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March-13-2009,
Legal Firm Fights for Free Speech in Online Gambling...By Hartley Henderson

While surfing the web a few weeks back, I came across a website, www.firstamendment.com, which had the following explanation of who they are and what they offer in the area of online gambling.

Our firm provides experienced legal guidance to online casinos and other participants in the virtual gaming industry. Legal compliance review is critical in the ever-changing field of online gaming law. Serious legal consequences can result from running a virtual gambling enterprise in the United States, however the promotion or advertising of gaming Websites raises different legal issues including the First Amendment right to engage in commercial speech. Our firm is equipped to evaluate the legality of online gaming promotions and business relationships to provide critical legal information necessary to evaluate the potential risks and rewards. Our services include the following:

· Legal Compliance Review
· Promotion/Advertising Evaluation
· Affiliate Contracts
· Legal Challenges
· Gaming Law Advice
· White Collar Criminal Defense

For several years now I've heard numerous arguments for why online gambling should be legalized and regulated in the United States and why the UIGEA needs to be either overturned or amended. But the one argument I never heard argued was that it was an issue of free speech. I decided to contact Larry Walters, the managing partner of the firm, to see if he was open to an interview on the issue and he agreed to be interviewed. The first thing that Mr. Walters stated in the interview is that he will not take on the argument that Americans have the constitutional right to gamble.

While he, like most connected to this industry, believe the U.S. government's stance regarding online gambling is inane and counterproductive, he nonetheless does not feel it's an issue of free speech. Moreover, he doesn't believe that there is anything in the law which prevents Americans from betting online anyway. "The UIGEA clearly states that it doesn't supersede any current laws," Mr. Walters stated, "and no federal laws prohibit American citizens from betting. All federal gambling statutes only relate to those in the business of gambling." Some states have passed laws which makes online betting a crime, and in fact in Washington it's a felony. But Larry believes if someone was ever challenged that law in court it would never withstand a constitutional challenge. "The U.S. government has taken a stance that anything that happens in cyberspace falls under federal law. The state does not have the constitutional right to pass laws that affect international commerce and that includes anything over the internet." But Larry Walters does have an issue with the UIGEA in the areas of advertising and website blocking where he believes the provisions of the UIGEA go against first amendment rights.

According to Mr. Walters the UIGEA gives the green light for the Attorney General to block any site he deems "offensive" and runs afoul of the UIGEA by forcing ISPs to cut off access to gambling websites or sites that promote gambling. Larry believes this creates a grave danger to the basic freedoms of all Americans. "If this law persists then what is stopping the AG from taking the next step and forcing an ISP to block websites with articles that oppose him personally or politically?" As well it gives no due process to the website operator who is about to be put out of business. The website owner has no recourse and because it is done outside of the normal legal process, it would evade public scrutiny. In a recent event, as many will recall, the Commonwealth of Kentucky tried to seize 141 domain names of websites it found "offensive" and "illegal," citing them as leeches on the community. The original circuit judge ruled that the state had the right to take the domain names but the court of appeals overruled that decision by a 2-1 margin. Nevertheless, the fact that it even got as far as it did should be a concern to all Americans that value their freedoms and don't want to give carte blanche to the Department of Justice. If this had been the AG rather than the state of Kentucky that wanted the domain names, the AG could have simply seized them stating the sites were in violation of the UIGEA and it is quite possible that Americans would no longer have access to those sites. Of course the countries housing those sites would have put up a fight but the U.S. government has shown with the Antigua WTO case that it really doesn't care about international due process. Mr. Walters also acknowledged that the internet is the ultimate vehicle of free speech and should never be censored. In a famous Supreme Court case, the court called the internet a "unique and wholly new medium of worldwide human communication" and because it is a worldwide communication tool it should not come under control of the U.S. government.

As well, the UIGEA purportedly gives the government the right to block gambling advertising sites since it deems advertising as a vehicle for aiding and abetting criminal activity. This is particularly where Mr. Walters has major issues with the law. The right to advertise and to express ones opinions about products is protected as commercial speech, and Mr. Walters believes that laws which curtail such speech are presumptively unconstitutional, whether the government likes the product or not. Mr. Walters points to the Greater New Orleans Broadcasting Association case of 1999 as precedent which protects advertisers under the First Amendment. In that case there was a law on the books dating back to the 1930s which prohibited broadcast advertising of gambling under the guise of protecting its citizens. The broadcasters, who wanted the right to take advertising from gambling establishments, challenged the law and took it all the way to the Supreme Court. In a unanimous decision the courts found that a government had no right to block advertising for a service that was legal in the place where it occurred, regardless of whether it was legal where the advertising was received. Nory Miller, the lawyer for the Greater New Orleans Broadcasting Association stated it as follows: "The court is saying that it is not legitimate to let an activity like gambling flourish but then treat people like they are so stupid to be told anything about it."

I tried to refute the argument by pointing out the ban on tobacco advertising to Mr. Walters, but he stated that tobacco companies do have the right to advertise in most media, but the FCC banned television advertising in 1971. He added that if broadcasters wanted to challenge the restriction on First Amendment grounds, they might have a case. But for now, given the precarious position in which the tobacco industry finds itself, cigarette companies remain satisfied with a more limited advertising market. For the longest time hard liquor advertising was verboten. Beer and wine were seen as fair game because they apparently are more genteel than hard liquor, but every day more and more hard liquor ads are seen. In NASCAR, for example, the likes of Winston, Skoal and Camel cigarettes have been replaced by Jim Beam, Crown Royal and Jack Daniels. Unfortunately for NASCAR, the old Cartoon Network and Burger King type advertisements don't seem to generate enough interest for the advertiser to continue sponsoring cars. But the bottom line is that any law that tries to stop online gambling advertisements may be illegal and an affront to free speech and the commerce clause.

Along the same lines, Mr. Walters feels the UIGEA threatens international relationships. Almost all online gambling sites are located outside of the United States, but the UIGEA has a section that deals with foreign jurisdictions that "encourages" foreign countries to cooperate with the United States in blocking all gambling transactions. Most laws in the U.S. prior to the UIGEA have focused on the legality of the activity in the place where it actually occurs. But the UIGEA contradicts that established legal principle and seeks to encourage foreign countries to impose U.S. law on their online gambling interests. Mr. Walters referred again to the Greater Orleans case where one state tried to ban advertising from another state because it didn't want their citizens seeing the gambling services offered from the other state. But the court struck it down on First Amendment grounds since the company offering the activity was doing so in a state where the activity was legal. Mr. Walters feels this argument may hold when applied to cases dealing with offshore gambling advertising as well. Obviously a company can't advertise illegal products or services such as heroin or child prostitution, because those products and services are illegal in almost every jurisdiction on earth. But gambling falls into a different category, since some form of gambling is legal in virtually every state, and online gambling is specifically licensed in over 30 foreign jurisdictions. So the attempts to ban advertising emanating from foreign countries for an activity that is not illegal where it originates is an affront to free speech.

Walters concedes that the issue may be different when it comes to sports betting sites, given the federal Wire Wager Act, which prohibits sports betting businesses throughout the United States. But traditional online casino games are not prohibited at the federal level, and state restrictions may be invalid under the Commerce Clause, as noted above. Walters also commented on the .net advertising appearing frequently on broadcast and print media. Many sites are trying to avoid prosecution by creating purely informational sites with a .net URL link, in the hopes that people will forget the .net information site and go to the .com play for real site. Still, Walters believes that a viable legal argument can be made for the legality even of .com sites. Walters argues that the DOJ's aiding and abetting theory makes no sense. "Aiding and abetting requires an underlying crime. With online gambling advertising, there is no separate crime being committed, since the activity is legal in the jurisdiction where it occurs."

To sum up, Larry Walters has outlined a case that shows portions of the UIGEA are an affront to the first amendment. Website blocking provisions in the law and the unlimited powers given to the Attorney General curtail free speech under the guise of advertising restrictions on "illegal" websites. Furthermore, states' efforts that have tried to assert their 10th amendment rights by passing laws to criminalize online gambling by its citizens and ban advertising by offshore websites are likely unconstitutional. According to the Supreme court, global internet commerce can only be regulated by Congress, not the individual states. Plus, since these states offer gambling themselves, trying to ban advertising by other gambling sites is blatantly hypocritical. Clearly Larry Walters is an advocate for the online gambling industry, but his business and passion is protecting the right to express oneself freely without fear of government repercussion.

I concluded my interview with Mr. Walters as I have with everyone connected to the industry since the election of a new government by asking whether he believes anything will change with the new administration.

"I doubt it," Mr. Walters replied. "Gambling isn't a Republican or Democratic issue. There is support and opposition on both sides. The only thing that can change it is if Obama appoints more progressive judges. The only ones who may be replaced in the coming years are Stevens and Ginsberg, because of age and health issues, but they are some of the more liberal Supreme Court judges anyway. Roberts, Thomas, Alito and Scalia have always voted very conservative on the issues and that doesn't bode well for gambling. Souter is the current swing vote, although he tends to vote with the conservatives." Mr. Walters also suggested that individual states may be instrumental in advancing online gambling interests since they are struggling financially and will be looking for revenue from any source they can, including possibly online gambling. In tough economic times, "vice" activities and habits are all of a sudden not so evil, especially the gambling cash cow!

03-13-2009
Hartley Henderson
MajorWager.com
henderson@majorwager.com

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