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They’re Baaack – Next Round of Subpoenas Targets Esquire
by Kevin Smith
http://www.igamingnews.com/index.cfm?page=artlisting&tid=5823
Any thoughts that the interactive gambling industry’s advertising dilemma was nearing an end were debunked this week by news of subpoenas handed out on April 12 to Esquire magazine publisher Kevin O’Malley and nearly a dozen members of the magazine’s staff.
Online gambling operators seem to have two choices when deciding how to advertise their sites in the United States: They can either go about promoting their business with blatant disregard for the Department of Justice or they can pitch free-play sites.
Some operators have continued to advertise their real-money sites via the few media outlets willing to run the ads in the face of DOJ pressure, while others are developing free-play promotional strategies. The latter approach at the moment seems to present more opportunities.
More. . .
The recent action, brought to light Wednesday by a New York Post article, is related to the magazine’s April issue, which features an eight-page insert billed as the “Gentleman’s Guide to Poker” and sponsored by BoDog Poker. The insert includes BoDog CEO Calvin Ayre’s photo and his tips for playing Texas Hold ‘Em online, along with several references to the BoDog Poker URL and images from the site. It also includes a greeting from Ayre, who invites readers to “join me online at the tables and see why the world is playing poker at Bodog.com,” and the disclaimer: “Void where prohibited by law. Fully licensed in Costa Rica.”
A similar insert appears in the May issue and another was planned for the June issue, which started printing on Saturday, but the Post reports that Hearst Publishing, which publishes the magazine, is considering pulling the ads.
The subpoenas are the first reported legal action of this nature since the U.S. Attorney’s office in the Eastern District of Missouri carried out a grand jury investigation into the advertising practices of the online gambling industry starting in mid 2003 and lasting well into 2004. The original investigation resulted in hundreds of media outlets, broadcasters, portal site owners and even ancillary providers to the industry receiving subpoenas.
Clear Channel, Infinity Broadcasting, Discovery Networks and a host of other media outlets subsequently ended longstanding relationships with I-gaming advertisers.
Ayre wasn’t immediately available for comment on the Esquire story and calls to Esquire went unreturned, but the Post quotes one insider as saying that the magazine would stand to lose nearly $1 million in revenue over the next three issues if the ads are pulled.
Prior to the DOJ crackdown, online gambling operators had been a breath of fresh air for many media outlets that were struggling to keep up with advertising revenue from years past.
Like many publications that forged relationships with I-gaming operators, Esquire has been mired in an advertising slump. Its number of ad pages dropped 12.2 percent in the first quarter of 2005 to 187.35, down from 213.5 in Q1 2004, marking the third consecutive year of decline.
Now the publication is in the same position as other men’s magazines, including Maxim and Men’s Journal, that opened their arms to I-gaming advertisers only to have the DOJ come knocking on their doors.
Since the beginning the of investigation, the Department of Justice has contended that any company accepting advertisements from online casino operators could be charged with aiding and abetting. The department has stated that such advertisements are in violation of the Interstate Telephone Act of 1964 and that online gambling operators are violating the Federal Wire Act of 1961.
A DOJ spokesman in Washington, DC told IGN on Tuesday that little has changed in the eyes of the federal government since the launch of investigation.
“Our position still stands that the advertisements are illegal and that anyone carrying them could be charged with aiding and abetting,” the spokesman said.
The spokesman, who didn’t want his name to be published, said the DOJ has a policy of not commenting on what is and isn’t legal, but in light of the subpoenas that were issued in the fall of 2003 (which included a letter from the department to the American Broadcasting Association informing the ABA that its members could be charged with aiding and abetting for accepting the ads), the DOJ felt compelled to take a stance.
“We have to handle the situation in a delicate manner,” he said. “If we start telling people what they can’t do, they interpret it to mean that they can do other things, and that may or may not be the case. We could have handed down indictments but decided to just issue a stern warning.”
The Post did not report which DOJ office issued the April 12 subpoenas. The U.S. Attorney’s office for the Eastern District of Missouri would neither confirm nor deny issuing the subpoenas and did not want to comment on them.
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This concerns offline ads only?
You raise a good point. I have recently moved all my sites to the UK partly as a result of the current situation in the US. Call me paranoid but I felt uneasy with them being hosted there, I also want to target the European Market more – so this made sense on both counts.
Casino City’s much publicised suit against the US DOJ is still ongoing as well. These are interesting times indeed as far as gambling legislation in the states is concerned.
Glamorama wrote:This concerns offline ads only?In this case, yes.
But in the past the DOJ has coerced PPC engines not to accept online gambling ads.
The fact that supoenas were handed to the staff is pretty amazing.
Again, advertising, under US law, is covered by the free speech laws.
Quote:Casino City’s much publicised suit against the US DOJ is still ongoing as well.No its not. The case was dismissed by the presiding judge. Casino City indicated they might appeal, but there has been no further news since the dismissal.
Quote:The fact that supoenas were handed to the staff is pretty amazing.Not in the least bit. The discovery channel was hammered by them last fall for accepting ads for online poker.
Quote:Again, advertising, under US law, is covered by the free speech laws.No, its not. No one has a “right” to advertise. Advertising is a paid commercial transaction and subject to restricition. If there is any doubt of this consult an attorney.
Also see this quote from the US Department of Justice
Quote:“Our position still stands that the advertisements are illegal and that anyone carrying them could be charged with aiding and abetting,”I am not happy about this development either and am hardly an advocate of the governments position, but we need to understand their intent clearly and notview it through rose colored glasses.
Well Professor,
with those prospects, I suggest we all stop advertising immediately and stop coming here.
Dom if you were to ask the Department of Justice what they thought I am sure thats what they would recommend.
Of course we are all still here, so go figure….
So, no one will really know what is the very
content of the law, until
someone get brought to court for showing gambling ads online
to the US and there is some clear decision from that?
Does it matter in wich country the site is hosted?
… head office of the owner of the site?
Hmmmmm…Is there other countries that have similar laws that anyone is aware of? Or just the US?
I received the Esquire magazine courtesy of Bodog. The insert was quite impressive and I actually learned a tip or two about playing poker.
They dont seem to go after online poker rooms
Actually this post shows that the DOJ is going after Esquire for taking money to run an insert for Bodog’s poker room, so it would seem they are going after online poker rooms.
Overall, this is a chilling set of circumstances. It isn’t really anything new though, just the latest in the DOJ’s assertion that advertisers are potentially aiding and abeting illegal activities. Of course, this has not been proven in a court of law, and the DOJ probably doesn’t want it to go that far since their position isn’t exactly rock solid…the wire act being the key to their arguement; which is specific to placing a phone call to make a bet on sports…that hardly extends to a computer that is connected to a server in another country where a US citizen happens to be playing online poker. Phone lines and internet connections are two distinct things, for proof of that just look at the growth of the VOIP industry (Vonage for example).
For the DOJ to win a case like this (let’s say against Esquire magazine), they would first have to prove that Bodog was doing something illegal. Since online poker isn’t explicitly illegal in the US, and because they are located in Costa Rica, this becomes a very difficult a thing to do. Then they would have to prove that Esquire knew that Bodog was doing something illegal, which is a very shaky assertion. Esquire doesn’t have access to Bodog’s player database, so how can they know anything about who is playing at Bodog? Both these things would have to happen in a court of law for Esquire to really be in trouble. But, the weight of a subpeona from the DOJ will scare just about anyone in the US. It is probably in Esquires best interest to skip the extra $1 million in revenue from Bodog than to pay for a potential legal battle with the government.
So what does this mean for affiliates like us. We are in the same position as Esquire, we advertise for online casinos and poker rooms, but we have no idea where our players are coming from, US or otherwise. If someone clicks to one of our sites from Google, that person could just as easily be in Moroco as the US. Most affiliate stats don’t provide that level of detail, which personally I wouldn’t want anyway because of the DOJ situation. And, we are much smaller fish than an Esquire or Clear Channel, so we would likely never see a letter from the DOJ.
Hopefully the tide will turn in our favor. Frankly, with the exploading popularity of poker in the US and around the world, the acceptance of online gambling in the UK and several other countries, and the hypocrisy of the US stance on gambling in general, that this could one day blow over altogether. At least all of us here hope so.
“Chilling” is a good word for it.
Online gambling operators seem to have two choices when deciding how to advertise their sites in the United States: They can either go about promoting their business with blatant disregard for the Department of Justice or they can pitch free-play sites
If you have noticed, most of the TV time for poker rooms has been promoting FREE play…. watch the new PokerStars ads…. they say that you can play with World Champions ‘free’….
….hook n bait….
The thing to do is to protect yourself.
Make sure all your Ts are crossed and all your Is are dotted.
You want to be totally above board with your taxes, and you want to consult with an online gaming lawyer such as Larry Walters so your site and personal situation are picture perfect as far as the law is concerned.
As long as we are completely informed, refuse to let chilling permeate our community and are completely above board with all of our dealings we are in a good position. It would be much too expensive to come after each of us, and we do have some backing from professional online gambling associations, as has Casino City.
We also DO have some laws that we can call on to protect ourselves. Interpretations can differ, and I am not about to give any legal advice. (That is illegal!)
I recommend you inform yourself!
