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On Jan. 20 the Justice Department announced that it had won a $7.2 million settlement from the parent company of The Sporting News to settle claims that the newspaper had run advertising promoting Internet gambling sites. But visit the Web site of Casino City Times, an online trade paper whose headquarters are in Massachusetts, and a series of ads appear for Internet casinos with names like Blackjack Club, Playgate, and Video Poker Classic. Both publications have engaged in a legal stare down with the feds. That The Sporting News is paying out millions while Casino City continues to profit from casino advertising is an illustration of the gray legal area in which prosecutors have found themselves in their effort to crack down on online gaming. “It’s come to the point where if you attack, like Casino City, the government will back away,” says Martin Owens, a Sacramento, Calif., attorney who specializes in online gaming law. “If you cooperate, you’ll get skinned.” The Justice Department has brought only a handful of cases against online casino operators themselves — nearly all of which are incorporated offshore. And prosecuting actual bettors is the province of state and local authorities. But in 2003 the department sent a letter to the National Association of Broadcasters warning that media outlets could be prosecuted for aiding and abetting Internet gambling. Since then, prosecutors have seized millions from media companies and online payment services.
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Casino City itself never received the NAB letter from the Justice Department. Nevertheless, the company decided to go on the offensive, filing a pre-emptive suit against the government in 2004. In court filings, the company asserted that Justice’s effort to squash advertising violated its right to commercial speech. That suit challenged the DOJ’s assertion that because online gambling is illegal in the United States, American companies that accept advertising dollars from overseas online gambling operators are breaking the law. Instead of tackling Casino City’s bold claims, the Justice Department dodged, asking for the suit to be dismissed on jurisdictional grounds. In a twist, the government cited its own lack of interest in prosecuting the company in arguing for the case’s dismissal — even though Casino City continued to run gambling ads. A federal judge in Louisiana agreed with the government last year, ruling that Casino City had “failed to demonstrate that it will be subject to a credible threat of prosecution.” “I think the DOJ was doing an awful lot of ducking,” says Patrick O’Brien, a Florida-based Greenberg Traurig lawyer who represented Casino City. “If they felt strongly that all Internet gaming was illegal, you’d think they’d want their day in court.” Casino City appealed but eventually filed to drop its suit Jan. 17. Yet the company has also employed a second method in an effort to thwart federal prosecutors. In its advertising contracts with gambling sites, it stipulates that ads are not to be paid for with money earned from U.S. gamblers. That’s a move to avoid being charged with receipt of illegal funds, which has been a central allegation in a number of the DOJ’s settlements, including the one made with The Sporting News, which states the paper received funds that “were derived from criminal offenses.” A number of gambling law experts say the government has reason to avoid a courtroom showdown. They argue the DOJ’s contention that online casino gambling is illegal is based in large part on the 1961 Wire Wager Act. But that statute refers only to “bets or wagers on any sporting event or contest” and does not explicitly mention casino games like poker and blackjack. “The Wire Act has never been applied to non-sports gambling in a federal court,” says Christine Hurt, a professor at Marquette University Law School. Still, the DOJ has remained steadfast in its view that online gambling is illegal. “The operation of a commercial gambling business where bets are transmitted in interstate or foreign commerce is illegal under federal law, and that includes Internet communications,” says DOJ spokesman Drew Wade. Despite the crackdown on some companies that have advertised online gaming, casino sites don’t lack for promoters. A number of C-list celebrities, including Anna “the Gold Digger” Benson (wife of Orioles pitcher Kris Benson); Playboy model Brooke Burke; and former NFL quarterback Jim Kelly, have signed endorsement contracts with online gambling houses. And one point on which supporters and opponents of online casinos agree is that technology has outstripped current law. “That’s the problem with using the tools that are currently available,” says David Remes, a Covington & Burling lawyer who has lobbied for restrictions on online gaming on behalf of the National Football League. “They weren’t designed for this. I don’t think anybody meant for what’s going on now to go unregulated.”

Jason McLure can be contacted at [email protected].

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