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Electronic Arts to Stop Advertising for Online Casinos on Its Web Site
By MATT RICHTELPublished: June 12, 2004
AN FRANCISCO, June 11 – Electronic Arts, the video game giant, said Friday that it had decided to stop running advertisements for Internet casinos on its Web site, delivering another blow to the online gambling industry.
The decision, which the company said would take effect soon, follows similar announcements in recent months by Google and Yahoo, the Internet titans, and some media companies like Discovery Networks and Clear Channel Communications, which said they stopped taking advertisements for online casinos that offer sports betting, virtual poker and other games.
Those moves follow a federal investigation into the activities of American companies that do business with offshore Internet casinos. The Justice Department has argued that such companies might be “aiding and abetting” the casinos, which are seen by the department as illegal operations under federal law.
This week, Electronic Arts informed Forward Slash, a South Africa-based company, that it would no longer run ads for its online casinos on an Electronic Arts Web site, which lets visitors play interactive games without charge.
Electronic Arts, based in Redwood City, Calif., has not been a subject of the investigation, nor has it been contacted by any law enforcement authorities in connection with online gambling, said Jeffrey Brown, a company spokesman.
Still, the company has been aware of developments, Mr. Brown said, and decided this month to stop running the advertisements rather than risk the wrath of federal law enforcement officials. He added that the company did not believe that it was doing anything wrong in publishing the ads.
“We do not believe running the advertisements is illegal,” he said. “We were just looking down the road and thought this could become a policy and legal problem for us.”
Mr. Brown declined to give the size of the Forward Slash deal that Electronic Arts canceled, but he characterized it as a semiannual contract worth “less than $5 million.”
Advertisements for Forward Slash casinos, including Jackpot City, River Belle, Gaming Club and Lucky Nugget, have run on Pogo.com, one of Electronic Arts’ online game sites. Mr. Brown said Electronic Arts was not running the advertisements on its sites that offer interactive versions of its popular sports games, like football.
He said the money represented a tiny fraction of Electronic Arts’ $3 billion in annual revenue and was not worth the trouble, echoing the comments of executives of other companies that have dropped offshore gambling ads.
“We decided the small revenue stream didn’t justify the possible problem,” Mr. Brown said.
As part of federal efforts to curb online gambling, United States marshals in April seized some $3 million in advertising proceeds paid by an offshore casino to Discovery Networks. Last year, the government started a grand jury investigation, led by the United States attorney’s office in St. Louis, to look into American companies working with offshore casinos.
The “aiding and abetting” legal theory is considered controversial and unproved, according to legal experts, who say American media companies may be protected by the First Amendment. But the mere threat of prosecution by the government, experts said, has companies running scared – as the move by Electronic Arts illustrates.
“The chilling effect is working,” said Lawrence G. Walters, a lawyer who represents American media companies that accept advertising on behalf of offshore casinos. He said that American companies “are buckling under pressure and threats of prosecution and litigation.”
The matter is complicated by what legal experts say is the uncertain legal status of offshore gambling in the United States. The Justice Department contends that federal law prohibits offshore operators from offering gambling over the Internet, but legal experts said the courts were divided on the matter.
The Justice Department has declined to comment on the investigation.
Mr. Walters said it was difficult to tell how many companies have stopped running casino advertisements.
David Carruthers, chief executive of BetOnSports.com, an online sports betting business based in Costa Rica, said in an interview last month that he was still finding some media companies, including local radio stations, that were willing to accept his ads.
Online casinos are typically operated from the Caribbean, Costa Rica or Britain, where the activities are licensed and legal. Roughly half of all online bets are placed by United States residents, according to industry analysts.
It is not yet clear that the crackdown on advertising has hindered the ability of offshore casinos to attract American bettors, Mr. Walters said. He did note, though, that there probably would be lag time between ending the ads and a decline in the casino business.
