They're Baaack . . . The Return of Dot-Com Advertising

Despite the U.S. government's efforts to keep online gambling advertising from seeing the light of television, media companies are beginning to fight back, and the I-gaming industry may only be better for it.

"Primarily, [the DOJ] wanted to let the American public know that online gambling is not legal in the U.S. But ultimately, they want to prevent people from complaining to them, asking, 'Why didn't you do something about this?' when they lose money gambling."

-Lawrence Walters
Weston, Garrou & DeWitt

In 2003, the Department of Justice sent letters to various members of the National Association of Broadcasters (NAB), threatening them with aiding and abetting charges if they accepted ads for online gambling services. The DOJ reasoned that these ads would confuse the American public into thinking online gambling is legal in the United States, when, according to the DOJ, it is not.

The actions led to a complaint filed in a Louisiana federal district court by Casino City, a casino directory Web site, against the DOJ on behalf of online casinos and media outlets that received the letter. In a legal ping-pong game, the two parties fought over what Casino City calls a first amendment issue. The case was dismissed in February 2005, but Casino City filed an appeal with the Fifth Circuit Court in New Orleans in June, asking for a declaratory judgment against the DOJ.

In the meantime, online gambling sites wiggled their way around U.S. advertising laws by promoting similarly named free-play "dot-net" sites with the hopes that consumers would undergo what marketing specialist Robert Haukoos has termed an "accidental migration" in which they find the pay sites by default.

Despite the long-term absence of real-money gambling commercials on TV, Haukoos, founder of the RJ Lauren consulting firm, has been successful in getting his client's "dot-com" ads on the air, and he believes that the government's effort to ban such ads from mainstream media is unrealistic.

"The whole thing seems ridiculous to me that the government would try to prohibit an American citizen from playing poker with a U.K.-based poker room," Haukoos said. "And I think a lot of people feel the same way. And now media companies who received the initial warnings from the justice department a couple years ago are starting to push back on the government."

Larry Walters, a First Amendment lawyer who specializes in the online entertainment industry, said he doesn't believe the DOJ would bring lawsuits against media outlets that choose to run online casino ads.

"This (running the dot-com ads) is really calling the DOJ's bluff," Walters said. "This is not sports betting, so the Wire Act doesn't apply. This is a difficult case for them to prove."

Walters disagrees with the DOJ's actions, but he understands the reasons behind them.

"Primarily, they wanted to let the American public know that online gambling is not legal in the U.S." Walters said. "But ultimately, they want to prevent people from complaining to them, asking, 'Why didn't you do something about this?' when they lose money gambling."

Haukoos feels the government was just flexing its muscles and bullying the media into seeing things its way.

"I think what has happened is that this was a scare tactic," Haukoos said. "This was a pressure tactic by the Justice Department where they were using intimidation. And quite frankly you can understand the point of view of a TV station that is licensed by the government to say, 'You know what, this is problematic. Let's just not take the advertisement. Let's just get our advertisement from Ford and Budweiser and mainstream advertisers, and who needs this?'"

Pushing Back

The so called bullying seemed to be working . . . until recently. Almost two years after the warnings were issued, more and more online casinos and media outlets are working together, and the ads are becoming more common on television; not just cable, but also network TV.

The reason for this change, Haukoos said, is that the media companies are simply no longer afraid of the government. And it isn't just the small companies that are fighting back; some mainstream companies are fighting as well.

"This was a pressure tactic by the Justice Department where they were using intimidation."

- Robert Haukoos
RJ Lauren

"There are many now that are saying, 'Poker is legal in our state. Casino gambling is legal in our state, and unless Congress takes specific action in our state, we're going to take this advertising. If the Justice Department comes in and forces us to stop, they will have to take action against somebody--not just a letter,'" Haukoos said.

One of several media outlets working with dot-com advertisers is Texas-based Showcase Cable, which has been running online casinos ads locally for the last six months. Showcase was not one of the companies to receive the DOJ letter, but it still finds itself in the middle of this fight, and Don Peterson, the company's general manager for ad sales and video production, has strong feelings about the matter.

"We feel it's hypocritical to say that you shouldn't accept [advertising], whereas regular casinos can run ads on broadcast and cable television stations all day long," Peterson said. "And it's the same business with the lottery. Every state has a lottery. That's all gambling. People do it and [media companies] accept it all the time."

As of September, Casino City's appeal has been delayed until 2006. In the meantime, without a move by the DOJ, media companies will probably keep accepting ads.

Haukoos explained, "I think this is clearly, in a way, putting the ball back in the court of the government, saying, "Are you going to sue a television station? Are you going to put somebody in jail for accepting a poker ad?' And I don't think that's going to happen."