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Emily D. Swoboda

I-Gaming Ads at the Heart of Legal Showdown in Colorado

2 March 2006

A story that appeared on a Denver television news station last week has reignited the online gambling advertising debate.

CBS4 investigative reporter Rick Sallinger learned that advertisements for online gambling site were on display inside Denver's Pepsi Center, home of the Denver Nuggets, and commercials for Golden Palace, as well as other gambling companies, were broadcast on TV during Nuggets games.

"The ads were in several forms," Sallinger said. "First they were on rotating billboards at court level in the Pepsi Center during games. There were also ads that aired on the Altitude Network which is owned by Kroenke Sports. These took two forms: crawls along the bottom of the screen and regular commercials for"

Sallinger added that since his original investigation, he has learned of other gaming ads accepted by Kroenke Sports.

Controversy of this nature is not new to the I-gaming industry. Most notable is online casino directory Casino City's battle with the Department of Justice over blanket threats (to numerous media outlets) of aiding and abetting charges for producing and carrying online gambling advertisements.

The Casino City case has been dropped, however, and the government continues to investigate I-gaming ads, although it has yet to bring a successful lawsuit against a gaming or media company. Some warnings have led to settlements, with the most recent one, a $7.2 million settlement with Sporting News, coming in January.

Colorado law doesn't specifically name Internet betting as an illegal form of gambling in the state, but according to Attorney General John Suthers, it is. And he said state law prohibits advertising of Internet gambling.

Colorado's constitution, however, doesn't get that specific. The only language that comes remotely close to pertaining to Internet gambling is in section 18-10-102, in which gambling is defined as "a means of risking any money, credit, deposit, or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device, or the happening or outcome of an event, including a sporting event, over which the person taking a risk has no control," and section 18-10-106, which addresses the transmission of information. It states "Whoever knowingly transmits or receives gambling information by telephone, telegraph, radio, semaphore, or other means or knowingly installs or maintains equipment for the transmission or receipt of gambling information commits a class 3 misdemeanor."

Larry Walters, a First Amendment lawyer specializing in the online gaming industry, said very few states have been successful at passing statutes specifically prohibiting online gambling. And he doesn't see many more accomplishing that either because of federal power.

"The constitutionality of any state's restriction of Internet gambling is questionable, in light of the Dormant Commerce Clause of the U.S. Constitution, which essentially requires that matters affecting interstate commerce, like Internet transactions, be regulated at the federal level, not by the states," Walters said. "Several state statutes attempting to restrict the content of Internet communications have been struck down on this basis. Therefore, it is an unsettled issue whether a particular state can pass any regulation of gambling that takes place in Cyberspace."

Federal lawmakers have yet to pass an anti-Internet gambling bill, but it's not for lack of trying. This session alone has seen Rep. James Leach, R-Iowa, introduce the Internet Gambling Enforcement Act and Rep. Bob Goodlatte, R-Va., the Internet Gambling Prohibition Act. But nobody could have foreseen at that time the Internet boom and the ability to talk, shop or gamble online. Goodlatte would like to see the language in the Wire Act changed to include remote forms of communication, such as the Internet. The Wire Act was passed in 1961 to put a stop to sportsbetting over the telephone because of the Mafia.

Robert Haukoos, marketing specialist and founder of RJ Lauren consulting firm, said the confusion in the Colorado case comes from trying to sort out what is legal and what isn't.

"With sports book advertising, I think everybody seems to feel that the Wire Act applies to that, but when it comes to casino and poker, I think there is a mixed opinion about whether that is really legal and whether you could advertise it."

Haukoos is all too familiar with the government's opinion of Internet gambling. His clientele consists of several online gambling companies. He has been successful, however, in getting his clients' advertisements into the American media.

"I find it interesting that the attorney general said it is illegal in Colorado," Haukoos said. "So, on the federal level we're all very familiar with what's going on. We understand that there's a controversy about whether this really is illegal."

Kroenke Sports announced Tuesday that it has suspended the gambling ads pending a meeting with the attorney general. Brian Kitts, senior director, marketing and public relations for Kroenke Sports Enterprises, confirmed the announcement, but was not at liberty to discuss any other aspects of the case.

I-Gaming Ads at the Heart of Legal Showdown in Colorado is republished from
Emily D. Swoboda
Emily D. Swoboda