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An April Fools’ perspective

By Martin D. Ownens, Jr.

If insanity is expecting different results from the same procedures, what do we call it when we actually get them?  The depth of American gambling law’s disarray, particularly as regards advertising became clear early this year.  Two U.S. Federal cases about iGaming advertisement were settled within ten days of each other.  Both covered the same subject, print ads for offshore gaming businesses.  Both were heard in the same Federal court system, using the same statutes, and both pitted the Department of Justice against an American publisher.  But the two results couldn’t have differed more if they had been heard on separate planets.
      The Missouri Sporting News, accused of running ads for online casinos, “cooperated” with the DOJ, and was fined $ 7million on January 23rd for its pains.  In New Orleans, the Casino City Press came out swinging, suing the DOJ and demanding a out swinging suing the DOJ and demanding a declaratory judgment as to whether or not its advertisement for online gaming businesses were forbidden.  But here, the DOJ backed away, saying that Casino city was in no danger of prosecution and so shouldn’t even be in court.  Appealing a previous dismissal, Casino City finally confirmed victory in the first week of February, accepting DOJ assurance that they were not in the prosecutor’s cross hairs.

   


      To complete the contradiction, while the Sporting News ran some iGaming ads but did not specialize  in them, advertising for online gambling business is the heart of Casino City’s business.  It is tempting to blame the apparent shift on natural forces (between January 23rd and February 6th the groundhog saw his shadow this year, you know).  But the truth is even stranger.  The reason that one publisher was punished and another deferred to, was based on their reaction to governmental pressure.  The Sporting News avoided court confrontation to settle behind the scenes and was squeezed unmercifully.  Casino City Press mounted an immediate attack, demanding judgment.  And when confronted boldly the DOJ backed away.  Why?  Because the DOJ’s assertion that all online gambling and its ads are illegal is supported neither in law nor in fact, and so they dare not expose it to judicial scrutiny.

 

The reason the DOJ hasn’t a legal leg to stand on is that gambling policy in the US is set on the state level, not the Federal.  There are, to be sure, Federal anti-gambling laws such as the Wire Act 918 U.S.C.§1084) and the illegal Gambling Business Act (18 U.S.C. §1955), but even these are not triggered unless state gambling law is violated.  The Federal laws, moreover, were originally written to help the States control gambling that reached beyond their ( internal) borders.  Constitutionally speaking the Executive branch has no power to dictate ambling policy.  That is reserved to State police powers.
      And at the State level, gambling laws are hopelessly behind the technology.  Many of these statues were written a century or more ago.  Even today, 16 states and the District of Columbia, don’t even have a coherent definition of what is, and is not, gambling.  Only six even mention the Internet in their gambling laws.  If a State prosecutor were to attempt bringing an online gambling business to book, he would likely have to extrapolate forward from laws written in the time of Al Capone or Jesse James- in the unlikely event that he could get jurisdiction at all.  Even the fundamental  question of where the online bet takes place has yet to be settled in American law.

      Moreover, the contradiction between  U.S. practice and preaching has come to light.  On the one hand, Wicked Gambling and its attendant evils remain stock bogeymen in the ongoing American morality play.  but on the other, 48 of the 50 States now license some form of gambling and it’s a permanent part of their revenue picture.  From the start, then, online gambling was an unwelcome competitor and perfect scapegoat for land-based gambling.  Efforts to wipe it out began as early as 1996.
      But a funny thing happened on the way t the guillotine: they never got there.  None of the dozen or so bills to kill iGaming by the U.S. congress became law.  To the contrary, the assaults have been losing steam.  The growth of Internet gambling has resulted in each successive bill against iGaming  essaying less draconian goals.  The Internet Gambling Prohibition Act of 1999 (Senate Bill 692) not only proposed to outlaw all Internet gambling but to punish the gamblers by forcing Internet service providers to cut off their Web access altogether.
      By 2001 the targets were limited to “illegal” (as opposed to legal) Internet gambling.  By 2005, bills against iGaming had a hard time getting on the Senate’s legislative calendar at all.  Their latest attempt to shut off American finances to iGaming was not even introduced on its own merits as a discrete item of legislation.  Instead it ended in a forlorn attempt to stow away aboard an unrelated appropriations bill – in the other house, yet.

     

Not only was Internet gambling not strangled offshore, it now has a thriving beachhead in the USA, and continues growing stronger.  When the States got into the gambling business, they lost their status as neutral arbiters and became competitors in a very competitive business.  Even with a local monopoly, nobody has to buy.  And so the pressure stays on to keep the games fresh, and the customers coming in.
      In such circumstances the focused marketing power and universal penetration of the Internet is irresistible.  A dozen states now license Internet betting services such as YouBet, to take their horse betting action online.  About as many use the Internet for “second  chance” drawings on their State lotteries.  And as noted above, since the efforts to beat’em have come to almost nothing, a number of States have read the handwriting on the virtual wall, and attempted to join ‘em.  Even conservative, ‘Bible Belt’ jurisdictions are now pondering everything from online lottery sales to licensed poker rooms.”
      But even as the States change their minds, the current Administration remains foursquare against Internet gambling and all its works.  Handed the unenviable task of outlawing Internet gambling with nothing to support the mission, the DOJ was forced into the bureaucratic equivalent of guerrilla warfare.  Since neither law nor reason were on their side, they could only bluff on the strength of their official position.  And the trick to pulling off a bluff is:  not half –measures.  However unlikely the ploy, if you’re brazen enough (especially if you’re the government).  It’s odds-on you’£ get away with it.


      Which is why, in defiance of the plain language of the U.S.  Constitution, its Tenth Amendment, and any amount of supporting case law, the DOJ began to assert that they and they alone had the power to bind and loose regarding Internet gambling, even unto forbidding State legislatures to legalize it – which is exactly the reverse of what the Federal gambling laws say.”
      When it became clear both the iGaming operators and the banks were out or reach, DOJ turned its guns on advertising.  Even more than by freedom of speech and press, ads had been protected by legal logic.  This is the doctrine of means rea, or wrongful intent, which says that in order to be roped in as equal party to a crime, you must have the same criminal intent as the principals.  But once again, the DOJ stood the law on its head.  In June 2003, a letter went out to America’s broadcasters and magazine publishers claming that advertising iGaming was aiding and abetting a felony under 18 U.S.C. § 2.  This flies in the face of the statutory language and the case law, not to mention the 1999 Supreme Court decision of Greater New Orleans Broadcasting U.S.  Damn the torpedoes, full speed ahead.

      Choosing vulnerable companies (burdened with reachable assets, or parents/subsidiaries that need licenses from the FCC or SEC), the DOJ sprang administrative ambushes.  Given the choice between a long expensive grind in court, and a fine coupled with an I’m – sorry letter, several companies have knuckled under.  These were trumpeted as proof of the DOJ position.
      But the point is, many others have not! Internet gambling advertisements continue to be printed, aired, and transmitted in America, even on TV.  They can’t arrest everybody – not even Stalin had that many cops! DOJ bullying notwithstanding, in America we are fast coming to the tipping point, if we aren’t there already.  State governments are looking favorably on iGaming the administration’s antipathy is more of
A conditioned reflex than a coherent position.  And the people are gambling online, all they like.  Opposition for opposition’s sake is doomed, certainly in the advertising arena, and eventually as regards operators too.  The best chance the foes of online gaming  have is to maintain the illusion of control while withdrawing in good order, and to meanwhile strike some kind of a deal with the new realities.
      It remains to be seen if they will take it.

1.   California lawyer specializing in Internet and interactive gaming law.  Co author of  Internet Gambling Law with Prof. Nelson Rose (2005).  Comments and inquiries welcome: mowen@trade-attorney.com
2. Arkansas, California, Delaware, Florida, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont and West Virginia.  The District of Columbia may also be added to this list.  In these States, particular games, wagers and devices are outlawed, but there is no statutory definition of what gambling is, and is not.
4.  Illinois, Indiana, Louisiana, Nevada, Oregon and south Dakota.  The Virgin Islands has also formally authorized the licensing of online gambling.
5.   S. 692 106th Congress: available at http://thomas.loc.gov/
Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act, H.R.2862  109th Congress, (2005) available at http://thomas.l.gov/

6.See IGN News, “U.S. LAW ROUNDUP”, October 6, 2005; and Kevin Smith, “NC Lottery Law Clears Way for Internet Sales” Sept 13th at www.igamingnews.com

7. The author cheerfully acknowledges his debt to (and lifting from ) the historical – fiction scalawag, Harry Flash man, Fraser.  Who hath, by Allah, builded better than he knew.

8. Both Sections 1084 and 1955 have a safe harbor: there is no violation of Federal unless State gambling law is broken first.  The States, then, have always had the power to authorize gambling interchanges between them, as shown by OTB betting and Powerball lotteries.  Nevertheless, each State which proposed to legalize iGaming has received a “don’t –you-dare” letter from DOJ.
9. 527 U.S. 163m 119 S. Ct 1923 (1999),  This overturned part of the Communications Act of 1934 to allow broadcast advertising for gambling, so long as it originated from a jurisdiction where that gambling is leg

 

 

 

 

 
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