Lawsuit claims free speech for online casino ads

23 August 2004

The lawsuit, filed on Aug. 9 by Casino City, which operates CasinoCity.com, an online casino directory, charges that the Justice Department violated the Constitution by threatening American publishers with criminal penalties if they broadcast, print or display advertisements for gambling Web sites. The company is asking the court to issue a declaratory judgment that advertisements for online casinos are constitutionally protected speech.

The suit is the first brought against the federal government, which has been engaged in an aggressive effort to crack down on online gambling. Prosecutors last year started a grand jury investigation into the efforts of American media companies, including major Web search engines that publish or broadcast advertisements for offshore casinos. The Justice Department has argued that American media companies, by carrying the ads, are aiding offshore casinos. According to prosecutors, the gambling operations are illegal, and so are the advertisements.

But some legal experts have questioned that position, in part because they say it is not clear that federal law prohibits all forms of online gambling. And some argue that even if the courts deem online gambling illegal, advertising for the casinos may nonetheless enjoy constitutional protections as commercial speech.

Barry Richard, a lawyer for Casino City, said ads for online casinos deserved the same protection as, for example, an advertisement in a national magazine for a casino in Las Vegas. Such a magazine, Richard said, would not be held criminally liable if it were distributed and read in California, even though the Las Vegas casinos are not licensed there.

By analogy, Richard said, because Internet gambling is permitted overseas, the advertisements should not be illegal in this country. Moreover, some states, including New York, do not make it a crime to place a bet over the Internet.

In the case of Casino City, which is based in Baton Rouge, La., the company derives advertising revenue from offshore casinos whose operations are legal and licensed overseas, according to the court filing.

The government "is not permitted, just because it has some policy against conduct, to keep people from knowing that the conduct is legal elsewhere," said Richard, who represented President Bush before the Florida Supreme Court during the 2000 election dispute.

Michael Kulstad, a spokesman for the Justice Department, said the agency would not comment on the lawsuit.

To date, the government has made no public statements about its grand jury investigation into online casino advertisers. But the investigation has already had an effect. Several major broadcasters, including the radio giants Clear Channel Communications and Infinity Broadcasting, and Discovery Networks of cable television ceased carrying ads for offshore casinos. The major Internet portals Yahoo and Google stopped accepting ads for the casinos in April.

Lawrence G. Walters, a lawyer who represents offshore casinos and their American partners, said the industry had been waiting for a test case and was eager to see how the Casino City case turned out. He said the stakes were significant, particularly for the offshore casinos, which do about half their business with American consumers.

Walters said that if the casinos could not advertise in the United States, their visibility and business would drop off significantly. But he said it was too soon to tell how much damage the federal investigation had done to the casinos.

The suit by Casino City comes on the heels of a lawsuit filed on Aug. 3 against several major Internet portals, including Yahoo, Google, AltaVista and Ask Jeeves, charging that they conspired to commit illegal acts by publishing advertising on behalf of the casinos. The lawsuit was brought by two California residents, including one man who lost $100,000 gambling on the Internet, according to the court filing.

A spokeswoman for Yahoo, Mary Osako, said the company would not comment on the suit.