The First Amendment and Commercial Speech - A Ray of Hope for Advertising Online Gambling in the United States

By: Lawrence G. Walters


While most of the news on the legal front emanating from the United States has been bad of late, the prospects for advertising online gambling may be brighter than expected. The reason for this is the too-often ignored First Amendment protections afforded commercial speech advertising, for purposes of this discussion, under the United States Constitution. In most countries, if an activity is illegal, all promotion and advertising relating to that conduct is consequently illegal since no legal distinction is made between speech and conduct. However, in the United States, an important distinction exists between conduct, and commercial speech relating to that conduct. The former can be heavily regulated or even banned by the government, but the latter enjoys significant constitutional protection. The issue of gambling advertising has been considered by several federal courts, including the United States Supreme Court, on several different occasions within the last two decades. The prevailing test used to evaluate the legality of any particular gambling advertising campaign is known as the "Central Hudson Test."[1] Under that test, the Court\'s first duty is to determine whether the First Amendment applies at all. In so doing, the proper inquiry is whether the advertisement concerns a lawful activity and is not misleading or fraudulent.[2] Once it is determined that the First Amendment applies to a particular kind of commercial speech at issue, the speech may be restricted only if: 1) the government\'s interest in doing so is substantial; 2) the restrictions directly advance the government\'s asserted interests; 3) the restrictions are no more extensive than necessary to serve that interest.[3] Until recently, virtually any governmental restriction of gambling advertising would be upheld under this test: The courts operated under the assumption that the government could regulate gambling advertising to any degree because it could completely ban gambling itself.[4] However, the legal paradigm under which gambling advertising is evaluated began to change after the United States Supreme Court considered a set of cases involving the advertising of another vice activity, namely; alcohol. Various alcoholic beverage distributors desired to disseminate truthful advertising about their products, but encountered difficulty with the significant restrictions placed on such advertising in various states. In particular, the beer distributors desire to inform the public of the alcohol content contained in certain beer brands, prompting an adverting blitz known colloquially as the "strength wars."[5] Another important case considered whether the First Amendment protects the ability to advertise alcoholic beverage retail prices at places other than the point of purchase.[6] The upshot of these alcoholic beverage advertising cases is that the Court must consider the First Amendment implications when reviewing the legality of advertising; even when that advertising involves a "vice" activity. The next time that the Supreme Court considered the constitutionality of a gambling advertising regulation, the Court would invalidate the law under this new legal paradigm. The Supreme Court considered the validity of Section 1304, which significantly restricts the ability to broadcast advertising of gambling services, in Great New Orleans Broadcasting Association, Inc., v. United States.[7] There, the Court concluded that its previous analysis of gambling advertising was wrong, holding that the power to prohibit or regulate particular conduct does not necessarily include the power to prohibit or regulate speech about that conduct.[8] This shift in favor of the right to advertise highlights an important legal principle that has yet to be exploited by the online gambling industry. Any attempt by the United States government to regulate the online gambling industry through legislation or prosecution must survive a First Amendment inquiry that will give any prosecutor heart burn. The federal courts are particularly sensitive to First Amendment claims, since the right to Free Speech is one of the principle building blocks of American civil liberties. The government will be hard-pressed to justify a restriction on commercial speech, absent a substantial interest in regulating that speech. In prior cases, the government attempted to justify any restriction on gambling advertising by citing a "parade of horribles" allegedly generated by gambling activities. Some of the common negative impacts that the government associates with gambling are moral corruption, crime, prostitution, and the infiltration of organized crime.[9] However, if a court were to consider the validity of a regulation of online gambling advertising, the government would be severely challenged in its effort to establish a substantial interest justifying such regulation. Can an online casino really cause prostitution and other crime? Is organized crime really in control of the online gambling industry? The fact is that Internet gambling produces a completely different experience than gambling in a traditional, land-based casino. There are no smoke filled rooms or high priced escorts. The mob is not taking a cut of the player losses. Most of the gambling activity takes places in private dwellings and in the confines of cyberspace. The traditional negative impacts associated with brick-and-mortar gambling are simply nonexistent in the online counter part. The government learned a similar lesson the hard way when it attempted to justify restrictions on Internet-based adult entertainment by referencing adverse impacts typically associated with land-based adult entertainment facilities, such as topless bars and adult video stores.[10] A unanimous United States Supreme Court invalidated portions of the Communications Decency Act of 1996, which sought to criminalize "indecent" speech on the Internet, since the First Amendment could not tolerate such a content based restriction on protected speech. The government may run into similar difficulties should it need to establish a substantial interest in regulating online gambling advertising, given the important distinctions between traditional and online gambling. The government may be reduced to arguing that online gambling advertising should be regulated because "gambling is bad" or other such visceral justifications. Given the First Amendment interests at stake, it is unlikely that a Court would uphold a restriction on commercial speech on that basis alone. Part of the Central Hudson test used to evaluate the legality of gambling advertising restrictions requires the Court to look at whether the underlying conduct is "legal." This produces an interesting quandary for the future reviewing courts since the legality of online gambling in the United States is currently the subject of conflicting Court decisions and opposing, proposed legislation.[11] Thus, the legality of the underlying conduct is uncertain, at best. Since online gambling operations are generally operated through licensed, offshore casinos, the proper question is not "Is gambling legal?" but, "Where is gambling legal?" If an offshore casino, licensed to operate an Internet Web site, desires to promote its services via the Internet or email, the government would be hard pressed to claim that such advertising promotes "illegal" activity. It is complex legal conundrums such as such these which may have prevented the enactment of online gambling advertising legislation at the federal level, thus far. While various federal laws exist which may, under some interpretation, appear to regulate online gambling advertising, no specific federal legislation exists. Although the government could claim that promoting an offshore casino in the United States constitutes some form of conspiracy or "aiding and abetting," it is unlikely that mere advertising, as a form of protected commercial speech could be considered a sufficient "overt act" to justify the imposition of criminal responsibility. In the event United States authorities attempt to regulate, or prosecute those involved in the advertising of online gambling in the United States, these First Amendment issues should certainly be raised as a defense. Until the Courts clarify the extent of constitutional protections afforded online gambling advertising, the concept of Free Speech merely provides a ray of hope in an otherwise dark tunnel of the Federal government\'s hostility towards the online gambling industry. Lawrence G. Walters is a partner in the national law firm Walters Law Group. Nothing in this article is intended as legal advice. Please consult with an attorney regarding specific legal matters. Mr. Walters can be reached or


[1] Central Hudson Gas & Electric Corp v. Public Service Commission of New York, 447 U.S. 557, 100 S.Ct. 2343, 65
[2] Id.
[3] 447 U.S. at 566, 100 S.Ct. at 2351.
[4] Posadas v. Tourism Co. of Puerto Rico, 478 U.S. 328 106 S.Ct. 2968, 92 LED 2d 266 (1986).
[5] Ruben v. Coors Brewing Co., 514 U.S. 46, 115 S.Ct. 1585, 131 LED 2d 532 (1995).
[6] 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 116 S.Ct. 1495, 135 LED 2d 711 (1996).
[7] 527 U.S. 173, 119 S.Ct 1923, 144 LED 2d 161 (1999).
[8] 119 S.Ct. at 1934.
[9] E.G. Valley Broadcasting Co. v. U.S., 107 F.3d. 1328 (9th Cir. 1997).
[10] See Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 138 LED 2d 874 (1977); compare with Renton v. Playtime Theathers, Inc., 475 U.S. 41, 54, 106 S.Ct. 925, 932, 89 LED 2d 29 (1986).
[11] Compare U.S. v. Cohen, 260 F.3d. 68 (2nd Cir. 2001) [finding that the Wire Act prohibits Internet gambling in some forms] with In re MasterCard International, Inc. Internet Gambling Litigation, 132 F.Supp 2d 468 (E.D.LA 2001) aff\'d, 2002 W.L. 31627004 (5th Cir. Nov. 20, 2002) [finding that the Wire Act does not prohibit Internet Gambling] See also S. 151, compared with H.R. 2143.