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The Advertising Conundrum
By Lawrence G. Walters, Esq.
Grand Jury investigations? Subpoenas? Aiding and abetting? What on earth is going on? Advertising for Internet gambling in the United States is an issue that has continued to spark debate among industry participants as well as federal and state lawmakers. Recently, the federal government has begun to harden its stance at both the federal and state levels, against Internet gambling, and at least one portal site has been subpoenaed to appear in a United States federal court in relation to advertising Internet gambling services. Interactive Gaming News (“IGN”) obtained a copy of the subpoena issued to the operator of a portal site to testify October 29, 2003, before a grand jury in the Eastern District of Missouri. The operator of the portal site provided IGN a copy on the condition of anonymity. Citing letters from Department of Justice officials to a handful of trade organizations, advising them not to accept advertising from such businesses since it could be in violation of federal law, the feds, through the subpoena, are seeking all commercial and financial information related to the advertisement of Internet casinos and sports books. The subpoena also calls for the operator to turn over any notes or correspondence relating to the legality of accepting advertising from Internet casinos and sports books.However, given the fact that courts have consistently upheld advertising as a form of speech, prosecutors may have wagered more than they bargained for in attempting to regulate advertising for Internet gambling services. The First Amendment provides significant protection towards this type of commercial speech. The government’s ability to regulate advertising for Internet gambling is not coextensive with its ability to regulate online gambling activity, itself. The prevailing test that has previously been used by the courts to evaluate the legality of any particular gambling advertising material is known as the Central Hudson Test. Under that Test, the court’s first duty is to determine whether the First Amendment applies at all. In doing so, the proper question is whether the advertisement concerns a lawful activity and is not misleading or fraudulent. This produces an interesting conundrum for the future reviewing courts since the legality of Internet gambling in the United States is currently the subject of proposed legislation and heated controversy. Moreover, if the gambling activity is legal in the jurisdiction where it is licensed, that may suffice for purposes of this prong of the Central Hudson Test.
Once it is determined that the First Amendment applies, the courts employ a three part analysis that allows commercial speech to be restricted only if: 1) the government’s interest in doing so is substantial; 2) the restrictions directly advance the government’s asserted interests; and 3) the restrictions are no more extensive than necessary to serve that interest. The government may find it more challenging to justify its attempt at regulating, or criminalizing, online gambling advertising because of the markedly different negative effects caused by traditional gambling operations as compared with the online counterpart. The government has traditionally emphasized the ‘parade of horribles’ when it attempts to justify gambling advertising restrictions, such as the increase of drugs, prostitution and other crime, along with the moral decay of society engendered by the presence of a casino in a community. The same arguments cannot withstand scrutiny when online gaming is involved. Crime does not surround an Internet gambling website. The typical justifications go out the window when online gambling advertising is the subject of governmental regulation. Perhaps in anticipation of this argument, the Justice Department has threatened to rely on the amorphous concept of ‘aiding and abetting’ as the legal vehicle to pursue advertisers of online gambling services. Although the courts have not considered such an argument in relation to online gambling in the past, using the criminal aiding and abetting laws to impose criminal liability against online gambling advertisers is a bit of a stretch, even for a conservative Administration. While this novel approach may win brownie points with the right wing conservatives, it would set a dangerous legal precedent, and runs rough shod over the Free Speech rights of advertisers who are promoting a service that is legal and licensed in its forum jurisdiction. This issue will certainly be the subject of future coverage.
Lawrence G. Walters, Esq., is a partner in the national law firm of Weston Garrou & DeWitt, with offices in Orlando, Los Angeles, and San Diego. Mr. Walters represents clients involved in all aspects of online gaming operations. Nothing in this article constitutes legal advice. Please contact your personal attorney with specific legal questions. Mr. Walters can be reached at Larry@LawrenceWalters.com, through his website: http://www.GameAttorneys.com, or via AOL Screen Name: “Webattorney.” You can register to receive these updates by visiting http://www.GamblingLawUpdate.com
