Lawyers and industry observers believe a federal investigation into I-gaming advertising practices is cause for concern.
The scope of the investigation remains unknown, but the consensus is that a broad net has been cast.
"This is the first time we have seen the federal government go after advertisers using the aiding and abetting clause. That is very significant."
- Lawrence Walters
Weston, Garrou & DeWitt
Interactive Gaming News on Tuesday obtained a copy of a subpoena issued to a portal owner who accepts advertising for online casinos and sports books.
The subpoena, issued by the United States District Court in the Eastern District of Missouri, asks the operator to turn over all commercial and financial information from Jan. 1, 1997 to the present related to the advertisement of online casinos and sports books.
Among information requested in the subpoena is all the "names and all identifying and contact information you have for every point of contact for each such gambling advertiser."
The subpoena also calls for the turning over of any information about advertisements placed on TV, radio or cablecasts. The court, through the subpoena, asks for any accounting records including accounts receivable or accounts payable. They also ask the portal to turn over records of sales calls, telephone records, contracts, invoices, records of negotiations pertaining to payment, e-mail correspondence (both incoming and outgoing), financial transactions, annual gross revenue for the site, information on how advertising revenue was received and the names of financial institutions and account numbers pertaining to the business.
Lawrence Walters, a lawyer with expertise in advertising law, said the subpoena should send up a red flag to those in the industry.
"This is a big deal," he said. "This is going to cause some ripples. This is the first time we have seen the federal government go after advertisers using the aiding and abetting clause. That is very significant."
It's the first time such an investigation has taken place, but not the first time the Eastern District of Missouri has targeted the online gaming industry. Raymond W. Gruender, the U.S. Attorney in the district, reached a $10 million settlement with PayPal Inc. in July following an investigation into the alternative payment solution provider's involvement with the interactive gaming industry. Gruender argued the company was in violation of federal law and aided in illegal activities by providing its service to online sports books and casinos.
"You have to wonder if this guy has an axe to grind against the industry," said a lawyer who represents interactive gaming parties, but requested anonymity.
Meanwhile, Gruender was nominated this week for a seat on the Eighth U.S. Circuit Court of Appeals. If confirmed, he would succeed Judge Pasco M. Bowman II of Kansas City, who took senior status. The nomination process could take six months to a year.
The subpoena calls for the party to testify to the grand jury Oct. 29, but one legal expert pointed out that the subpoena is aimed at getting as much information as possible through documentation and not testimony.
"Document subpoenas, which is what we have in this case, are pretty standard," the source said. "They are just trying to get as much information as they can to determine what direction the investigation will take next."
The uncertainty has many in the industry on edge, but at least one major broadcaster that runs online gambling ads isn't concerned. A spokesperson with the Howard Stern Radio show, one of the highest rated syndicated programs in the United States, said they haven't been served any subpoenas and aren't worried about it. The program is aired by Infinity Broadcasting and one if its sponsors is GoldenPalace.com.
"This cleared all the proper channels through the Infinity legal department," the spokeswoman said. "We only advertise the free part of the site and we are following all the rules."
The news of the grand jury came one day before the Metropolitan Transportation Authority in New York announced a deal with online sports book BetOnSports.com to place advertisements on 250 New York City buses with the BOS logo and the company's toll-free wagering hotline.
Walters is concerned that an investigation could be centered on advertising rights for companies. He said it would mark the first time advertising for a certain industry has been singled out as off-limits to radio stations, newspapers and Web sites.
"This is probably just a scare tactic, but the government likes to take on issues, and if they feel strongly enough about it, they could create some problems," Walters said. "For them to single out online gaming advertising is unheard of, but the Department of Justice is unfriendly to First Amendment interests and there are significant constitutional rights at stake here."
Nobody knows where Kevin Smith came from. He simply showed up one day and started writing articles for IGN. We liked him, so we decided to keep him. We think you'll like him too. Kevin can be reached at firstname.lastname@example.org