Reply Brief — Greater New Orleans Broadcasting Assn., Inc. v. United States

Supreme Court, U.S.

eee y

APR 12 1999

No. 98-0387 CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

GREATER NEW ORLEANS BROADCASTING

ASSOCIATION, INC., ef al.,

Petitioners,

\V

UNITED STATES OF AMERICA. et ai..

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

For the Fifth Circuit

REPLY BRIEF FOR PETITIONERS

BRUCE J. ENNIS, JR.*

NoORY MILLER

DONALD B. VERRILLL JR

LAN HEATH GERSHENGORN

JENNER & BLOCK

601 Thirteenth Street, N.W.

Washington, D.C. 20005

April 12, 1999 *Counsel of Record

TABLE OF CONTENTS

Page

pro ty ts. a nares li

I. THE CHALLENGED REGULATORY SCHEME

DOES NOT MEET THE CENTRAL HUDSON

SE 5s a kd eo Ee ee ee l

A. The Government Has Not Shown, and

Cannot Show, That Its Regulatory Scheme

Advances Its Asserted Interests to a

i ee EERE IES ey ges Wg ae 2

1. The scheme does not materially assist

states that prohibit gambling............ 2

2. The scheme cannot materially reduce

any social costs of gambling ............ 5

B. The Government Could Use Any of

Numerous More Effective Non-Speech

PU EP eh pare = te ee 15

C. Remand Would Serve No Purpose Here .... 17

Il. GOVERNMENT-ENFORCED IGNORANCE

IS PRESUMPTIVELY UNCONSTITUTIONAL ... 18

ed See iy ig 8 re ee ee ere 20

TABLE OF AUTHORITIES

CASES Page

44 Liquormart, Inc. v. Rhode Island, 517

I IN ice Sida Bhat A ia's «0 3 du a ihe passim

Bates v. State Bar of Arizona, 433 U.S. 350 (1977) . 19

Bolger v. Youngs Drug Products Corp., 463

i rl tes h, erties a ct be - 11, 12

Butler v. Michigan, 352 U.S. 380 (1957) ......... 12

Central Hudson Gas & Electric Corp. v. Public

Service Commission, 447 U.S.

AGES SET ME SS l

City of Cincinnati v. Discovery Network, Inc. , 507

5 Ca ae a a 13, 15

Edenfield v. Fane, 507 U.S. 761 (1993) .......... 20

Linmark Associates, Inc. v. Township of

Willingboro, 431 U.S. 85 (1977) ............ 19

Players International, Inc. v. United States, 988

F. Supp. 497 (D.N.J. 1997), cert. denied, 119

hg a5 Sacha hig 2, 16, 17

Posadas de Puerto Rico Associates v. Tourism

kes ners nee l

Reno v. ACLU, 117 S. Ct. 2329 (1997) .......... ll

Roth v. United States, 354 U.S. 476 (1957)... ..... 12

Rubin v. Coors Brewing Co., 514

i ae ate et SS kg passim

United States v. Edge Broadcasting Co., 509 U.S.

Es lta loa visas 4 oi a: & gsiihe’a-o 4,10, 19

Valley Broadcasting Co. v. United States, 107 F.3d

1328 (9th Cir. 1997), cert denied, 118 S. Ct.

ESRI PNR tS ORR ET 5 a a a 2

iil

TABLE OF AUTHORITIES -- Continued

Page

Virginia State Board of Pharmacy v. Virginia Citizens

Consumer Council, 425 U.S. 748 (1976) ...... 19

STATUTES AND REGULATIONS

a a a a 6

ET eet ten passim

OT ne cc ucwdcccenesc 1,9

ee See 1,9

Og eee 13

Ee rate toe eee 10

I lis eas cv coun.

USC ASIINOTID ....... 2.6 ..0050..0.. 4

SE et ee 7

ae os yy eds... 7

ro, 4

28 U.S.C. § 3704(aX4) ............. i gieit

ee 13

W. Va. Code § 29-22A-4(1998)................. 3

R.I. Gen. Laws § 42-61.2-2(a) (1998)............. 3

Del. Code Ann. tit. 29 § 4801(1998)........ 3

Del. Code Ann. tit. 29 § 4820(1998) ............. 3

S.D. Codified Laws § 42-7A-4 (1998) ............ 3

ADMINISTRATIVE RULINGS

In re Elimination of Unnecessary Broadcast

Regulation, 56 Rad. Reg. 2d (P&F) 976

DEE. a esc PG e ee ENE Sere eek KS. oY 1, 16

iv

TABLE OF AUTHORITIES -- Continued

Page

Letter to Calnev.r 5 voadcasting, Inc., 8 F-C.C.R. 32

| sy he Tn edge ee 1,14

Letter to DR Partners, Licensee, 8 F.C.C_.R. 44

(OUR... i iol ee AT 2

In re WTMJ Inc., 8 F.C.C_R. 4354 (1993) ....... 1,5

MISCELLANEOUS

Eugene M. Christiansen, Gambling and the American

Economy, 556, Annals Am. Acad. Polit. & Soc.

eh, SS lee 6 ive ch cs BARR e. 4,8

Letter to Forbes W. Blair (Mass Media Bureau,

Ra Dh CI ss < CCR ah ch Se be es 5

Charles T. Clotfelter, et al., Duke University Report to

| Se et a ae 9

Wendy Melillo, Lottery Ad Standards Urged, Adweek

GT, Gs 6 9:50 vide Pekadaddakc bse kes 1

Park Place Entertainment Corp. 8-K Filing (filed Feb. 5,

WO co Se ES 8

Deirdre Shesgreen, Stacked Deck, Legal Times

Otis Wi MUG. GSS. ces 5s 6 a 3

<txre6.txre.state.tx.us/tracks.html>. .............. 4

<www.ctownraces.com/slots/index.html> .......... 6

<www.dgsys.com/ niga/stats.html>............... 3

<www.doverdowns.comyslots> .................. 6

<www.harrahs.com/tour/tour_index.html> ......... 4

<www.msla.state.md.us/keno.html> .............. 7

<www.mtrgaming.com/gaming html> ............. 6

v

TABLE OF AUTHORITIES -- Continued

Page

<www state.de.us/tourism/attrkent htm> .......... 6

<www.trackinfo.com/li/li_hist html> ........_.. 7, 13

<www.wheelingdowns.com/slots htm> ............ 6

REPLY BRIEF

The advertising ban challenged here is plainly invalid under

44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996),

Rubin v. Coors Brewing Co., 514 U.S. 476 (1995), and Central

Hudson Gas & Electric Corp. v. Public Service Comm'n, 447

U.S. 557 (1980). Pt. I. But the fact that the court below

nevertheless felt at liberty to uphold the ban in reliance on

Posadas de Puerto Rico Associates v. Tourism Co., 478 U.S.

328 (1986), illustrates the need for a clearer line to protect

consumers and commerce from unconstitutional restrictions on

commercial speech. Pt. If.

I. THE CHALLENGED REGULATORY SCHEME

DOES NOT MEET THE CENTRAL HUDSON TEST.

The regulatory scheme at issue criminalizes the broadcast

of truthful, non-misleading advertising of lawful games of

chance. 18 U.S.C. § 1304; Gov. Br. 14. From this general

prohibition, numerous exceptions have been carved, as the

government concedes. Gov. Br. 43. For example, broadcast

advertising is permitted in every state regarding:

1) Casinos on Indian lands. 25 U.S.C. § 2710(d).

2) Government casinos. 18 U.S.C. § 1307(a)(2).

3) Betting on horse races, dog races and jai alai. 28

U.S.C. § 3704(a)(4); Elimination of Unnecessary Broadcast

Regulation, 56 Rad. Reg. 2d (P&F) 976 (1984) (Broadcast).

4) Poker tournaments. Letter to Calnevar

Broadcasting, _Inc., 8 FCCR. 32 = §=(1992).

State lotteries may also be advertised in all 37 states that

conduct lotteries. See 18 U.S.C. § 1307(a)(1),; Wendy Melillo,

Lottery Ad Standards Urged, Adweek (Mar. 22, 1999).

Even with respect to the gambling primarily covered by the

ban, commercial casinos owned by private companies, the law

does not ban all advertising. In every state, these casinos may

advertise that they provide “Vegas-style excitement,” if they are

a multi-use establishment. Jn re W7M/J, Inc., 8 F.C.C.R. 4354

2

(1993). And they may include the word “casino” if it is in the

establishment’s name, even though the government recognizes

this is promotional advertising. Letter to DR Partners, 8

F.C.C.R. 44, 44 (1992). These casinos may not, however,

advertise which games they offer or their payouts, information

potential customers could use to choose among casinos.

Despite the government’s effort to identify interests to

justify these Swiss cheese rules, the “overall irrationality of the

Government’s regulatory scheme” undermines every interest the

government claims. Coors, 514 U.S. at 488. Further, the

government impermissibly chose to ban speech, without even

considering the numerous direct regulations that would as

effectively advance its interests as the First Amendment

requires. See Coors, 514 U.S. at 491.'

A. The Government Has Not Shown, and Cannot

Show, That Its Regulatory Scheme Advances Its

Asserted Interests to a Material Degree.

1. The scheme does not materially assist states that

prohibit gambling. The government’s claim that its scheme

helps states that prohibit gambling protect their own residents

by preventing broadcast advertising “spillover” from stations

licensed elsewhere, Gov. Br. 29, is fatally undermined by the

advertising it permits. For example, the government has not

protected states from spillover of state lottery advertising,

which it permits to spill over from any of the 37 states that

conduct lotteries. The government has also not “assisted” any

' Contrary to the government’s suggestion, the scheme challenged here

has not been reviewed, much less upheld, by this Court. The only lower court

to uphold it is the court below. Cf Valley Broad. Co. v. United States, \07

F 3d 1328 (9th Cir. 1997) (holding ban invalid), cert. denied, 118 S. Ct. 1050

(1998), Players Int'l, Inc. v. United States, 988 F. Supp. 497 (D.N.J. 1997)

(same), cert. denied, 119 S. Ct. 852 (1999).

3

states to shield their residents from advertising for betting on

horses, or jai alai, or poker tournaments, or gambling operated

by charities or as commercial promotions. To the contrary, the

government permits advertising for these types of gambling to

be broadcast both as spillover from other states and from inside

the states alleged to need help protecting residents from such

speech. Moreover, the number of states that may want such

assistance has dwindled almost to nothing. Only two states

have not legalized some form of gambling. Deirdre Shesgreen,

Stacked Deck, Legal Times 1, 4 (Mar. 29, 1999).

The government’s attempt to avoid these devastating facts

by recharacterizing its interest as assisting states that prohibit

casino gambling, Gov. Br. 28, is equally flawed. The statutory

scheme permits broadcast advertising for casino gambling, not

only from other states, but from inside the very states the

government purports to assist -- if the advertised casino is

controlled by a government entity or Indian tribe. Thus,

Delaware, Rhode Island, West Virginia, and South Dakota may

advertise their video poker, blackjack, keno and other casino-

type games on any station in the country. See W. Va. Code

§ 29-22A-4 (1998); R.L. Gen. Laws § 42-61 .2-2(a) (1998); Del.

Code Ann. tit. 29, §§ 4801, 4820 (1998); S.D. Codified Laws

§ 42-7A-4 (1998). The “assistance” provided to states that

prohibit ail types of gambling is to permit advertising about

these slot machines, video black jack and other casino-type

games to be broadcast to their residents, without restriction.

Likewise, casinos operated on Indian land may advertise in

every state, regardless of the state’s policies on casino or any

other type of gambling. This is a huge “exception.” In 1997,

there were 115 tribes with at least one casino operation each.

<www.dgsys.com/~niga/stats.html>. Those known to advertise

on television and radio included casinos near Phoenix, Portland,

Minneapolis, Sacramento, Albuquerque and in New York State

4

and Connecticut. Gov. Lodging 435-37. Thus in Texas, the

very state the court below “protected” from spillover

advertising, Pet. App. 10a, federal law permits the Speaking

Rock Casino near El Paso, and Indian casinos in Louisiana and

other states, to advertise from stations inside Texas itself.”

Indeed, tk.. government has aggressively forced states to

accept the operation and advertising of Indian casinos within

their own borders, which “makes no rational sense if the

Government’s true aim is to” assist anti-gambling states to

protect their residents from such gambling. Coors, 514 U.S. at

488. The Indian Gaming Regulatory Act (IGRA), enacted not

only to regulate but also to promote the development of Indian

casinos, requires states to permit Indian casinos if they permit

any casino-type gambling for any purpose by any person. 25

U.S.C. § 2710(d)(1)(B).? The federal government has forced

anti-gambling states that permit occasional “casino night”

charity functions to accept Indian commercial casinos within

their boundaries, advertising to their residents -- as well as

advertising by Indian casinos operating in other states. Even in

North Carolina, the state protected in United States v. Edge

Broadcasting Co., 509 U.S. 418 (1993), from in-state

advertising of Virginia’s lottery, the casino Harrah’s operates on

Indian land in North Carolina may freely advertise from in-state

stations. <www.harrahs.com/tour/tour_index.html>.

? Federal law also permits Texas’ racetracks to advertise their horse or

dog racing, simulcast wagering, and wagering windows. Texas has seven

horse racetracks and three dog tracks. See <txrc6.txrc.state.tx.us/tracks.html>.

All web sites cited in this brief were visited March 28-31, 1999.

*The federal law that excepted Indian casinos from the advertising ban,

also “authorized casino gaming on Native American lands in approximately

31 states.” Eugene M. Christiansen, Gambling and the American Economy,

556 Annals Am. Acad. Polit. & Soc. Sci. 36, 38 (1998) (Christiansen).

5

These contradictory provisions ensure “[t}here is little

chance [the scheme] can directly and materially advance its aim”

of helping states keep their residents ignorant of casino

gambling. Coors, 514 U.S. at 489.

2. The scheme cannot materially reduce any social

costs of gambling. The government also claims that its

prohibition reduces social costs of gambling, Gov. Br. 31, but

that claim is similarly unpersuasive and is completely

undermined by the regulatory scheme’s massive contradictions.

For example, the materials submitted by the government

regarding compulsive gambling emphasize that what attracts

compulsive gamblers and others is the excitement generated by

casinos. See, e.g., Gov. Lodging 399-400 (“Casino addicts . .

. are attracted to the fantasy atmosphere, the excitement, the

special treatment, and the incentives offered”); id at 236

(“[e]xcitement plays a large role in motivating people to

gamble”). Yet private casinos are permitted to advertise these

very qualities. Advertising may associate the word “casino,” if

(as is Common) it is in the advertiser’s proper name, with

fantasy atmosphere, excitement, special treatment and incentives

such as shows, drinks, food, and luxury hotel rooms. See Jn re

WIMJ, 8 F.C.C.R. at 4354. Casinos are even permitted to

attract potential customers with such double entendre teasers

as: “The odds for fun are high at Harrah’s.”*

“If combating [compulsive gambling] were the goal,” one

“would assume that Congress would regulate” the advertising

‘Another permitted commercial shows a man in an old chair, with a

voice-over, saying: “The no-win vacation . . . [i]t’s not happening here” and

then switches to a happy crowd scene, with a voice-over saying: “It’s

happening at Harrah’s. You can have a winning vacation here.” Letter to

Forbes W. Blair (Mass Media Bureau, Apr. 24, 1987) (explaining that § 1304

would not prohibit these broadcast spots) (attached to Gov. Mot. for Summ.

J. below)(E.D. La., filed June 14, 1994).

6

most likely to attract such gamblers. Coors, 514 U.S. at 489.

Instead, federal law permits that advertising, but prohibits

advertising that could help those inclined to gamble make

economically rational choices among potential vendors, such as

advertising promoting more generous payouts than offered by

competitors. Prohibiting this type of advertising just keeps all

gamblers’ costs higher by discouraging payout (i.e., price)

competition. The government makes no attempt to justify this

inexplicable line.°

The government’s regulatory scheme also permits

advertising of most other types of gambling, including identical

casino gaming operations controlled by a government or Indian

tribe. Cf Coors, 514 U.S. at 488. The government concedes

that the same types of gambling are available at casinos that may

advertise freely as at casinos that may not. Gov. Br. 38.°

* What the government does try to justify is the broader ban on broadcast

advertising than on print advertising, asserting that broadcast advertising

presents a far greater danger of social costs. Gov. Br. 35. That assertion,

however, is at odds with the provisions themselves, which impose harsher

penalties for violating the ban on mailing print advertising (up to two years in

prison for a first offense, up to five years for subsequent ones) than for

violating the ban on broadcast advertising (one year maximum whether first

or subsequent offense). Compare 18 U.S.C. § 1302 with § 1304.

* Thus, Delaware boasts of “the closest slot facility to the Delaware

beaches . . . the most fun you’ve had since you were a kid,” a “Las Vegas-style

facility,” the “thnll of over 1000 slot machines.” See

<www doverdowns.com/slots> and <www.state.de.us/tourism/attrkent.htm>.

West Virginia claims its “gaming rooms will electrify your sense of

anticipation,” “the action will accelerate and exhilarate you,” that “winning is

just a play away!” and that you will “find your fortune” by playing its gaming

machines and betting on horse races. Players also receive free cocktails while

playing the machines. See <www.ctownraces.com/slots/index.html>,

Maryland advertises its keno games as available “in many of your favorite

social gathering spots -- restaurants, taverns, bowling alleys” and as “a fun,

7

Moreover, no clear line exists between government or Indian

casino gaming and private casinos even in terms of management

or ownership. According to the Delaware Lottery, for example,

the slot machines Delaware controls are not owned by the State;

they are owned by slot machine vendors and /eased to the State.

Delaware, in turn, contracts with the privately-owned facilities

where it places the slot machines, such as Harrington Raceway

and Dover Downs, to actually operate and advertise the

machines as the State’s agents. Rhode Island undertook casino-

type electronic gaming when its private racetracks were

threatened by competition from racetracks and Indian casinos

in other states. Had Rhode Island simply authorized those

racetracks to offer video poker and slot machine games,

imposing whatever regulations and tax it chose, the racetracks

would have been prohibited by federal law from using broadcast

advertisements to compete. Accordingly, the legislature

authorized the state lottery commission to “provide” video

gaming machines at those tracks. The private racetracks

operate and advertise the gaming, and keep 31% of the revenue.

See <www.trackinfo.com/li/li_hist.html>. Because Rhode

Island could exercise the same control by regulation as it does

by contract, the sharp distinction between gaming that is

regulated by a state and gaming that is “conducted” by a state

does not further the government’s asserted interests.

Similarly, federal law does not require casinos on Indian

lands to be operated by tribes. The same companies that

operate private casinos may, under contract with a tribe, build,

operate, and keep up to 30 to 40% of the net revenues of

casinos on Indian land. 25 U.S.C. §§ 2710(d)(9), 2711(c).

Harrah’s, for example, a private casino company in Atlantic

fast-paced game that can be enjoyed alone or with friends,” with a new game

available “everv five minutes.” See <www.msla.state.md.us/keno.html>. All

these claums inay also lawfully be made in broadcast advertising.

City, Las Vegas and Reno, operates the Phoenix Ak-Chin

casino and several others for tribes, and advertises them on

television and radio. See <www.nigc.gov/contracts.html>;

Gov. Lodging 435-36. The largest casino resorts in Louisiana,

Grand Casino Avoyelles and Grand Casino Coushatta, are

operated by a subsidiary of the world’s largest private casino

company, Park Place Entertainment. Because they are on

Indian land, both can, and do, advertise on television and radio.

See Gov. Lodging 435; Park Place Entertainment Corp. 8-K

Filing (filed Feb. 5. 1999). These same companies, however,

are prohibited from broadcasting even informational advertising

about the identical gaming they operate on non-Indian land.

The government’s attempt to justify the differential

treatment of gaming activities that can and cannot be advertised

on the ground that those banned from broadcast advertising

impose greater social costs, is not even supported by the

government’s own “evidence,” much less by common sense.

For example, the government argues that state lotteries present

little risk of infiltration by organized criminal groups, Gov. Br.

38, without even trying to reconcile this argument with the

scheme’s acceptance of horse and dog racing, even though

these have in the past been associated with organized crime. Its

sole explanation for why advertisements of horse racing are

permitted, notwithstanding any social costs associated with

“betting on the ponies,” is that fewer people bet on races than

go to casinos. /d. at 40. Yet, having suggested that the size of

the audience is the defining issue, the government then provides

no explanation for why advertising of the types of gaming that

account for approximately 60% of the country’s gambling

revenues is permitted under the federal scheme. See Gov. Br.

40-41: Christiansen at 39.

The government’s attempt to distinguish between permitted

and prohibited advertising on the basis of a link between the

= =

9

activity advertised and compulsive gambling is equally

unpersuasive. The government suggests that state lotteries do

not attract compulsive gamblers because they do not involve

“continuous play” games. Gov. Br. 38. But the government’s

own materials contend there are state lottery addicts. See Gov.

Lodging 399; see also Charles T. Clotfelter, ef al., Duke

University Report to the National Gambling Impact Study

Commission 16 (1999) (5% of state lottery players account for

54% of the nation’s lottery sales). Further, the government’s

materials indicate that the aspects of state lotteries that attract

lottery addicts are their low cost and easy access. Gov.

Lodging 399. Yet the federal scheme permits state lotteries to

advertise exactly these qualities -- regardless of the impact on

compulsive gamblers. Other gaming the government finds to be

associated with compulsive gambling may also be advertised on

television and radio. See Gov. Lodging 283 (jai alai associated

with increased incidence of Gamblers Anonymous chapters).’

In addition, the government has asserted other social costs

of gambling that it neglects to mention in discussing state

lotteries, possibly because lotteries are much more likely to

entail those costs than is the gambling subject to the ban: e.g.,

a regressive tax on the poor, and false but sometimes irresistible

hope of financial advancement. Gov. Br. 15-16; Gov. Lodging

243 (study finding those in $15,000 to $30,000 income range

constitute 66% of lottery players, 44% of bingo players, but

only 24% of casino players).

Critically, the government is unable to point to any

’ The government's claim that lotteries cause less harm is also in tension

with the provisions themselves. Congress imposed a partial ban on broadcast

advertising of state /otteries -- advertising permitted only in states that conduct

lotteries -- but no ban on broadcast advertising of state or Indian casino

gaming. Cf 18 U.S.C. § 1307(a)(1) and § 130/(a)(2). Thus, a state may

advertise its own casino gaming in every state, but its lottery only in some.

10

distinction between the casinos that may freely advertise and

those that may not that could justify the government’s speech

restriction. Its attempt to argue that Indian casinos impose

lower social costs than private casinos is based solely on the

existence of federal regulation and the location of Indian casinos

in allegedly more remote areas. Gov. Br. 38. These factual

claims are questionable, but more important, the argument

misapplies the law. If, as the government suggests, social costs

engendered by casino gambling can be lowered to an acceptable

level with non-speech regulation, including regulation of the

location of casinos, the existence of these effective non-speech

alternatives precludes the government from imposing a ban on

commercial speech.* 44 Liquormart, 517 U.S. at 507 (Stevens,

J.); id. at 529 (O’Connor, J.).

The government’s reliance on Edge to save its Swiss

cheese scheme is misplaced. The regulation upheld in Edge,

despite its limited impact in the particular instance before the

Court, was entirely consistent with the government’s then-

asserted interest in assisting states that conduct lotteries to

promote them and assisting states that prohibit lotteries to

prohibit advertising of lotteries within their borders. See 509

U.S. at 428 (“This congressional policy of balancing the

interests of lottery and non-lottery States is the substantial

* As a factual matter, the government's intimation that private casinos are

not heavily regulated is mistaken, and its assertion that private casinos are in

big cities and Indian casinos are remote is open to dispute. South Dakota’s

private casinos, for example, are remote, and many Indian casinos are close to

population centers. See Gov. Lodging 435-36. More to the point, casinos

attract patrons from afar, a factor the government itself relied on in enacting

the IGRA to further “tribal economic development.” 25 U.S.C. § 2702(1).

That goal was not premised on anticipated gambling by Indians living nearby.

It was premised on gambling by large numbers of visitors, and was based on

experience with private casinos in places such as Las Vegas which, despite

their location in a remote desert, have successfully attracted visitors.

1]

governmental interest that satisfies Central Hudson’).

Here, however, as in Coors, the interests the government

now asserts are undermined not by geographic happenstance,

but by provisions the government itself enacted. While the

“it allows the exact opposite in the case of” state, local, and

state lotteries, and many other gambling activities. Coors, 514

U.S. at 488. Moreover, the government permits even private

casinos to advertise the very qualities of fantasy and excitement

most likely to attract gamblers, especially compulsive gamblers.

As in Coors, “the irrationality of this unique and puzzling

regulatory framework ensures that the [ban on advertising] will

fail to achieve” the government’s asserted interests. /d. at 489.

Moreover, even if the government’s scheme were not

“pockmarked with exceptions and buffeted by countervailing

state policies,” Pet. App. 40a, its reliance on an “axiomatic” link

between promotional advertising and demand here, Gov. Br. 34,

is questionable. The government has not asserted an interest in

reducing consumer demand for gambling generally, or even the

demand for casino gambling. The interest it asserts is in

reducing social costs of gambling, costs the government does

not contend are evenly associated with all gambling, or with all

casino gambling. Most of the social costs it identifies are

associated with the 1.1% of the population, id at 16, the

government identifies as compulsive gamblers: addiction, harm

to families, street and white collar crime. See id. at 18, Gov.

Lodging 385-89, 401.” Another social cost it identifies --

* This alone makes clear that the ban “lacks the precision the First

Amendment requires” because it substantially abridges the speech nghts of the

vast majority to protect the few. Reno v. ACLU, 117 S. Ct. 2329, 2346

(1997), see also Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 73

12

gambling as a regressive tax on the poor -- is implicated only

when the poor gamble, not when people of means gamble.

Gov. Br. 15-16. And organized crime is implicated only if

gaming operations are infiltrated by organized crime groups.

Thus, even assuming arguendo that the prohibited

advertising would materially affect overall demand, rather than

market share,"® this is not the link the government needs to

prove. The links necessarily posited here are that advertising

showing specific games in private casinos, or providing

information about practices such as payout percentages, will

lead to maternal increases in compulsive gambling, gambling by

the poor, and infiltration of gambling operations by organized

crime. The links posited by the government here, therefore, are

at least as attenuated as the link between price advertising and

demand asserted in 44 Liquormart that no member of this Court

found “axiomatic.” The publications the government cites and

the materials it lodged also fall woefully short of establishing the

links it posits. Instead, those materials suggest that social costs

of gambling increase when gambling is /egalized, Gov. Br. 24-

(1983) (“the government may not reduce the adult population to reading only

what is fit for children” (citation omitted), Butler v. Michigan, 352 U_S. 380,

383 (1957) (same), Roth v. United States, 354 U.S. 476, 488-89 (1957)

(reyecting as “unconstitutionally restrictive” a test for obscenity that focused

on the matenal’s effect on “the most susceptible persons” in the community)

Moreover, because of its numerous exceptions, the ban here at best “provides

only the most limited incremental support,” even with respect to those few, and

that 1s msufficient to justify such aban. Bolger, 463 U.S. at 73.

‘But such assumptions are exactly what this Court has found insufficient.

See, e.g., 44 Liquormart, 517 U.S. at 531 (O'Connor, J.). Indeed, they would

vitiate the third prong of the Central Hudson test because government could

almost always idenufy a problem with a product or service and assume that its

advertising restriction would advance its interests by decreasing demand

13

25 -- a factor the government’s prohibition does not affect.’

The government’s final attempt to defend the statutory

scheme mirrors Cincinnati’s in City of Cincinnati v. Discovery

Network, Inc., 507 U.S. 410 (1993). The government argues

that it can ban certain private casino advertising while

private casino gaming has less social value since its revenues do

not accrue directly to governmental purposes. Gov. Br. 37-38.

Cf. Discovery Network, 507 U.S. at 428 (ban on commercial

handbills but not on newspapers defended on the ground that

handbills have a lower value than newspapers).'* This argument

cannot justify the ban for two reasons. First, a distinction based

on who receives revenues, like the distinction rejected in

Discovery Network, “has absolutely no bearing on the interests

[the government] has asserted.” /d.

Second, the claimed distinction is illusory. Rhode Island

receives 46% of the revenues its privately-operated casino

games generate. See <www.trackinfo.com/li/li_hist.html>.

Rhode Island could achieve the same result by authorizing the

same company to offer the same casino gaming, under the same

conditions, and imposing a 46% gross receipts tax. Thus,

contrary to the government’s argument, the amount of revenues

devoted to governmental purposes is not determined by who

"Cf American Gaming Ass'n Br. at 7-22, Nat’! Ass’n of Broadcasters,

et al, Br. at 5, 15-20. One government affidavit suggests state lottery addicts

blame advertising for their problems, Gov. Lodging 400. But even accepting

such rationalizations at face value, that “evidence” undermines the government

because its scheme permits advertising of state lottenes.

® The government does not claum that revenues from gambling on horse

or dog races, or jai alai, accrue directly to governments

iia

14

controls the gaming.’ Furthermore, the federal government

could itself imose a tax and provide the proceeds to states or

tribes. Because the sovereigns at issue have taxing powers, no

sensible distinction can be based on the ownership of gaming

revenues -- even if ownership were related to the interests the

government asserts to justify the ban."*

This contradictory statute makes another distinction the

government does not even attempt to justify: a distinction

between so-called games of skill and games of chance. Section

1304's advertising ban applies only to games of chance, not to

betting on the outcome of games of “skill.” Thus, the

implementing agency excludes winner-take-all poker

tournaments from the advertising ban on the ground that a

poker fournament is primarily a game of skill, but applies the

ban to video poker and casino poker, which it considers games

of chance. See Calnevar Broad., 8 F.C.C.R. at 32.'° Wholly

'* Nor does it follow that a governmental entity would receive more

revenues if it operated the casino gaming directly, as long expenence with

government outsourcing has proven. Private companies often perform

functions so much more effectively than governraent that they can provide a

better financial result for the government, and still keep a portion as profit.

‘* In addition, the statute’s incentive to governments to provide casino

gaming themselves (so it can be advertised) instead of strictly regulating and

taxing private casinos, 1s especially peculiar if the government is concerned

that permitting advertising umplies endorsement because, if true, advertising

by governments necessarily sends an even stronger message of endorsement.

'* The scheme also expressly permits advertising involving “bets or

wagers On sporting events or contests,” 18 U.S.C. § 1307(d), see also 47

~ CFR. § 73.1211(d)(1). A separate provision now prohibits operation and

advertising of gambling on certain sporting events. 28 U.S.C. § 3702. But

sports gambling not unlawful under that provision, e.g., betting on horse races,

jai alai, and certain grandfathered sports betting, may be advertised

notwithstanding § 1304's ban because these are considered games of skill.

15

apart from whether this makes any sense as a definitional

matter, the distinction between these types of gambling bears no

relationship to the interests the government asserts to defend

the ban. Absent any connection between the government’s

asserted interests and critical distinctions drawn by its

regulatory scheme, it is clear the government has not, and

cannot, establish “the ‘fit’ between its goals and its chosen

means that is required.” Discovery Network, 507 U.S. at 428.

B. The Government Could Use Any of Numerous

More Effective Non-Speech Alternatives.

The regulatory scheme also runs afoul of this Court’s clear

directive that governments may not restrict speech when direct

regulation would be effective. 44 Liquormart, 517 U.S. at 530

(O’Connor, J.); Coors, 514 U.S. at 491. Here, the government

has a choice of direct regulations that would more effectively

reduce any social costs of private casino gambling and assist

advertising ban. The government itself asserts it has the power

to directly regulate casino gambling. Gov. Br. 22-23. Thus, it

could, for example, prohibit private casinos. Based on its own

“evidence” linking increased compulsive gambling to expanded

availability of legalized gambling, reducing that availability

should be its first choice for reducing compulsive gambling. /d.

at 17. Unlike Puerto Rico, which claimed an interest in

Posadas in exploiting visitors while shielding its own residents,

the federal government has not asserted any interest in keeping

private casinos open.

Regulating the conduct, rather than the speech, is not

impractical; it is precisely the approach the government has

taken with respect to sports betting. Betting on sports events

and athletic performances that are considered harmful may not

be authorized, licensed, operated, sponsored, or advertised. 28

U.S.C. § 3702. The government has not suggested that its

16

experience with prohibiting sports betting casts doubt on the

effectiveness of direct regulation of private casino gaming. And

its allusion to prohibitions that led to black markets and

enforcement burdens, Gov. Br. 46, fails to acknowledge that the

prohibition at issue would be of private casino gaming only, not

a complete prohibition of gambling. As the government itself

recognizes: “the widespread growth of legalized gambling

throughout the country in recent years acts as a strong counter-

force to illegal gambling by providing alternative, legal

opportunities for gambling.” Broadcast, 56 Rad. Reg. 2d at

984. Moreover, it would be even easier to enforce a ban on

private casino gambling than a ban on sports betting, a ban

Congress has already determined presents no untoward

enforcement difficulties. "®

There are many other non-speech regulations that could

more effectively reduce the asserted social costs of private

casino gambling. The government could impose play or credit

limits, or prohibit credit altogether, or impose admission

controls or a substantial admission charge to discourage those

without considerable discretionary income from pursuing this

type of entertainment. The amount each person could gamble

could be limited, either by an absolute maximum per player or

based on income. This cou!d be enforced by requiring bets to

be made with pre-paid cards and cards to be obtained from the

government. In other words, as the principal opinion in 44

Liquormart recognized, “[p]er capita purchases could be limited

as is the case with prescription drugs.” 517 U.S. at 507.

‘© The government's professed concern that banning private casino

gambling would impinge on state authority, Gov. Br. 46, is hypocritical. The

current scheme unpinges on state authority by imposing its ban in states that

encourage private casinos as a means of attracting tourists and raising tax

revenues, such as Louisiana. Players /nt'], 988 F. Supp. at 503.

17

Interestingly, the government’s own “evidence” suggests

several Indian tribes have been successful in curbing compulsive

gambling through similar measures. Gov. Lodging 294-95

(measures include prohibiting betting on credit or borrowing,

limiting gambling to surplus property, and placing limits on the

amount bet). In any event, the government itself claims that the

far less strict federal regulations currently imposed on Indian

casinos, in combination with location, reduce social costs to an

acceptable level. Gov. Br. 37.

ol Remand Would Serve No Purpose Here.

The government’s plea for yet another chance to defend

this statutory scheme should be rejected. No amount of

evidence can untangle the scheme’s inherently contradictory

provisions, and certainly not the materials on which the

government rests its request for remand.'’ The regulatory

scheme’s own provisions undermine the government’s asserted

goals in every imaginable manner, or bear no relationship to

those goals whatsoever. Numerous non-speech alternatives

would serve the government’s asserted interests at least as well,

if not far better. Remand would therefore serve no purpose.

Nor has the government been caught unawares by a change

in the law after its evidentiary record was already established, as

it claims. Gov. Br. 49. The government had an adequate

opportunity on remand, after 44 Liquormart, to move to

'? The lodged material the government claims justifies the statutory

scheme is aimed almost entirely at supporting the substantiality of the

government's interests. Much of it contradicts the government's assertions

with respect to the more difficult third and fourth prongs of the Central

1udson test, as discussed above. And that evidence failed to satisfy the court

to which it was submitted. See Players Int'l, 988 F. Supp. at 506-07 (finding

“no evidentiary support” that the ban “will significantly reduce gambling

addiction or violence,” and finding the ban “more extensive than necessary’’).

18

supplement the record before the Court of Appeals or to

remand for a further evidentiary proceeding. It did neither.

Il. GOVERNMENT-ENFORCED IGNORANCE IS

PRESUMPTIVELY UNCONSTITUTIONAL.

The decision below, relying heavily on the language and

rationale of Posadas, illustrates the need for a rule stating

clearly that government may not ban commercial speech based

on the assumption that people cannot be trusted with truthful

information about lawful activities. The restriction challenged

here seeks to manipulate the choices of potential consumers by

denying them information about entirely lawful leisure activities.

To that end, it deprives them of useful facts, such as payout

percentages, that would help them make economically rational

choices among casinos. It also discourages “price” competition

and innovations by private casinos that could benefit consumers,

by prohibiting advertising of those benefits. Further, it hides the

government’s policy from public view. See 44 Liquormart, 517

U.S. at 509 (Stevens, J.) (noting that Posadas’ “advertising ban

served to shield the State’s anti-gambling policy from the public

scrutiny that more direct, non-speech regulation would draw’).

It has been increasingly recognized by this Court that

enforced ignorance is antithetical to the First Amendment

principles that require protection of commercial speech in the

first place. The government simply has no legitimate basis for

regulating in order to “keep would-be recipients of the speech

in the dark.” 44 Liquormart, 517 U.S. at 523 (Thomas, J.,

concurring), see also id. at 503 (Stevens, J.) (noting that such

bans “usually rest solely on the offensive assumption that the

public will respond ‘irrationally’ to the truth”); cf id. at 517

(Scalia, J., concurring) (sharing the “aversion towards

paternalistic governmental policies that prevent men and women

from hearing facts that might not be good for them”).

19

In this Court’s first full discussion of the First

Amendment’s protection of commercial speech, it held that “the

First Amendment makes for us” the choice between the

“paternalistic” approach of protecting people from speech, and

the assumption that “information is not in itself harmful, that

people will perceive their own best interests if only they are well

enough informed, and that the best means to that end is to open

the channels of communication rather than to close them.”

Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer

Council, 425 U.S. 748, 770 (1976). Since Virginia Pharmacy,

this Court has repeatedly held unconstitutional speech

restrictions that “rest[{] in large measure on the advantages of

[citizens’] being kept in ignorance.” /d. at 769-70. See, e.g.,

Linmark Assoc., Inc. v. Township of Willingboro, 431 U.S. 85,

96-97 (1977) (rejecting signage prohibition premised on fear

that “disclosure would cause the recipients of the information to

act ‘irrationally””); Bates v. State Bar of Ariz., 433 U.S. 350,

375 (1977) (“we view as dubious any justification that is based

on the benefits of public ignorance”). Indeed, the only case in

which the Court upheld a restriction adopted to keep the public

ignorant about lawful activities is Posadas, a decision that has

already been effectively abandoned by this Court."*

This Court should unambiguously reaffirm that Virginia

Pharmacy correctly rejected government justifications resting

on the premise that it is legitimate to keep citizens ignorant of

lawful options. Such a ruling is needed to prevent the mischief

" See Coors, 514 U.S. at 482 n.2 (rejecting Posadas’ “vice” and

“greater includes the lesser” rationales), 44 Liqguormart, 517 U.S. at 509

(“Posadas erroneously performed the First Amendment analysis”) (Stevens,

J.), id. at S31 (noting Posadas’ deferential approach has not been followed in

subsequent case law) (O'Connor, J.). Edge, unlike Posadas, involved

advertising of an activity that was illegal in the state where it would have been

advertised. 509 US. at 423.

20

encouraged by the lingering specter of Posadas, pointedly

illustrated by the decision below. Government restrictions on

the flow of accurate information to the public should be deemed

inconsistent with the First Amendment’s premise that more

information is preferable to less, and that liberty is threatened

when government decides what information is available to its

citizens. See, e.g., Edenfield v. Fane, 507 U.S. 761, 767 (1993)

(“the general rule is that the speaker and the audience, not the

government, assess the value of the information presented.”).

The advertising ban at issue provides an appropriate vehicle for

this Court to make clear that the First Amendment

presumptively precludes laws that advance government interests

by enforcing ignorance.

CONCLUSION

The decision below should be reversed.

Respectfully submitted,

Bruce J. Ennis, Jr.*

Nory Miller

Donald B. Verrilli, Jr.

Ian Heath Gershengorn

JENNER & BLOCK

601 Thirteenth Street, N.W.

Washington, D.C. 20005

April 12, 1999 *Counsel of Record