Feds ease threats to online advertisers

Jan 24, 2006 3:43 AM

The U.S. Department of Justice last week announced it had accepted a settlement from the Sporting News, which it had accused of promoting Internet gambling by publishing advertisements for online gambling sites.

Under the settlement, the Sporting News will pay a fine of $4.2 million and complete a 3-year public service campaign, valued at $3 million, to educate people about illegal Internet and telephone betting.

For its part, the Sporting News neither admitted nor denied legal liability in making the settlement. Rather, it said the amount reflected profits it had received from running Internet gambling ads from the spring of 2000 through the end of 2003.

The settlement is the latest in the ongoing campaign led by the DOJ, which two years ago decided publishers and broadcasters are guilty of promoting and profiting from Internet gambling by running ads for it.

At the time, GamingToday was also contacted by the DOJ with questions about off shore advertising. Since the campaign began, the DOJ has reached settlements with several American media companies.

An official with the DOJ said prosecutors had warned publishers that their activities were analogous to advertising on behalf o drug dealers and child pornographers.

The media companies in effect "are aiding and abetting in the promotion of these illegal gambling sites," said U.S. Attorney Catherine Hanaway.

After the campaign began, there was a significant drop-off in American media organizations that accept off shore advertising.

But most recently, the advertising has begun to show up again and, Internet gambling experts agree, it appears that prosecutors are not intending to undertake massive prosecutions.

Some legal experts questioned the government’s reasoning in going after media companies, which might be entitled to First Amendment protections that allow them to broadcast or print advertisements for companies that are operating legally in their own jurisdictions, which include the Caribbean and other venues.

In fact, millions of Americans use their computers to place bets on sports events and play poker and other games. The casinos said the popularity of Internet gambling makes federal efforts to regulate the industry unrealistic and possibly foolhardy.

Making the governments efforts seem less realistic is the fact that many of Wall Street’s largest investment firms have loaded up on Internet casino stocks.

Blue chip houses like Goldman Sachs, Fedelity and Merrill Lynch now hold hundreds of millions of shares of online casinos and betting sites.

The growing participation by American investors points out the disconnect between the law-enforcement objectives of the DOJ and the reality of a booming Internet industry.