online gambling offers few surprises and is not likely to succeed in dismissing the case. The bulk of the long document attempts to discard the case on technical grounds while the free speech issue is addressed in only five pages. Assuming the government's technical arguments will fail, at the heart of case remains the question of whether or not Internet gambling is a legal activity in the U.S.

The DOJ first proposes to dismiss the case by claiming that the U.S. District Court of the Middle District of Louisiana lacks appropriate jurisdiction to rule over the case because Casino City does not have standing and because its challenge is not ripe for review.

According to the DOJ, Casino City, in stating that it does not advertise for companies that take bets from U.S. residents, fails to assert that it engages in activities which the government's public service letter to the National Association of Broadcasters warns against. The DOJ also points out that its letter states only that advertisers of online gambling may be guilty of aiding and abetting, not that they certainly are.

The government further develops its technical argument by claiming that Casino City has not established that it faces a credible threat of prosecution. Not only were the public service letters sent out over a year ago, the DOJ argues, but no such letter was ever sent to Casino City. So because the DOJ's letters and subpoenas did not target Casino City and because the company claims that it does not accept ads from companies that take U.S. bets, the DOJ contends that Casino City has asked the court to rule on a hypothetical situation, and the case is therefore not worthy of a court ruling.

As Free Speech attorney Lawrence Walters describes 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, and therefore they are not going to have any exposure under aiding and abetting so the court should dismiss this case because there is nothing to hear."

He points out, however, that the DOJ's technical defenses of standing and ripeness probably won't succeed in a case like this.

"There are some relaxed rules of standing that apply in First Amendment cases that the government did not happen to mention that I'm sure will be addressed in the responsive memo," says Walters.

In addressing the merits, the DOJ contradicts its earlier statement that Casino City does not engage in illegal activity by basing part of its argument on a claim that online gambling is illegal, and therefore the advertisement of it is not protected by the First Amendment. Perhaps alluding to the contradiction, Michael Corfman, president of Casino City, stated that he got a good laugh at the circular nature of many of the DOJ's arguments.

The DOJ offers two arguments to defend its case-- first that the government's application of aiding and abetting charges to the advertisement of online gambling does not violate the First Amendment because it addresses only the advertising of unlawful activity, and secondly that its application satisfies the established precedence of the Central Hudson Test.

Its claims that online gambling is illegal in the U.S. are based upon two pieces of legislation: the Illegal Gambling Business Law and the Wire Act. With regard to the Wire Act, Casino City has a huge advantage because the Court has already ruled that the Wire Act does not apply to casino gaming and the judge will be bound to uphold that ruling.

It seems quite possible that the Court will have to analyze whether or not elements of either of these two laws are met by Casino City's advertisers.

Walters demonstrates an example: "If there was a casino that accepted only non-U.S. bettors and Casino City decided to advertise that casino, the government would have a very poor argument even under the best interpretation of the Wire Act for them that there could be any aiding and abetting activity. In this case there is no U.S. bettor, and there is no basis on which to conclude there is an illegal activity. These are just offshore entities that are advertising to other foreign individuals. Those are going to be the kinds of factually intensive issues that the Court is going to have to get into.

He continued, "What we might end up with is a ruling that says you can advertise these kinds of casinos but not these other kinds of casinos."

The Central Hudson Test, which is implicated only if the challenged restrictions regulate speech that is not misleading and does not concern unlawful activity, is probably not something Casino City should fear. In determining whether a restriction satisfies the Central Hudson Test, courts evaluate whether the asserted governmental interest is substantial, whether the regulation directly advances the governmental interest asserted, and whether there is a reasonable fit between the legislature's ends and the means chosen to accomplish those ends. The Test is usually reserved for advertising cases, not criminal prosecutions. If it comes into play, Casino City is likely to have succeeded in establishing that certain forms of online gambling are legal.

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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