NEW ORLEANS – The operator of a gambling news site on the Internet has asked a federal judge to declare that advertisements in U.S. media for foreign online casinos (search) and sports betting outlets are protected by free-speech rights.
The suit, filed by Louisiana-based Casino City Inc (search). in Baton Rouge federal court, challenges subpoenaes sent by the Justice Department to media outlets for records dealing with the purchase of ads for offshore gambling sites.
Online casinos and sports betting books are not legal in the United States, but operations in such locales as the Caribbean have sprung up widely in recent years with U.S. residents making bets through credit card transactions.
The suit by Casino City, which operates a Web site featuring news about casinos and sports books but does not offer wagering, contends that the Justice Department action has "had a chilling effect upon free speech" — as well as a dent in its advertising revenue.
The suit contends that the Justice Department also has warned major media trade groups, such as the National Association of Broadcasters, that running such ads may subject a media outlet to criminal prosecution under the 1961 Wire Communications Act (search), which was written to cover sports betting by telephone.
A number of major Internet portals recently stopped accepting ads for online casinos and sports books.
In a statement, Casino City president Michael Corfman said his company lost business with a cable television network and a mainstream casino after "their lawyers nixed the arrangement because of our involvement with online gaming."
Much of Casino City's revenue comes from ads for online gambling services, the suit said.
The company said that since the ads are for Internet operations that are legal in the countries where they operate, the ads running in the United States should be fully covered by the First Amendment as an "exercise of free expression."
The Justice Department declined comment.
Attorney Barry Richard, who is handling the suit for Casino City, said he did not believe that prosecutors were trying anything improper, but "I just think they can't do it constitutionally."
The suit, which was filed last week, was assigned to U.S. District Judge Frank Polozola. No hearing date has been set.
Despite U.S. restrictions, online gambling revenue topped $6 billion in 2003 and is projected to reach $7.6 billion, according to Christiansen Capital Advisors LLC.
The General Accounting Office has estimated there are 1,800 Internet gambling operations. Virtually all of them are based outside of the United States. As much as 70 percent of the wagers come from the United States, according to the report.
In March, the World Trade Organization issued a preliminary ruling that U.S. restrictions on Internet gambling violated trade commitments the United States has made as a member of the WTO. The Bush admininistration is appealing the ruling.