Vice Squad
Tuesday, June 01, 2004
Feds Confiscate Online Gambling Ad Payments

When Google and Yahoo! announced a couple months ago that they would no longer accept advertisements for online gambling (see this April 22 Vice Squad post), it was speculated that they were doing so under the threat of pressure from federal prosecutors. That speculation looks to be valid given yesterday's revelation (NY Times article here, registration required) that US marshals seized $3.2 million from Discovery Communications, the owner of the Travel Channel, in April.

The US can't realistically close down Internet gambling sites that are legal and licensed in other countries, so now it is going after third parties in an effort to make it a little bit more difficult for some of our friends and neighbors to wager over the web. Major issuers of credit cards have already been scared off from allowing their cards to be used at web casinos (admittedly in part because of fears that state courts might rule that debts acquired at gambling sites are not legally enforceable), and now this. Here's an excerpt from the Times story:
The money initially belonged to Tropical Paradise, a Costa Rica-based Internet casino operation, which in October paid Discovery for television spots to advertise an online poker room, According to court documents, the government seized the money and told Discovery, which is based in Silver Spring, Md., that it could be party to an illegal activity by broadcasting such advertisements.

Federal prosecutors contend that online gambling sites are illegal, but the offshore casinos fall outside their jurisdiction. So for nearly a year, the government has been trying to curb the sites' activities by investigating and pressuring American companies that provide services to offshore gambling sites on the theory that they are "aiding and abetting" the operations.

Until now, the effort has largely involved seeking information from American companies, including major broadcasters, Web portals and industry consultants. The seizure of money significantly escalates the government's attack.

The move has raised strong criticism from First Amendment experts, media industry executives and people involved with offshore casinos. They assert that the federal government is relying on an untested legal theory in taking action against American companies, and using tactics more typically used against organized crime activities.

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