Advertising for Casino Gambling and Other Lotteries

While it has been over a decade since the FCC changed its polices on advertising of lotteries -- and specifically casino gambling advertising -- many broadcasters still find the topic confusing and fraught with danger. A short review may help to clear up some of the confusion.

Until the late 1990s the FCC prohibited any advertising of a lottery, i.e.: an event where the three elements of prize, chance and consideration are present. There were many variations and interpretations that led to a myriad of rulings where, sometimes, a seemingly prohibited lottery was not deemed to exist even though all three elements were involved, such as where the prize was offered by a party that did not receive the consideration. Basically, however, we knew the rules -- prize, chance and consideration meant no advertising -- or at least we thought we did.

Casinos and Other Lottery Advertising Prohibition

Then, in the 1997 case Valley Broadcasting Company v. USA, the U.S. Court of Appeals for the Ninth Circuit struck down the federal prohibition on advertising lotteries by broadcast stations in the states within its circuit. Two years later, in Greater New Orleans Broadcasting Ass’n v. United States, the United States Supreme Court held that the law against the broadcast of lottery information, 18 U.S.C. § 1304, “may not be applied to advertisements of private casino gambling ... broadcast by radio or television stations located in [a state] ... where such gambling is legal.”

In light of that decision, the FCC adopted a policy not to enforce the federal law that prohibits the advertisement of commercial casino establishments where they are legal. The FCC expanded the Court exclusion to include lotteries conducted by a State acting under State law and broadcast in that State or any other State which conducts such a lottery and certain contests conducted by not-for-profit organizations.

In addition, the FCC rules now also contain two further broad categories of exception to the general ban. The first is any lottery conducted by a not-for-profit or governmental organization. Note also that in order to qualify as not-for-profit, an organization must be tax exempt under §501 of the Internal Revenue Code.

The second is any lottery conducted as a promotional activity by a commercial organization that is clearly occasional and ancillary to the primary business of that organization. Thus, aside from casino commercial contests and promotions, the type of contests broadcasters are frequently confronted with in respect of their regular merchant advertisers are unlikely to be considered to constitute a lottery even though they contain the three elements of prize, chance and consideration, since they are conducted as a promotional activity that’s clearly occasional and ancillary to the primary business of the merchant.

However, both of these exceptions apply only if the activities are either authorized or not otherwise prohibited by the state in which they are conducted. (Additional exceptions cover most non-profit fishing contests and state lotteries.)

Where the occasional and ancillary test is not met, a question frequently arises whether having to go to a store or other location constitutes consideration such that the consideration element of the three-part lottery test is met. The answer to this question is found in an FCC staff letter in response to a request for a declaratory ruling following the Greater New Orleans case. The staff ruled that, although entrants were required to travel 40 to 90 miles from the New Orleans area to Biloxi to obtain a game card from a booth outside the casino, this travel did not constitute “consideration.” Rather, the staff held that consideration is present when the contestant must pay money or give something of value for the chance to win a prize. Thus, an entrant who must travel a certain distance to appear at the promoter’s place of business in order to enter the contest has not provided any “money or thing of value,” even if the travel takes an hour or two of the entrant’s time.

Indian Casinos

Increasingly, broadcasters are presented with advertising for Indian casino gaming on Indian reservations. According to the website 500Nations, Indian casinos are now operated in 28 states by 233 of the nation’s 562 tribes with the total number of Indian casino and bingo halls approaching five hundred. A further exception to the lottery prohibition is found in the Indian Gaming Regulatory Act (“IGRA”), 25 U.S.C. §2720, which allows the advertising of casino gambling conducted by Indian tribes on Indian Tribal lands. The statute specifically provides that the lottery prohibition “shall not apply to any gaming conducted by an Indian Tribe pursuant to this Act.” The FCC implemented that law by making such advertising an exception to the general prohibition in its own lottery rule.

In relying on these Indian gaming exceptions it is important to understand how the IGRA classifies gaming into three classes and how those classes relate to the exemption.

Class I gaming is defined as social games solely for prizes of minimal value or traditional forms of Indian gaming connected to tribal ceremonies.

Class II gaming includes (1) bingo, including pull-tabs, lotto, punch boards, tip jars, and instant bingo, and (2) card games that are explicitly authorized by the state, or otherwise not explicitly prohibited, including gambling played exclusively against other players and not the house.

Class III gaming is gambling against the casino, or the house. It includes all other forms of gambling and generally includes banking card games such as baccarat and blackjack (21), as well as roulette, craps, and slot machines.

The IGRA permits the advertising and depiction of casino gambling conducted by Indian tribes under the following conditions:

• Gaming must occur on tribal land and be operated by the tribe.
• The gaming must be allowed by state law.
• State law is not preempted.
• If bingo is completely forbidden in the state, then bingo also cannot be played on the Indian reservation located in the state and, thus, cannot be advertised.
• Class III gaming must be conducted pursuant to a “tribal-state compact” between the state and the tribe, approved by the National Indian Gaming Commission. Broadcasters can search for applicable state compacts at the website of the National Indian Gaming Commission, http://www.nigc.gov/Reading_Room/Compacts.aspx or by contacting the National Indian Gaming Commission at (202) 632-7003.

The Valley and Greater New Orleans cases did not rule on any state laws restricting such advertising. Therefore, in the case of Indian gaming it is important to note that section §2720 of the IRGA exempts advertising about tribal casino gambling even if the broadcaster is located in or broadcasts to a jurisdiction with anti-gambling laws and policies. In situations other than Indian gaming, however, broadcasters must still look to state law to assure that their advertisements are legal. Many such state statutes are confusing at best, and at worst seem to prohibit this form of advertising.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.