Online casino pursues long-odds lawsuit.

In the first case of its kind, Casino City Online, a Web site that provides information about casinos and online betting, sued the U.S. Department of Justice (DOJ) last year for infringing on its First Amendment rights. A federal district court in Louisiana dismissed the case with prejudice, on the grounds that Casino City had no standing to sue. (Casino City v. U.S. Dep't of Justice, No 04-557-B-3 (M.D. La. Feb. 15, 2005).)

But Michael Corfman, the company's president and CEO, said he is not giving up, claiming the DOJ's efforts to curtail gambling-related advertising are a threat to free trade and free speech rights of legitimate business operators.

The story began in 2003, when the DOJ launched a new initiative to target illegal gambling online. The agency sent letters to several organizations, including the National Association of Broadcasters, advising them to warn their members that accepting advertising from online gambling sites could put them at risk for prosecution if the ads were found to promote illegal activities. The letters were followed by subpoenas to certain media outlets.

Although Corfman did not receive a letter or subpoena, he decided to sue the DOJ as a preemptive strike. In his lawsuit, Corfman--who is represented by Barry Richard and Patrick O'Brien of Fort Lauderdale, Florida--argued that the DOJ's actions infringed on the right of companies like his to engage in legal commercial activity. The agency argued that since Corfman was not directly targeted, its actions posed no direct threat to him.

Corfman noted that many companies immediately stopped taking ads from online casinos when they received word from the DOJ. "The two biggest examples are Google and Yahoo," he said, referring to two of the biggest search engines on the Web, which no longer accept gambling ads. "Those in the gambling industry believe firmly that they stopped doing so because of the risk of prosecution. The last thing anyone wants is public uncertainty about the legality of your business."

A Business Week Online article reported that Discovery Communications, Infinity Broadcasting, and Clear Channel Communications also pulled their gambling-related ads in the wake of the letters and subpoenas. So did the publisher of Pro Football Weekly, a sports publication.

"What this shows," said Corfman, "is that the Department of Justice can threaten anyone they want, without even needing to prosecute them. This has certainly had a chilling effect."

At press time, Corfman said he planned to appeal the Louisiana court's decision. Meanwhile, he and others in the gaming industry are closely watching another case pending in the World Trade Organization (WTO): that of the tiny island nation of Antigua and Barbuda.

In 2003, Antigua and Barbuda filed a joint complaint against the United States with the WTO. Antigua and Barbuda said the U.S. ban on cross-border gambling violated the United States's commitments under the General Agreement on Trade and Services. The complaint said the ban had devastated Antigua and Barbuda's economy, which depends on tourism and betting, and noted that "the United States is the world's largest consumer of gambling and betting services" and that supplying this demand was necessary to improve the nation's small and developing economy.

In August 2004, the WTO sided with Antigua and Barbuda. The U.S. government is appealing that decision to the WTO Appellate Body.

Corfman said he is waiting for the result of that appeal because it will have a clear bearing on his own case "if the U.S. government's position is rebuffed by the WTO as a trade violation."

There is confusion about the legality of online gambling. No federal law specifically prohibits it, and state laws are a mixed bag. Some states--such as Louisiana, where Casino City operates-allow regulated forms of online betting. Others prohibit it entirely. (Rebecca Porter, Prosecutors, Plaintiffs Aim to Curb Internet Gambling, TRIAL, Aug. 2004, at 14.)

"Is online gambling legal?" asked Corfman. "It's an interesting question. For instance, 'skill games' are legal in many states. Now take poker: There are different opinions about whether poker is a game of chance or a game of skill. And in some states, if it's a game of skill, you can play it online and win prizes--money prizes. And then there are publicly traded companies that support online horse-race betting."

Judging from how quickly other companies reacted to Justice Department pressure, Corfman said, he realizes the odds are against him. But he has two key reasons for pursuing his case.

"One is, I try to run a reputable business. And when there is ambiguity about the law, I seek guidance from the courts. The other is, the DOJ's tactics are unconstitutional, and I feel it is almost my obligation as a citizen to stop activity that I view as unconstitutional," he said.