The US Government's war against internet gambling continues, despite its inability to implement regulations relating to the payment processing provisions of the Unlawful Internet Gambling Enforcement Act, which was ratified in September 2006.
These efforts see the government potentially misusing its authority to unjustly exaction civil fines against media outlets that carry advertisements for online gambling sites. This continues the trend of focusing enforcement efforts on those US companies that serve as intermediaries between foreign gambling sites and US players. In effect, confronting foreign owned and operated sites poses too much of a legal challenge, and arresting US players is too controversial - even for the Bush administration.
Most recently, on December 19, 2007, the US Attorney’s Office in St Louis announced the settlement of civil forfeiture cases against Google, Yahoo and Microsoft that resulted from the ‘Big Three’ online giants accepting banner advertisements for sports wagering and other internet-based gambling on their sites. According to the news reports, the companies agreed to collectively "forfeit" US$10.5m. Additionally, Microsoft agreed to "donate" $7.5m to the International Center for Missing and Exploited Children. Yahoo and Microsoft also agreed to contribute $13.5m in a public service campaign to inform the public that online gambling is illegal in the States.
Interesting legal issues exist as to whether an internet site can be deemed to be criminally aiding and abetting an alleged criminal activity merely by carrying a banner advertisement, particularly in the context of the internet, where a large number of visitors are likely to be from jurisdictions where it is perfectly legal to wager online.
This argument is novel in that no reported case under American law recognises that a newspaper or other print or a broadcast media can ‘aid and abet’ a crime by simply carrying a business advertisement. This line of thinking carries substantial questions under the Free Speech provision of the US Constitution. The idea that a newspaper or television station must necessarily vet the legality of all the adverts that it carries presents interesting public policy arguments. For the first 200 years of the Union, these arguments have remained untested because no prior administration felt so compelled to use its powers to intimidate the public’s forums for the dissemination of information.
Moreover, strong arguments exist that the advertisements themselves - at least for casino and poker sites - are worthy of Constitutional protection that extends to legal and truthful commercial speech including advertisements. The government’s argument that advertisements for poker and casino sites are unlawful and therefore unworthy of Constitutional protection is therefore questionable. The Fifth Circuit ruled that various Federal gambling laws did not apply to casino-style gaming on the internet in at least the three states reviewed in that case. This established strong precedent that online gaming sites not involving sports wagering are not unlawful in at least some US states. The question now arises as to whether advertisements for those sites that appear in media that reach some states where the activity is lawful can be constitutionally prohibited.
The settlements potentially raise other issues regarding legal procedures. The cases did not involve the invocation of criminal charges against the three web companies. Instead, the government sought a settlement of a civil matter: the civil forfeiture of funds. The government earlier threatened persons and corporations it said were violating criminal laws by accepting advertisements for gambling sites. Next they subpoenaed financial records to determine the amount of money that the companies received from those advertisements. Following this, the government proposed that the companies not only pay huge civil settlements, but also fund a government advertisement campaign and direct money to a private charity acceptable to the government prosecutors.
This situation thus raises at least three separate issues. The first is the ethical propriety of threatening criminal prosecution to force these companies to pay civil fines, donate money and undertake advertising campaigns that would far exceed probable criminal fines. The second is the use of civil forfeiture provisions to effectively create a vehicle to extract payments from private entities. A final issue is how the US Attorney’s office, as part of the executive branch, can create a new civil offence along with ad hoc fines and penalties. Effectively, the prosecutors are dictating the nature of the civil offence and then the penalty. This decision is without legislative standards on the propriety of assessing fines for the alleged conduct or the range or nature of the penalties.
Should Congress or a local prosecutor be deciding whether $21m in fines should be used for ‘illegal’ gambling education and a charity instead of going toward education? Who decides the propriety of the charity or the theme or correctness of the advertising campaign? Finally, and perhaps most alarmingly, these decisions are made without judicial intervention on the culpability of the defendant according to legislative standards, or indeed the suitability of the fines.
Anthony Cabot is the chair of the gaming law practice at Lewis and Roca, with offices in Las Vegas, Phoenix, Tucson and Albuquerque. He has practised in the field of gaming law for 25 years. He is also an adjunct faculty member at the Boyd College of Law, University of Nevada, Las Vegas.
He is the immediate past president of the International Association of Gaming Attorneys, past president of the Nevada Gaming Attorneys Association and past general counsel to the International Association of Gaming Attorneys.
