LEGAL BRIEFS

III. Application of Existing Legal Principles to Online Gambling Promotions

A. General Considerations

Part one of this article series provided a legal analysis describing the current state of the law concerning traditional land-based gambling ad regulation challenges.LEGAL BRIEFS

III. Application of Existing Legal Principles to Online Gambling Promotions

A. General Considerations

Part one of this article series provided a legal analysis describing the current state of the law concerning traditional land-based gambling ad regulation challenges. The promotion of Internet gambling raises some unique legal issues not addressed in the existing court decisions. Initially, these decisions involved the use of traditional media and not advertising on the Internet. Since Internet advertising is contemporaneously available everywhere on the planet, and not “broadcast” in the traditional sense, any analysis based on the location of the transmission or the recipient may be logically flawed. In addition, the existing cases do not address the legality of Internet gambling, and what effect that licensure of the online casino in foreign countries has on the legal analysis. For example, if current case law suggests that the advertising of private casinos is protected by the First Amendment if it occurs in a place where gambling is legal, does that mean that all Internet advertising by a virtual casino, which is duly licensed by some government, is legal? Those and other complex legal questions will almost certainly be addressed by the courts in the future. To begin to assess the risks associated with promotion of online casinos in the United States, an assessment of the potentially applicable legislation is appropriate.

B. Federal Regulatory Options

Internet gaming promotion might be regulated by several different federal statutes and legal theories. The applicable law will partially depend on the medium chosen to market online gambling. Radio and television broadcast is regulated by Title 18 U.S.C. §1304, which has been the subject of substantial constitutional litigation as described in Part One. Cable television and the Internet are not “broadcast” and thus are not covered by that prohibition.

If direct mail is selected as the advertising medium of choice, Title 18 U.S.C. §1302 is implicated. This statute is specifically limited to use of the mail and prohibits the “advertisement of any lottery, gift enterprise, or scheme of any kind offering prizes dependent in whole or in part upon lot or chance.” The postal service is empowered to issue “stop mail” orders to prevent violations of this statute. Both the FCC and the Post Office have taken the position that “lotteries” include virtually all forms of gambling, including casinos. Thus, §1302 appears, on its face, to prohibit the use of the mail to promote online casinos.

Currently, substantial debate exists regarding the applicability and scope of the “Wire Act,”1 with regard to Internet gambling. Indeed, conflicting decisions have been reached by the courts on the issue of whether the Wire Act prohibits gambling that occurs solely on the Internet.2 Assuming that the Wire Act is eventually found to apply to some form of Internet gambling, the advertising or promotion of such services may also be considered a violation of the Wire Act under a conspiracy or aiding/abetting theory. Notably, only advertisements that solicit participation by United States citizens could be deemed to violate the Wire Act under those theories.3

“Aiding and abetting” is defined under Title 18 U.S.C. §2, which provides, in pertinent part: “(a) Whoever commits an offense against the United States or aides, abets, counsels, commands, induces or procures its commission, is punishable as a principle.” That offense occurs when a defendant willfully associates himself in some way with the criminal venture and willfully participates in it as he would in something he wished to bring about.4 Conspiracy, on the other hand, requires the government to prove knowledge of, and voluntary participation in an agreement to violate the law.5 Conspiracy does not require a completed crime, while “aiding and abetting” does not expressly require proof of an agreement to violate the law.6

Often, the United States government casts its conspiracy net wide enough to ensnare all individuals who were in any way associated with a criminal enterprise. Whether the conspiracy laws are broad enough to encompass individuals or companies that promote Internet gambling through advertising is an open question. The courts will, however, cut off the reach of a statute if it is applied to situations absurdly remote from the concerns of the statute’s framers.7 That principle of law has prevented credit card companies from being swept up in allegations that their services aided and abetted an illegal online gambling enterprise.8 However, given the lack of a precise federal prohibition on the advertising of Internet gambling, remote theories such as conspiracy or “aiding and abetting” may be the only available option should law enforcement decide to prosecute the advertisers of Internet gambling.

One additional option for federal regulation would be civil, administrative or criminal enforcement of the Deceptive and Unfair Trade Practices Act or False Advertising legislation.9 The Federal Trade Commission (“FTC”) investigates and prosecutes claim of deceptive or unfair advertising. If the specific advertisement is deemed to involve illegal activity or is otherwise alleged to be somehow deceptive or unfair, the FTC may become involved to protect United States consumers. The definition of what constitutes “unfair” is extremely broad, and can vary from case to case. Thus far, however, the FTC has not been actively involved in prosecuting gambling advertisements.

In sum, Congress has not seen fit to pass legislation specifically prohibiting or regulating the advertising of online gambling thus far. Given the broad scope of existing advertising regulations, however, such promotions may already be prohibited by existing laws regulating traditional gambling advertising. Other, more general prohibitions might also be used to punish allegedly illegal, unauthorized or deceptive gambling advertising. The applicability of any of these provisions is dependent on the type of gambling being promoted, and the medium used to disseminate the message.

C. State Regulatory Options

Various state governments have passed legislation that either specifically or tangentially affects the promotion of online gambling in the United States. The validity of any of these laws, as applied to online transactions, is questionable given the constitutional restriction on legislation affecting interstate commerce under the Commerce Clause of the United States Constitution.10 However, to the extent that the regulation is found to be consistent with the Commerce Clause, it must also comport with the First Amendment. That analysis will come down to the Central Hudson test, discussed in Part One. The following are examples of some gambling advertising restrictions that have been enacted by various states:

California:
California prohibits: “Prevailing upon a person to visit a place of illegal gambling or prostitution.” Cal. Penal Code §318. It is also a crime to knowingly transmit racing information to gamblers. Cal Penal Code §337i. Those provisions do not appear to be broad enough to encompass the advertising of casino gambling, although it would not be impossible to bring a test case challenging those or similar broad prohibitions. It is unclear whether simple advertising of Internet gambling “prevails upon” a person to visit a “place of illegal gambling” when the gambling occurs in cyberspace and not in any geographic location. These advertising prohibitions have not been used successfully against online gambling promotion thus far.

Georgia:
Georgia makes it a criminal offense to advertise commercial gambling:

(a) A person who knowingly prints, publishes, or advertises any lottery or other scheme for commercial gambling, or who knowingly prints or publishes any lottery ticket, policy ticket, or other similar device designed to serve as evidence of participation in a lottery commits the offense of advertising commercial gambling.

(b) A person who commits the offense of advertising commercial gambling shall be guilty of a misdemeanor of a high and aggravated nature. Code of Georgia Advertising Commercial Gambling §16-12-26.

However, Georgia has not sought to regulate the advertising of Internet gambling, or the gambling activity itself. According to one official, online betting “is not on the forefront for us.”11

Idaho:
Idaho regulates gambling advertising on signs:

Any building, place, or the ground itself, wherein or whereon gambling or any game of chance for money, checks, credit or other representatives of value is carried on or takes place, or gambling paraphernalia is kept, or any notice, sign or device advertising or indicating the existence or presence of such gambling or any game of chance is displayed or exposed to view, is declared a moral nuisance and shall be enjoined and abated as provided as law. ID. St. §52-106.

Kentucky:
Similar to many other states, Kentucky prohibits the “promotion” of gambling:

(1) A person is guilty of promoting gambling in the second degree when he knowingly advances or profits from unlawful gambling activity. KY. St. §528.030.

Although the term “promote” may be equated with “advertise,” the Kentucky statute specifies the manner in which the gambling must be promoted in order for the Statute to be violated.12 Advertising does not fall into the prohibited categories.

Minnesota:
Minnesota allows the advertising of legal gambling, but regulates the content of the advertising. All marketing materials relating to gambling must:

(1) be sufficiently clear to prevent deception and;

(2) not overstate expressly, or by implication, the attributes or benefits of participating in legal gambling. MN. St. §325E.42.

New Hampshire:
New Hampshire addresses the issue by prohibiting the distribution of literature promoting gambling machines in any state which prohibits such literature:

Literature advertising or promoting the use and possession of gambling machines may not be printed in and distributed from this State; provided, however, that such literature shall not be designed for distribution in any state which forbids such literature. NH. St. §287-C; 2.

New Jersey:
New Jersey regulates the content of advertising by requiring that any casino advertising contain language providing information about social assistance for compulsive gamblers. Such language must appear on all print, billboard and sign advertising of casinos. NJ. St. 5:12-5. No mention is made of Internet advertising.

Florida:
Florida’s approach to the advertising issue is illustrative of the fact that a state need not have enacted specific anti-gambling advertising legislation in order to take action. During 1998-99, the Florida Attorney General distributed “Cease and Desist” letters to at lest ten media companies providing publishing or broadcasting advertisements for offshore computer gambling sites.13 Florida, however, does not have in place any specific prohibition on the advertising of gambling, let alone Internet gambling. Florida law prohibits anyone from keeping any gaming apparatus or from playing any game of chance for money, but the issue of advertising is not specifically addressed by the gambling legislation.14 The Attorney General’s actions prompted many Florida media companies to scale back their operations, move out of Florida or get out of the business all together.15 More recently, however, Florida seems to have ducked the issue of Internet gambling advertising and devoted resources to other matters.16

Wyoming:
The Wyoming statutes contain a specific reference to the type of gambling advertising that is allowed, but are less clear as to the prohibitions. Section 6-7-104 of the Wyoming Statutes, entitled “Advertising of Allowable Gambling Activities or Events,” states:

Nothing in this Chapter prohibits the advertising of any gambling activity or event excluded from gambling under W.S. 6-7-101(a)(iii) and conducted by or for any charitable or non-profit organization or conducted as a promotional activity by a private business entity, which is clearly occasional and ancillary to the primary business of that entity.

Although the Statute appears to be somewhat vague, it may be difficult to enforce against the advertising of Internet gambling by a charitable organization, or a business that is primarily engaged in something other than gambling.

These state regulatory examples demonstrate the wide variety of legislation available to regulate gambling advertising. The applicability of such laws to virtual casinos remains an open question since these laws were enacted before online gaming began. Moreover, constitutional problems are created when a state attempts to apply inconsistent regulations to global communications.

Lawrence G. Walters is a partner with the national firm of Weston, Garrou & DeWitt, with offices in Orlando, Los Angeles and San Diego. The firm practices in the area of Free Speech regulation, Internet law, Gaming law and Advertising issues. Nothing in this article is intended as legal advice. Please consult with your personal attorney on specific legal issues. You can reach Lawrence Walters at Larry@LawrenceWalters.com, www.GameAttorneys.com or AOL Screen Name, “Webattorney”.

1 18 U.S.C §1084
2 Compare United States v. Cohen, 260 F.3d 68 (2nd Cir. 2001) [Finding that the Wire Act prohibits Internet gambling in some forms] with In re MasterCard International, Inc. Internet Gambling Litigation, 132 F.Supp.2d 468 (E.D. La. 2001) [Finding that the Wire Act does not prohibit Internet gambling.]
3 See Cohen, Supra.
4 United States v. Indelicato, 611 F.2d 376, 385 (1st Cir. 1979); see also: United States v. Longoria,569 F.2d 422, 425 (5th Cir. 1978).
5 United States v. Bright, 630 F.2d 804, 813 (5th Cir. 1980).
6 Perenira v. United States,347 U.S. 1, 11, 74 S.Ct. 358, 364, 98 L.Ed 435 (1954).
7 Jubelirer, v. MasterCard Intern. Inc, 68 F.Supp.2d 1049, (W.D. Wis. 1999).
8 Id.
9 15 U.S.C. §§45, 52, respectively.
10 See: ACLU v. Johnson, 194 F.3d 1149 (10th Cir. 1999); Cyberspace Communications, Inc. v. Engler, 55 F.Supp.2d 737 (E.D. Mich. 1999); PSINET, Inc. v. Chapman, 167 F.Supp.2d 878 (W.D. VA 2001).
11 M. Ritchel, “US Firms Roll Legal Dice With Stake in Online Gambling,” Chicago Tribune, (July 6, 2001).
12 Traditional advertising does not appear to violate the Kentucky statute.
13 Id.
14 §849.01, Fla. Stat. (2002).
15 M. Ritchel, “US Firms Roll Legal Dice With Stake in Online Gambling,” Chicago Tribune, (July 6, 2001).
16Id.