Today, advertisements for brick-and-mortar casinos provide significant revenue streams for broadcasters across the country.  Such was not always the case.  Just over a decade ago, the federal broadcast lottery statute – 18 U.S.C. §1304, as amended by 18 U.S.C. §1307 – prohibited the broadcast of casino-related advertisements by broadcasters located in a state that had not legalized casino gambling.   In the late 1990s, a group of radio and television broadcasters located in the New Orleans metropolitan area challenged the Section 1304 ban as applied to advertisements for private, for-profit casinos operating lawfully in Louisiana and Mississippi.  The broadcasters argued that the ban violated their First Amendment commercial speech rights.   In Greater New Orleans Broadcasting Ass’n v. United States, 527 U.S. 173 (1999), the Supreme Court agreed.  The Court found that precluding casino advertisements would be inconsistent with the First Amendment so long as private casino gambling is legal in the state where the advertisement is aired.

In light of Greater New Orleans, the Department of Justice (DOJ) and Federal Communications Commission (FCC) subsequently set forth interpretations of Section 1304 that established the agencies’ view that the statute could not constitutionally be applied to truthful advertisements for lawful casino gambling “regardless of whether the broadcaster who transmits the advertisement is located in a State which permits casino gambling or a State which prohibits it.”  As a result, today federal law permits a broadcaster to air truthful advertisements for lawful brick-and-mortar casino gambling, regardless of whether or not gambling is legal in the state where its broadcast station is licensed.

But what about advertisements for lawful online casinos?  Federal law – for now – is silent.  Greater New Orleans itself involved advertisements for brick-and-mortar casinos.   The Internet was in its infancy at the time of the decision and thus not addressed by the Court.  In addition, neither the FCC nor the DOJ has expressly stated whether it would find the application of 18 U.S.C. §§ 1304 and 1307 to truthful advertisements for legal Internet-based casinos or gambling websites to raise constitutional issues.

Until recently, the DOJ’s Criminal Division had interpreted the Wire Act to forbid the interstate transmission of bets or wagers (or information assisting in placing such bets or wagers) of all kinds, including bets or wagers made on online casino-style games.  As a result, criminal charges and other legal proceedings had been brought against a number of online gambling websites that allowed users to take part in for-money gaming, and a few broadcasters had been subject to prosecution for running ads for these websites.   Broadcasters were thus generally advised by legal counsel not to broadcast advertisements for online casinos.  On December 23, 2011, however, the DOJ issued a letter and accompanying memorandum opinion from its Office of Legal Counsel (OLC) essentially overruling the Criminal Division and making clear that “interstate transmission of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.”  The Wire Act, in other words, applies only to sports betting.  Online casinos and other gaming websites that do not offer sports betting are thereby removed from the specter of liability under the Wire Act.

DOJ emphasized in its letter that other federal statutes potentially applicable to online gambling – including the Travel Act, 18 U.S.C. § 1952; the Illegal Gambling Business Act, 18 U.S.C. § 1955; and the Unlawful Internet Gambling Enforcement Act (UIGEA), 31 U.S.C. §§ 5361-5366 – remain available to DOJ to prosecute illegal gambling operations.  All of these, however, require a violation of state law before federal prosecution can occur.  As discussed below, a few states have begun to regulate online gambling, although the issue remains unsettled in many more.

Congress may well jump into this regulatory void.  On June 6, 2013, Representative Peter King (R-NY) introduced the “Internet Gambling Regulation, Enforcement, and Consumer Protection Act of 2013,” which attempts to regulate online gaming at the federal level.  Specifically, the law would prohibit the operation of “an Internet gambling facility that offers services to persons in the United States” but includes exceptions (among others) for persons authorized under the Act as well as operators “authorized and licensed to provide services relating to bets or wagers by a State …, and which solely provides services to participants wholly within the boundaries of such State….”  Other legislation has also been introduced.  More recently, the House Subcommittee on Commerce, Manufacturing, and Trade held a hearing focused on the state of online gaming.  Witnesses expressed a variety of views on the proper role of the federal government in regulating online gambling, and a summary of the hearing can be found here.

At the state level, as of December 20, 2013, three states have legalized online gambling – Nevada, Delaware and, most recently, New Jersey.  Only one state – Utah – has outlawed it.  Significantly, Utah also prohibits the dissemination of any “advertisement … or solicitation for participation in any lottery unless the advertisement or solicitation contains or includes the words ‘Void in Utah’ conspicuously printed.”  Legislation is currently pending in sixteen other states.  Eleven of those states, including California, Florida, and Texas, have promulgated bills that would, to varying degrees, authorize online gambling and/or the sale of lottery tickets online.  Meanwhile, Maryland, Michigan, Oklahoma, and Washington have put-forth legislation prohibiting internet gambling (again, to varying degrees).  Pennsylvania remains of two minds – legislation both authorizing and prohibiting internet gambling has been introduced in the state legislature.

Given this regulatory uncertainty, broadcasters located in a state that has not specifically legalized online gambling should consult with legal counsel before airing advertisements for online gambling.  Even in states that have legalized online gambling, a degree of caution is in order.  To date, all of the states that have done so impose strict licensing and other controls on online gaming operations and only authorize Internet gambling by individuals physically present within their borders.  Broadcasters should therefore exercise diligence to ensure that they run ads only for websites that they have reason to believe comply with applicable state law restrictions.  In addition, broadcasters should review ad copy to ensure that commercials are not likely to be considered false or deceptive, which they currently could if they suggest that a person located outside of the state could place a bet on the advertised website.

 

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