NJ Law Journal 8/27/07 -- Front Page Article on IMEGA Suit

[niss]

Link: http://www.law.com/jsp/nj/PubArticle...=1187859732103

but membership is required so here it is:

Internet Gambling Law Challenged as Restraint on 'Expressive Association'
By Mary Pat Gallagher

New Jersey Law Journal

August 23, 2007



A federal law that targets online gambling by making it illegal to make or receive payoffs violates the First Amendment, a federal suit charges.

A not-for-profit association of Internet gamers and gaming companies is asking a federal judge in Trenton to block enforcement of the Unlawful Internet Gambling Enforcement Act and to issue a temporary restraining order.

The suit alleges that the law, enacted last October, restricts a form of consensual private conduct that is legal in many states. The statute does not outlaw Internet gambling outright but cuts off its proceeds by criminalizing the transfer of funds by U.S. banks and credit card companies to entities that run online gambling sites. It provides immunity from civil liability for blocking a restricted transaction or one reasonably believed to be restricted.

The law makes it illegal for someone engaged in the business of betting or wagering to knowingly accept credit or the proceeds of credit, electronic fund transfers, checks, drafts or similar financial instruments or the proceeds of any other financial transaction in connection with unlawful Internet gambling.

Eric Bernstein, who represents the New Jersey-based Interactive Media and Gaming Association (iMEGA), says the law effectively shuts down Internet gambling. "The government is telling people that they can't, in the privacy of their own homes and using their own computers, wherever they are, engage in Internet gambling," says Bernstein, who heads a firm in Warren.

In his brief for injunctive relief, Bernstein argues the statute impermissibly chills expressive association among iMEGA members by subjecting them to criminal prosecution and possible incarceration and loss of property. Violations are punishable by a fine and/or a prison term of up to five years.

Bernstein argues that criminalizing financial transactions related to Internet gambling is not the least restrictive means of regulation. He says that filtering technology can block unwanted contact with an Internet casino and that parental controls are already built into the latest operating systems: Microsoft Windows Vista and Apple's Mac OS X Tiger.

Bernstein further argues that the law's exemptions for some forms of online gambling and its effect in even those states that do not outlaw it also render it unconstitutional.

The law covers games of chance and sporting events but expressly does not apply to horse racing, sports fantasy leagues or the stock market. It also does not apply to gambling on Indian tribal lands or to purely intrastate transactions, so long as gambling is legal in the state and the state has protections in place to keep minors from taking part.

The act also creates inconsistencies across international borders because online gambling is legal in countries like Antigua, Barbuda and Costa Rica, Bernstein argues. In response to a complaint by Antigua and Barbuda, the World Trade Organization criticized the law, in a March 30 report, for making an exception for domestic practices such as off-track betting on horse races.

On Tuesday, the government responded with a cross-motion to dismiss the suit, arguing in its brief that the law is not directed at speech but at the facilitation of illegal conduct.

The government also argues that the law does not interfere with states' Tenth Amendment rights but furthers existing gambling prohibitions and that congressional enactments trump WTO rulings. The brief also notes that after the WTO report, the U.S. government announced it would withdraw gambling from WTO jurisdiction.

The government also takes the position that iMEGA lacks standing and the claim is unripe because the government has not yet issued regulations implementing the law and no association members have been prosecuted under it.

The U.S. Department of Justice in Washington, D.C., declines comment.

The case, Interactive Media Entertainment and Gaming Association v. Gonzales, 07-2625, is pending before U.S. District Judge Mary Cooper in Trenton. The motions are scheduled for Sept. 4.

In another case, a federal judge has held that online fantasy sports leagues are allowable under New Jersey law and the federal statute. On June 19, U.S. District Judge Dennis Cavanaugh granted motions by ESPN, Sportsline and Vulcan Sports Media to dismiss the suit, Humphrey v. Viacom, 06-Civ.-2768, which alleged that pay-for-play fantasy sports Web sites violated the laws of New Jersey, Illinois, Massachusetts, Ohio and other states.

The plaintiff, Charles Humphrey Jr. of Colorado, claimed that the player registration fees, ranging from $9.95 to $499.95 per team, were essentially wagers or bets and sought to recover those amounts as gambling losses under the qui tam laws of states whose laws were supposedly violated.

But Cavanaugh found that where entry fees are unconditional and prizes are guaranteed, reasonable entry fees charged by the sponsor of a contest are not wagers or bets. He observed that spelling bees, track meets and beauty pageants would constitute gambling if all it took was the combination of an entry fee and a prize.

Cavanaugh noted that the Unlawful Internet Gambling Enforcement Act exempts fantasy sports leagues where winning depends on participants' relative knowledge and skill and is determined by statistical results of multiple real-world sporting events and not on the performance of a single real-world team or single performance of an individual athlete.

According to the Web site of the New Jersey Division of Gaming Enforcement, Internet gambling is not legal in New Jersey, even if the Web site is situated outside the state or the United States. The New Jersey Constitution allows the Legislature to authorize gambling in specific, limited forms, notably casino gambling in Atlantic City.

[YoureToast]

Good article. I found some stuff at the end particularly interesting.

[ QUOTE ]

But Cavanaugh found that where entry fees are unconditional and prizes are guaranteed, reasonable entry fees charged by the sponsor of a contest are not wagers or bets. He observed that spelling bees, track meets and beauty pageants would constitute gambling if all it took was the combination of an entry fee and a prize.

[/ QUOTE ]

Then wouldn't this make all online poker tournaments legal in the jurisdiction(s) this covers?

This is a nice result.

[YoureToast]

Also:

[ QUOTE ]
Cavanaugh noted that the Unlawful Internet Gambling Enforcement Act exempts fantasy sports leagues where winning depends on participants' relative knowledge and skill and is determined by statistical results of multiple real-world sporting events and not on the performance of a single real-world team or single performance of an individual athlete.

[/ QUOTE ]

Anyone else find this statement odd?

[oldbookguy]

I find this most interesting. Though ring games may have a problem, poker tournaments may not, I.E. a guarenteed pool.

obg

[JPFisher55]

Has anyone seen the DOJ's motion. I have not found it online.

[meleader2]

[ QUOTE ]
The government also argues that the law does not interfere with states' Tenth Amendment rights but furthers existing gambling prohibitions and that congressional enactments trump WTO rulings. The brief also notes that after the WTO report, the U.S. government announced it would withdraw gambling from WTO jurisdiction.

[/ QUOTE ]


wow. just wow.

[Jay Cohen]

Here is the US motion to dismiss:


CHRISTOPHER J. CHRISTIE
United States Attorney
PETER D. KEISLER
Assistant Attorney General
VINCENT M. GARVEY
Deputy Branch Director
JACQUELINE COLEMAN SNEAD
Trial Attorney
U.S. Department of Justice
Civil Division
Federal Programs Branch
20 Massachusetts Avenue, N.W., Room 7214
Washington, DC 20530
(202) 514-3418
Attorneys for Defendants
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
TRENTON DIVISION
INTERACTIVE MEDIA )
ENTERTAINMENT AND GAMING )
ASSOCIATION, L.L.C., a limited liability)
corporation of the State of New Jersey )
Vo
Plaintiff,
ALBERTO GONZALES, Attorney
General of the United States, THE
FEDERAL TRADE COMMISSION,
and THE FEDERALRESERVE
SYSTEM
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Hon. MARY L. COOPER
Civil Action No. 07-2625 (MLC)(TJB)
DEFENDANTS’ OPPOSITION TO
PLAINTIFF’S MOTION FOR
TEMPORARY RESTRAINING ORDER AND
MEMORANDUM IN SUPPORT OF
DEFENDANTS’ CROSS-MOTION TO
DISMISS
RETURN DATE: SEPTEMBER 4, 2007
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 1 of 46
TABLE OF CONTENTS
PAGE
TABLE OF AUTHORITIES .................................................. .................................................. ...iii
INTRODUCTION .................................................. .................................................. ......................1
STATUTORY BACKGROL~D .................................................. .................................................4
PROCEDURAL BACKGROUND .................................................. ..............................................7
ARGUMENT .................................................. .................................................. .............................8
I. PLAINTIFF HAS NO LIKELIHOOD OF SUCCESS ON THE
MERITS OF ITS CLAIMS .................................................. ..................................9
A. Plaintiff’s Claims Should be Dismissed for Lack of Standing ...............10
1. Plaintiff lacks standing to challenge the UIGEA under
the First Amendment .................................................. ..................12
a. Plaintiff’s claim that the UIGEA has a chilling
effect on members is insufficient to confer
standing .................................................. ..........................12
b. Plaintiff has not alleged a credible threat of
prosecution under the UIGEA sufficient to confer
standing .................................................. ..........................14
c. Plaintiff’s claim of its members’ imminent financial
ruin are insufficient to confer standing ............................15
2. Plaintiff lacks standing to challenge the UIGEA’s alleged
violation of a WTO order .................................................. ...........16
3. Plaintiff lacks standing to challenge the UIGEA as an ex post
facto law .................................................. .....................................17
4. Plaintiff lacks standing to challenge the UIGEA under the
Tenth Amendment .................................................. .....................17
B. Plaintiff’s Claims Should Be Dismissed as Unripe .................................19
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 2 of 46
C. Plaintiff’s Claims Should Be Dismissed for Failure to State a
Claim .................................................. .................................................. ....21
1. Plaintiff Has not Stated a Claim of a First Amendment
Violation .................................................. ....................................22
a. The UIGEA is not an unconstitutional interference
with Plaintiff’s right of association ..................................24
b. The UIGEA does not violate Plaintiff’s right of
privacy .................................................. ............................26
c. The UIGEA does not regulate commercial speech ..........27
2. Plaintiff’s Allegation of an Inconsistency Between the
UIGEA and a WTO Ruling Fails to State a Claim ......................29
3. The UIGEA Is a Constitutional Exercise of Congress’
Authority Under the Commerce Clause and Therefore
Does Not Violate the Tenth Amendment .....................................30
4. The UIGEA Does Not Apply Retroactively and Therefore
Does Not Violate the Ex Post Facto Law ....................................31
II. PLAINTIFF HAS NOT ESTABLISHED THAT IT WILL SUFFER
IRREPARABLE HARM IN THE ABSENCE OF AN INJUNCTION ...............32
III. THE BALANCE OF HARMS AND PUBLIC INTEREST DO NOT
SUPPORT AN INJUNCTION .................................................. ..........................34
CONCLUSION .................................................. .................................................. ........................35
ii
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 3 of 46
CASES
ACLU v. Ashcrof!,
TABLE OF AUTHORITIES
PAGE(s)
322 F.3d 240 (3d Cir. 2003) .................................................. .......................................... 14
Acierno v. New Castle County,
40 F.3d 645 (3d Cir. 1994) .................................................. ...................................... 32, 34
Adams v. Freedom Forge,
204 F.3d 475 (3d Cir. 2000) .................................................. .................................... 32, 33
Aiello v. City of Wilmington, Delaware,
623 F.2d 845 (3d Cir. 1980) .................................................. .......................................... 13
Allen v. Wright,
468 U.S. 737 (1984) .................................................. .............................10
American Future Sys., Inc. v. Pennsylvania State Univ.,
688 F.2d 907 (3d Cir. 1982) ...... .................................................. ....................................26
American Littoral Soc’y v. United States Envt’l Protection Agency Region,
199 F. Supp. 2d 217 (D.N.J. 2002) 11
Anderson v. Davila,
125 F.3d 148 (3d Cir. 1997) .................................................. ..........................................33
Arcara v. Cloud Books,
478 U.S. 697 (1986) .................................................. .................................................. .... 23
Baldwin County Welcome Ctr. v. Brown,
466 U.S. 147 (1984) .................................................. .................................................. .... 21
Barnes v. Glen Theatre, Inc.,
501 U.S. 560 (1991) .................................................. .................................................. .... 23
Bolger v. Youngs Drug Prods. Corp.,
463 U.S. 60 (1983) .................................................. .................................................. ...... 28
Borawski v. Henderson.,
265 F. Supp. 2d 475 (D.N.J. 2003) .................................................. ...............................21
111
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 4 of 46
Boy Scouts of America v. Dale.,
530 U.S. 640 (2000) .................................................. .................................................. .................21
Brooklyn Legal Servs. Corp. v. Legal Servs. Corp.,
462 F.3d 219 (2d Cir. 2006) .................................................. ..........................................18
In re Burlington Coat Factory See. Litig.,
114 F.3d 1410 (3d Cir. 1997) .................................................. ........................................21
Central Hudson Gas & Electric Corporation v. Public Service Commission,
447 U.S. 557 (1980) .................................................. ................................................ 27, 28
Church of Human Potential, Inc. v. Vorsky,
636 F. Supp. 93 (D.N.J. 1986) .................................................. ......................................22
City of Los Angeles v. Lyons,
461 U.S. 95 (1983) ..........................? .................................................. .............................. 15
Corus Staal BV v. Department of Commerce,
395 F.3d 1343 (Fed. Cir. 2005) .................................................. ..................................... 29
Dallas v. Stanglin,
490 U.S. 19 (1989) .................................................. .................................................. ...... 22
Doe v. Pryor,
344 F.3d 1282 (1 lth Cir. 2003) .................................................. .................................... 14
Emerson v. Thiel College,
296 F.3d 184 (3d Cir. 2002) .................................................. ..........................................22
Gilstrap v. United States,
389 F.2d 6 (5th Cir. 1968) .................................................. ............................................30
Griswold v. Connecticut,
381 U.S. 479 (1965) .................................................. .................................................. .... 24
Hohe v. Casey,
868 F.2d 69 (3d Cir. 1989) .................................................. ............................................ 33
Hoxworth v. Blinder Robinson & Co.,
903 F.2d 186 (3d Cir. 1990) .................................................. ...................................... 9, 34
Hunt v. Washington State Apple Advertising Comm’n,
432 U.S. 333 (1977) .................................................. .................................................. .... 11
iv
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 5 of 46
Johnson v. United States,
529 U.S. 694 (2000) .................................................. .................................................. .... 32
LCN Enters., Inc. v. City of Asbury Park,
197 F. Supp. 2d 141 (D.N.J. 2002) .................................................. ....................... 8, 9, 27
Laird v. Tatum,
408 U.S. 1 (1972) .................................................. .................................................. .. 12, 13
Lawrence v. Texas,
539 U.S. 558 (2003) .................................................. ............................................ 2, 26, 27
Louisiana v. NAACP,
366 U.S. 293 (1961) .................................................. .................................................. .... 23
Lujan v. Defenders of Wildlife,
504 U.S. 555 (1992) .................................................. ................................................ 11, 12
Malia v. General Elec. Co.,
23 F.3d 828 (3d Cir. 1994) .................................................. ...........................................21
Mariana v. Fisher,
338 F.3d 189 (3d Cir. 2003) .................................................. .................................... 18, 19
Medeiros v. Vincent,
431 F.3d 25 (lst Cir. 2005) .................................................. ...........................................18
Morse v. Lower Merion Sch. Dist.,
132 F.3d 902 (3d Cir. 1997) .................................................. ..........................................21
Northeast Ohio Coalition for Homeless & Serv. Employees Int’l Union v. Blackwell,
467 F.3d 999 (6th Cir. 2006) .................................................. .......................................... 9
Oldroyd v. Kugler,
352 F. Supp. 27 (D.N.J. 1973) .................................................. ................................ 12, 14
Oxford Assocs. v. Waste System Auth. o fEast MontgomeiT County,
271 F.3d 140 (3d Cir. 2001) .................................................. .......................................... 18
Paton v. La Prade,
524 F.2d 862 (3d Cir. 1975) .................................................. .......................................... 12
Paul v, Davis,
424 U.S. 693 (1976) .................................................. .................................................. .... 26
V
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 6 of 46
Pennsylvania Family Instit., Inc. v. Black,
489 F.3d 156 (3d Cir. 2006) .................................................. ...............................~ ........... 11
Pi Lambda Phi Fraternity, Inc. v. University of Pittsburgh,
229 F.3d 435 (3d Cir. 2000) .................................................. .............................. 23, 24, 25
Pic-A-State Pennsylvania, Inc. v. Reno,
76 F.3d 1294 (3d Cir. 1996) .................................................. .......................; .................. 19
Pierce County, Washington v. Guillen,
537 U.S. 129 (2003) .................................................. .................................................. .... 18
Poe v. Ullman,
367 U.S. 497 (1961) .................................................. ................................................ 10, 14
Raines v. Byrd,
521 U.S. 811 (1997) .................................................. .................................................. .... 11
Richardson v. Pennsylvania Bd. of Probation & Parole,
423 F.3d 282 (3d Cir. 2005) .................................................. .......................................... 32
Roman Chariot, LLC v. JMRL Sales & Serv., Inc.,
2006 WL 4483165 (D.N.J. 2006) .................................................. .................................34
Sacks v. Office of Foreign Assets Control,
466 F.3d 764 (9th Cir. 2006) .................................................. ........................................ 14
Sampson v. Murray,
415 U.S. 61 (1984) .................................................. .................................................. ...... 34
Schlesinger v. Reservists Comm. to Stop War,
418 U.S. 208 (1974) .................................................. .................................................. .... 12
Steel Co. v. Citizens for a Better Envt.,
523 U.S. 83 (1998) .................................................. .................................................. ........ 9
Tennessee Elec. Power Co. v. Tennessee Valley Auth.,
306 U.S. 118 (1939) .................................................. .................................................. .... 17
Then v. INS,
37 F. Supp. 2d 346 (D.N.J. 1998) .................................................. ................................... 9
vi
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 7 of 46
Timken Co. v. United States,
354 F.3d 1334 (Fed. Cir. 2004) .................................................. ..................................... 30
Truchinski v. United States,
393 F.2d 627 (8th Cir. 1968) .................................................. ........................................21
U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia,
898 F.2d 914 (3d Cir. 1990) .................................................. .................................... 27, 28
United Food & Commercial Workers Union Local 751 v. Brown Group, Inc.,
517 U.S. 544 (1996) .................................................. .................................................. .... 11
United States v. Avarello,
592 F.2d 1339 (5th Cir. 1979) .................................................. ......................................31
United States v. Barrow,
363 F.2d 62 (3d Cir. 1965) .................................................. ............................................ 30
United States v. Borgese,
235 F. Supp. 286 (S.D.N.Y. 1964) .................................................. .........................i ...... 21
United States v. Ceraso,
467 F.2d 653 (3d Cir. 1972) .................................................. .......................................... 30
United States v. Darby,
312 U.S. 100 (1941) .................................................. .................................................. .... 30
United States v. Extreme Assocs., Inc.,
431 F.3d 150 (3d Cir. 2005) .................................................. .................................... 24, 27
United States v. Kelley,
254 F. Supp. 9 (S.D.N.Y. 1966), rev’d in part on other grounds,
395 F.2d 727 (2d Cir. 1968) .................................................. .......................................... 21
United States v. O’Brien,
391 U.S. 367 (1968) .................................................. .................................................. .... 22
United States v. Parkel;
108 F.3d 38 (3d Cir. 1997) .................................................. ............................................30
United States v. Smith,
209 F. Supp. 907 (E.D. Ill. 1962) .................................................. ....................... ............ 21
vii
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 8 of 46
United States v. Villano,
529 F.2d 1046 (10th Cir. 1976) .................................................. ....................................31
Warth v. Seldin,
422 U.S. 490 (1975) .................................................. .................................................. .... 10
Weaver v. Graham,
450 U.S. 24 (1981) .................................................. .................................................. ...... 32
Whitmore v. Arkansas,
495 U.S. 149 (1990) .................................................. .................................................. .... 15
Wyatt Virgin Islands, Inc. v. Government of Virgin Islands,
385 F.3d 801 (3d Cir. 2004) .................................................. ..........................................20
STATUTES
18 U.S.C. § 1084 .................................................. .................................................. ................. 7, 21
18 U.S.C. § 1952 .................................................. .................................................. ..................... 30
18 U.S.C. § 1995 .................................................. .................................................. ..................... 31
19 U.S.C. § 2504(a) .................................................. .................................................. ................ 29
19 U.S.C. § 3512(c)(1)(A) .................................................. .................................................. 16, 29
19 U.S.C. § 3512(c)(1)(B) .................................................. .................................................. ..... 16
31 U.S.C. § 5361 .................................................. .................................................. .............. passim
31 U.S.C. § 5362 .................................................. .................................................. ........... 5, 25, 31
31 U.S.C. § 5363 .................................................. .................................................. ....... 5, 6, 13, 28
31 U.S.C. § 5364 .................................................. .................................................. ............. .... 6, 15
31 U.S.C. § 5365 .................................................. .................................................. ....................... 6
31 U.S.C. § 5366 .................................................. .................................................. ....................... 6
152 Cong. Rec. H7905 (Sept. 29, 2006) .................................................. ........................13, 31, 34
Vlll
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 9 of 46
72 Fed. Reg. 38846 (July 16, 2007) .................................................. ..........................................16
Pub. L. 103-465, Title III, § 101(d), 108 .................................................. ...................................16
Pub. L. 109-347, 120 Stat. 1884 (Oct. 13, 2006) .................................................. .........................4
MISCELLANEOUS
Internet Gambling Prohibition Act of 2006: Hearing on H.R. 4777 Before the
Subcomm. On Crime, Terrorism, and Homeland Security of the H. Comm. On the
Judiciary, 109th Cong. 10 (2006) .................................................. .................................................. 4
ix
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 10 of 46
INTRODUCTION
Plaintiff Interactive Media Entertaimnent & Gaming Association, Inc. ("Plaintiff") seeks
the extraordinary remedy of a temporary restraining order to enjoin the enforcement of the
Unlawful Internet Gambling Enforcement Act ("UIGEA") and its forthcoming regulations. In
making that argument, however, Plaintiff completely mischaracterizes that Act as analogous to
the anti-sodomy law struck down in La~rence v. Texas, 539 U.S. 558 (2003), because it
allegedly reaches consensual activity conducted in the privacy of one’s home. Plaintiff then
cobbles together various legal theories from constitutional jurisprudence in an effort to persuade
this Court that the UIGEA also should be struck down. The UIGEA, however, is a lawful
exercise of Congress’ authority under the Commerce Clause to assist states and the federal
government in enforcing existing gambling laws.
Specifically, the Act prohibits gambling businesses from knowingly accepting monetary
proceeds in connection with illegal internet gambling. In forthcoming regulations to be jointly
issued by the Federal Reserve Board and the Secretary of the Department of Treasury, certain
financial institutions will be required to establish policies and procedures to identify and block or
otherwise prevent or prohibit illegal gambling transactions. Plaintiff’s attempt to bring the
UIGEA within the folds of strict scla~tiny is therefore baseless. None of the legal theories
Plaintiff advances affords constitutional protection to illegal conduct. Thus, Plaintiff is unlikely
to succeed on the merits of its claims and therefore is not entitled to preliminary relief. Without
even considering those claims, however, this Court not only should deny such relief but dismiss
this action altogether because Plaintiff has improperly invoked this Court’s jurisdiction.
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 11 of 46
This Court’s jurisdiction is limited by Article III of the Constitution to actions that
present an actual case or controversy. Such actions involve a dispute appropriate for judicial
resolution that is brought by a party with standing. This action involves neither. Plaintiff
purports to sue on behalf of its members who fear prosecution under the UIGEA. None of
Plaintiff’s members, however, has been prosecuted or threatened with prosecution. Thus, their
fears are insufficient to confer standing on them or on an association purporting to represent
them. As to Plaintiff’s other claims, Plaintiff lacks standing because it seeks to advance claims
that only the states or the United States may bring. Without standing, Plaintiff is not properly
before this Court.
But even if Plaintiff were, the Court should refrain from deciding this case as the claims
here are unripe. The regulations that Plaintiff challenges have not even issued and thus this
Court can only speculate as to their substance. Although prosecution under the UIGEA is
theoretically possible, Plaintiff has not identified a single member or described its circumstances
sufficiently for this Court to determine Plaintiff’s as-applied constitutional challenge. The
ripeness doctrine dictates that the Court refrain from adjudicating such a dispute.
Alternatively, denial of preliminary relief as well as dismissal is warranted because
Plaintiff has failed to state a claim. Plaintiff alleges that the UIGEA and its forthcoming
regulations violate the First Amendment, a World Trade Organization ruling, the Tenth
Amendment, and the prohibition against ex post facto laws. Every one of these claims is
unfounded. The UIGEA does not implicate any of the First Amendment protections because it
does not regulate speech but prohibits facilitation of certain illegal conduct. Whatever its
incidental impact on those protections, the UIGEA withstands constitutional scrutiny in
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 12 of 46
furthering an important government interest that is within Congress’ power.
The UIGEA also withstands scrutiny under the Tenth Amendment. The Act is in
furtherance of states’ existing gambling prohibitions. Indeed, the UIGEA expressly provides that
nothing in the Act should be construed as "altering, limiting, or extending any Federal or State
law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United
States." 31 U.S.C. § 5361(b). Thus, Plaintiff’s contention that the UIGEA constitutes an
abrogation of power reserved to the states is completely unsubstantiated. Similarly,
unsubstantiated is Plaintiff’s claim that the UIGEA is an ex post facto law. Nothing in the Act
suggests that it has retroactive application, and without such there can be no ex post facto
violation. Finally, Plaintiff’s suggestion that the UIGEA is inconsistent with a WTO ruling, even
if true, is not grounds to invalidate the Act. By statute, if a WTO ruling is inconsistent with a
congressional enactment, the latter is to be given effect.
Since Plaintiff’s unlikelihood of success in this litigation is clear, preliminary relief is
wholly unwarranted. Plaintiff additionally has not demonstrated any irreparable harm, a
necessary element for such relief. Rather, Plaintiff suggests that such harm is established by
virtue of Plaintiff’s assertion of First Amendment rights. In this Circuit, however, irreparable
injury must be demonstrated even when such rights are asserted. Because preliminary relief
cannot be granted without both a likelihood of success on the merits and irreparable harm, this
Court need not consider whether the balance of harms and the public interest support an
injunction. Such consideration, however, also supports denial of Plaintiff’ s request.
This Court accordingly should deny Plaintiff’s motion for a temporary restraining order
and grant Defendants’ cross-motion to dismiss.
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 13 of 46
STATUTORY BACKGROUND
On October 13, 2006, President Bush signed into law the Security and Accountability for
Every Port Act of 2006. See Security and Accountability for Every Port Act of 2006, Pub. L.
109-347, 120 Star. 1884 (Oct. 13, 2006). Title VIII of that Act is entitled the Unlawful Internet
Gambling Enforcement Act of 2006 ("UIGEA"). Congress determined that "[n]ew mechanisms
for enforcing gambling laws on the Internet are necessary because traditional law enforcement
mechanisms are often inadequate for enforcing gambling prohibitions or regulations on the
Internet, especially where such gambling crosses State or national borders." 31 U.S.C. §
5361(4); see also 31 U.S.C. § 5361(2) ("The National Gambling Impact Study Commission in
1999 recommended the passage of legislation to prohibit wire transfers to Internet gambling sites
or the banks which represent such sites."). Additionally, Congress found that "Internet gambling
is primarily funded through personal use of payment system instruments, credit cards, and wire
transfers," and "Internet gambling is a growing cause of debt collection problems for insured
depository institutions and the consumer credit industry." 31 U.S.C. § 5361(1), (3). The UIGEA
is intended to address such concerns without "altering, limiting, or extending any Federal or State
law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United
States." 31 U.S.C. § 5361(b). Thus, the Act excludes from its prohibitions certain intrastate and
intratribal transactions as well as interstate horseracing permitted under the Interstate
Horseracing Act of 1978.~ See 31 U.S.C. § 5362(10).
~ The Department of Justice publicly has stated that it does not believe that the Interstate
Horseracing Act amended or repealed existing federal criminal statutes. See Internet Gambling
Prohibition Act of 2006: Hearing on H.R. 4777 Before the Subcomm. on Crime, Terrorism, and
Homeland Security of the H. Comm. on the Judiciary, 109th Cong. 10 (2006) (statement of
Bruce G. Ohr, Chief, Organized Crime and Racketeering Section, Criminal Division, United
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 14 of 46
In recognition of the international component of unlawful internet gambling here in the
United States, the UIGEA provides that "[i]n deliberations between the United States
Government and any foreign country on money laundering, corruption, and crime issues, the
United States Government should - [] encourage cooperation by foreign governments and
relevant international fora in identifying whether Internet gambling operations are being used for
money laundering, corruption or other crimes" and "advance policies that promote the
cooperation of foreign govermnents, through information sharing and other measures, in the
enforcement of this Act." 31 U.S.C. § 5361 note.
Section 5363 of the Act provides that "[n]o person engaged in the business of betting or
wagering may knowingly accept, in connection with the participation of another person in
unlawful Internet gambling - (1) credit, or the proceeds of credit, extended to or on behalf of
such other person...; (2) an electronic fund transfer, or funds transmitted by or through a money
transmitting business, or the proceeds of [such]...; (3) any check, draft, or similar instrument
which is drawn by or on behalf of such other person and is drawn on or payable at or through any
financial institution; or (4) the proceeds of any other form of financial transaction, as the
Secretary and the Board of Governors of the Federal Reserve System may jointly prescribe by
States Department of Justice). In passing the UIGEA, Congress recognized that a disagreement
exists over that issue and therefore included a Sense of Congress provision (codified at 31 U.S.C.
§ 5362(10)(D)(iii)), that states: "It is the sense of Congress that this subchapter shall not change
which activities related to horse racing may or may not be allowed under Federal law. This
subparagraph is intended to address concerns that this subchapter could have the effect of
changing the existing relationship between the Interstate Horseracing Act and other Federal
statutes in effect on the date of the enactment of this subchapter. This subchapter is not intended
to change that relationship. This subchapter is not intended to resolve any existing disagreements
over how to interpret the relationship between the Interstate Horseracing Act and other Federal
statutes."
5
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 15 of 46
regulation, which involves a financial institution as a payor or financial intermediary on behalf of
or for the benefit of such other person." 31 U.S.C. § 5363. The Secretary and the Board of
Governors of the Federal Reserve System, in consultation with the Attorney General, shall
additionally "prescribe regulations.., requiring each designated payment system, and all
participants therein, to identify and block or otherwise prevent or prohibit restricted transactions
through the establishment of policies and procedures reasonably designed to identify and block or
otherwise prevent or prohibit the acceptance of restricted transactions.’’2 31 U.S.C. § 5364(a).
Although the UIGEA contemplated that such regulations would issue "[b]efore the end of.the
270-day period beginning on the date of the enactment of this subchapter," they are still
forthcoming. 31 U.S.C. § 5364(a).
Liability under the Act includes both civil and criminal remedies. The district courts of
the United States "shall have original and exclusive jurisdiction to prevent and restrain restricted
transactions by issuing appropriate orders in accordance with th[e Act], regardless of whether a
prosecution has been initiated under this subchapter." 31 U.S.C. § 5365(a). A "person that
identifies and blocks a transaction, prevents or prohibits.., or otherwise refuses to honor a
transaction that is restricted" or that "such person reasonably believes to be [] restricted" in an
effort "to comply with regulations prescribed under subsection (a), shall not be liable to any party
for such action." 31 U.S.C. § 5364(d). However, any person who violates Section 5363 shall be
criminally liable and "fined... imprisoned for not more than 5 years, or both." 31 U.S.C. §
5366(a).
? -~ The requirements under this Section shall be enforced by the "Federal functional
regulators" and "the Federal Trade Commission." See 31 U.S.C. § 5364(e).
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 16 of 46
PROCEDURAL BACKGROUND
On June 5, 2007, Plaintiff Interactive Media Entertainment and Gaming Association filed
this declaratory action seeking to enjoin enforcement of the UIGEA, the forthcoming regulations
to be jointly issued by the Federal Reserve Board and the Secretary of the Treasury, and the
"provisions of any other Act, statute, law, rule and/or regulation of the United States but not
limited to the Wire Act, 18 U.S.C. § 1084." Compl. ¶ 54c. Purporting to sue on its own behalf
as well as its members who allegedly "engage in electronic gaming by and through the Internet..
? [either as] individuals and/or business entities," Plaintiff alleges that the UIGEA and
unidentified statutory provisions violate the Constitution and international treaty obligations.
Specifically, Plaintiff alleges that the UIGEA violates the First Amendment by
"impermissibly chill[ing its ] expressive association," (Compl. ¶ 48a), "impermissibly
interfer[ing] with the personal privacy and consensual activities of those members of the public
who wish to avail themselves of iMEGA members’ services," (Compl. ¶ 62), and constituting a
"more excessive [regulation of commercial speech] than is needed to serve any governmental
interests," (Compl. ¶ 75). The Act also allegedly "violates the Tenth Amendment by
unconstitutionally arrogating to the United States such express and implied reserved powers to
the individual states to regulate gambling and the financial transfers, content neutral or not,
associated therewith for the purpose of betting or wagering." Compl. ¶ 105. According to
Plaintiff, the very enactment of the UIGEA "constitutes an ex post facto criminalization of
iMEGA members’ activities as well as those activities of the members of the public." Compl. ¶
99.
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 17 of 46
Plaintiff further alleges that UIGEA violates a World Trade Organization ("WTO") order
"direct[ing] the United States to cease and desist in its illegal, restrictive trade practices."
Compl. ¶ 90. That order allegedly issued in a WTO dispute arising from a grievance filed by the
sovereign nation of Antigua and Barbuda over the United States’ treatment of that nation’s
"nationals and resident corporations who are or who have engaged in the business of operating
Internet Casinos which are legal and permitted by [that nation’s] sovereign laws." Compl. ¶ 82.
According to Plaintiff, because the UIGEA is inconsistent with that order, the Act is both ultra
vires and in violation of a WTO order.
Almost a week after filing the instant action, Plaintiff moved for a temporary restraining
order against enforcement of the Act and its forthcoming regulations allegedly because some of
Plaintiff’s members "face imminent and immediate criminal arrest and prosecution for engaging
in the business of operating Internet Casinos which permit betting or wagering" and "imminent
financial ruin, closure, forfeiture and termination of their employees if the provisions of the Act
are implemented." Compl. ¶¶ 32-33.
ARGUMENT
It is well established that "[i]njunctive relief is an extraordinary remedy, which should be
granted only in limited circumstances." LCN Enters., Inc. v. City of Asbury Park, 197 F. Supp.
2d 141, 145 (D.N.J. 2002). In making that determination, this Court "must consider whether: (1)
the party seeking a preliminary injunction has shown a reasonable probability of success on the
merits; (2) the party will be irreparably injured by the denial of the relief; (3) granting
preliminary relief will result in even greater harm to the nonmoving party; and (4) granting the
preliminary relief will be in the public interest." Id. An injunction is warranted "only if the
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 18 of 46
plaintiff produces evidence sufficient to convince the district court that all four factors favor
preliminary relief." Id. Here, consideration of those factors compels not only denial of such
relief but dismissal of this action.
I. PLAINTIFF HAS NO LIKELIHOOD OF SUCCESS ON THE MERITS OF ITS
CLAIMS.
Plaintiff is unlikely to succeed on the merits of its claims and therefore is not entitled to a
preliminary injunction. Although "it is not necessary that [Plaintiff’s] right to a final decision
after trial be wholly without doubt," Plaintiff"must demonstrate a reasonable probability of
eventual success in the litigation." LCNEnterprises, 197 F. Supp. 2d at 145 (internal quotations
omitted). A preliminary injunction cannot be granted without that demonstration. Hoxworth v.
Blinder Robinson & Co., 903 F.2d 186, 197 (3d Cir. 1990) ("To obtain a preliminary injunction,
the moving party must demonstrate [] a likelihood of success on the merits ...."). The
jurisdictional deficiencies of Plaintiff’s claims render it impossible for Plaintiff to make that
demonstration here. See Steel cO. v. Citizens for a Better Envt., 523 U.S. 83, 94 (1998)
("Without jurisdiction, the court camaot proceed at all in any cause. Jurisdiction is power to
declare the law, and when it ceases to exist, the only function remaining to the court is that of
announcing the fact and dismissing the cause."). Thus, this Court need not reach the dubious
merits of the claims themselves because preliminary relief is unwarranted where the conditions
precedent to this Court’s jurisdiction are absent. See Northeast Ohio Coalition for Homeless &
Serv. Employees Int ’l Union v. Blackwell, 467 F.3d 999, 1010 (6th Cir. 2006) ("The weakness of
plaintiffs’ showing of standing leads us to conclude that their likelihood of success on the merits
is not strong."); Then v. INS, 37 F. Supp. 2d 346, 352 (D.N.J. 1998) (concluding that plaintiff has
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 19 of 46
not established a reasonable likelihood of success on the merits because the jurisdiction of the
court was not properly invoked).
"Article III of the Constitution confines the federal courts to adjudicating actual ’cases’
and ’controversies.’" Allen v. Wright, 468 U.S. 737, 750 (1984). In the absence of an actual case
or controversy, the Court is without jurisdiction to decide the case. See Warth v. Seldin, 422 U.S.
490, 499 (1975); see also Poe v. Ullman, 367 U.S. 497, 502 (1961). Thus, a court must ensure
that its authority is invoked where there is "a lively conflict between antagonistic demands,
actively pressed, which make resolution of the controverted issue a practical necessity," id at 503
- a requirement "founded in concern about the proper - and properly limited - role of the courts
in a democratic society," Warth, 422 U.S. at 498. Otherwise, "the courts would be called upon to
decide abstract questions of wide public significance even though other governmental institutions
may be more competent to address the questions and even though judicial intervention may be
unnecessary to protect individual rights." Id. at 500. These considerations "press with special
urgency in cases challenging legislative action.., as repugnant to the Constitution" where the
Supreme Court has admonished courts "not to entertain constitutional questions in advance of the
strictest necessity." Poe, 367 U.S. at 503. Such necessity is clearly not present here.
A. Plaintiff’s Claims Should be Dismissed for Lack of Standing.
Plaintiff’s failure to satisfy the requirements of associational standing or standing in its
own right compels denial of its request for preliminary relief and dismissal of this action for lack
of jurisdiction. See Plaintiff’ s Brief in Support of Issuance of Temporary Restraining Order ("P1.
Br.") at 20-21 (alleging that iMEGA has standing to assert its own claim of violation of
expressive association as well as the claims of its members"). Standing is "an essential and
10
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 20 of 46
unchanging part of the case-or-controversy requirement." Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992). The standing inquiry is "especially rigorous when reaching the merits of
the dispute would force [the Court] to decide whether an action taken by one of the other two
branches of the Federal Government was unconstitutional." Raines v. Byrd, 521 U.S. 811,819-
20 (1997).
The requirements of standing are well established. To sue in its own right, Plaintiff must
demonstrate "(1) a cognizable injury that is (2) causally connected to the alleged conduct and is
(3) capable of being redressed by a favorable judicial decision." Pennsylvania Family Instit., Inc.
v. Black, 489 F.3d 156, 165 (3d Cir. 2006); see also Lujan, 504 U.S. at 560-61; American
Littoral Soc ’y v. United States Envt ’l Protection Agency Region, 199 F. Supp. 2d 217, 230
(D.N.J. 2002). To sue on behalf of its members, Plaintiff must demonstrate 1) that it "seeks to
protect [interests that] are germane to the organization’s purpose"; 2) that its "members would
otherwise have standing to sue in their own right"; and 3) that "neither the claim asserted nor the
relief requested requires the participation of individual members in the lawsuit." Hunt v.
Washington State Apple Advertising Comm ’n, 432 U.S. 333,343 (1977); United Food &
Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 552-53 (1996). The
failure to satisfy any one of these elements is sufficient to defeat standing. That failure is evident
as to each of the claims Plaintiff asserts.
11
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1. Plaintiff lacks standing to challenge the UIGEA under the First
Amendment.
None of the three bases on with Plaintiff claims standing to challenge the UIGEA under
the First Amendment is sufficient. Each lacks the requisite injury in fact. See Lujan, 504 U.S. at
560-61 (noting that the "irreducible constitutional minimum of standing contains three elements[,
including that]... Plaintiff [] have suffered an ’injury in fact’ - an invasion of a legally protected
interest which is (a) concrete and particularized, and (b) ’actual or imminent, not "conjectural" or
"hypothetical .....). "Until a judicially cognizable injury is shown no other inquiry is relevant to
consideration of [] standing." Schlesinger v. Reservists Comm. to Stop the War, 418 U.S, 208,
227 n. 16 (1974). This Court accordingly need not consider the remaining elements of standing
as dismissal of Plaintiff’s First Amendment claims is required on that basis.
a. Plaintiff’s claim that the UIGEA has a chilling effect on
members is insufficient to confer standing.
Plaintiff cannot properly predicate standing based on an alleged chilling of its members’
expressive association. See Compl. ¶ 48a (alleging that the "Act impermissibly chills []
expressive association in that iMEGA members are branded criminals and subjected to criminal
prosecution, loss of freedom and seizure and/or forfeiture of property for engaging in association
,,
espousing safe, legal and responsible wagering"). "[i]t is not enough that [Plaintiff] claim[s] to
’feel inhibited’ in the exercise of First Amendment rights." OIdroyd v. Kugler, 352 F. Supp. 27,
29 (D.N.J. 1973). Such an allegation cannot substitute for a claim of specific objective harm.
See Laird v. Tatum, 408 U.S. 1, 13-14 (1972) ("Allegations of a subjective ’chill’ are not an
adequate substitute for a claim of specific present objective harm ...."); see also Paton v. La
Prade, 524 F.2d 862, 874 (3d Cir. 1975) (concluding that allegation that defendants’ conduct
12
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 22 of 46
constituted an "inhibiting force" was insufficient to confer standing). Plaintiff here has not
alleged one example of any member who was deterred from protected activity or other specific
objective harm to substantiate its claim of a chilling effect.
Moreover, Plaintiff has failed to demonstrate the connection between the alleged chill and
the UIGEA. See Laird, 408 U.S. at 14 (concluding that plaintiffs’ claim of a chilling effect was
not a cognizable injury where they °°left somewhat unclear the precise connection between the
mere existence of the challenged system and their own alleged chill"). According to Plaintiff, the
Act impermissibly chills members from %spousing safe, legal and responsible wagering."
Compl. ¶ 48a. The UIGEA, however, only imposes criminal liability for violations of Section
5363 which "[p]rohibits persons engaged in the business of betting or wagering from knowingly
accepting credit, funds, bank instruments, or proceeds of any other form of financial transaction
in connection with the participation of another person in unlawful Internet gambling." 152 Cong.
Rec. H8030; 31 U.S.C. § 5363; see also Compl. ¶ 28 (acknowledging that the Act imposes
criminal liability for violations of Section 5363). Thus, the connection between that provision
and the activity that Plaintiff alleges has been chilled is not evident. See Aiello v. City of
tgilmington, Delau, are, 623 F.2d 845,862 (3d Cir. 1980) (suggesting that a claim of an actual
chill may be sufficient to confer standing where there is a "reasonable possibility that a
regulation will be applied directly" to plaintiff (emphasis added)). Moreover, because the
UIGEA relies on existing laws for its "in connection with.., unlawful Internet gambling"
requirement, it is unlikely that the Act’s specific prohibition has aw independent chilling effect
at all. See 31 U.S.C. § 5363. For these additional reasons, Plaintiff’s claim of a subjective chill
is inadequate to confer standing.
13
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b. Plaintiff has not alleged a credible threat of prosecution under
the UIGEA sufficient to confer standing.
Plaintiff’s allegations of its members’ fear of prosecution under the UIGEA also are
insufficient to confer standing. See Compl. ¶ 32 (alleging that "some of the members of iMEGA
face imminent and ilnmediate criminal arrest and prosecution"). Fear of criminal prosecution is a
cognizable injury only when the fear is objectively reasonable. See Poe, 367 U.S. at 508 (noting
that the Court had passed upon criminal statutes in cases "grounded in a realistic fear of
prosecution"); see also ACLUv. Ashcroft, 322 F.3d 240, 250 n.10 (3d Cir. 2003) ("The plaintiffs
have standing to sue because they could all reasonably fear prosecution ...."(emphasis added)).
In determining whether a plaintiff’s fear is objectively reasonable, courts have considered factors
such as the prosecution, threat of prosecution, or arrest of the plaintiff and the history of past
prosecution. See, e.g., Sacks v. Office of Foreign Assets Control, 466 F.3d 764, 768 (9th Cir.
2006); Doe v. Pryor, 344 F.3d 1282, 1286 (1 lth Cir. 2003); Oldroyd, 352 F. Supp. at 30. Such
consideration compels the conclusion that Plaintiff has not alleged an objectively reasonable fear
of prosecution.
This action comes almost a year after the UIGEA was enacted. Yet, Plaintiff has not
identified a single arrest, tlu’eatened prosecution, or actual prosecution of any of its members
under that Act. Instead, "on information and belief," Plaintiff alleges "other persons and/or
business entities situated identically to or substantially similar to some of the members of
Plaintiff iMEGA" have been prosecuted "under other laws" in three different states. Compl. ¶
34. Not one occurred in the state of New Jersey.
14
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The only apparent explanation for the alleged sudden fear of prosecution is the Act’s
Section 5364(a), which provides that "[b]efore the end of the 270-day period beginning on the
date of the enactment of this subchapter, the Secretary and the Board of Governors of the Federal
Reserve System, in consultation with the Attorney General, shall prescribe regulations [under the
Act]." 31 U.S.C. § 5364. According to Plaintiff, that period ended July 10, 2007. See P1. Br. at
14. Yet, as Plaintiff concedes, "[a]s of this date, no regulations have been introduced by the
Board, the Commission, or the Attorney General" and "no regulations have been adopted by any
of the Agencies required to do so." P1. Br. at 14. This Court clearly cannot base standing on
Plaintiff’s speculation that its members will be liable under regulations not even in existence.
Those members’ subjective fears of prosecution are simply not enough. Plaintiff therefore
cannot predicate standing on that basis.
c. Plaintiff’s claim of its members’ imminent financial ruin are
insufficient to confer standing.
Plaintiff contends that "some of the members of iMEGA face imminent financial ruin,
closure, forfeiture and termination of their employees if the provisions of the Act are
implemented." See Compl. ¶ 33. That contention is insufficient to confer standing. Allegations
of possible future injury "do not satisfy the requirements of Article III." g~hitmore v. Arkansas,
495 U.S. 149, 158 (1990). Rather, the alleged injury "must be certainly impending," id (internal
quotation marks and citations omitted), and "real and immediate," CiO/of Los Angeles v. Lyons,
461 U.S. 95, 102 (1983). None of the allegations in the Complaint demonstrates that any of
Plaintiff’s members faces immediate financial destruction- let alone as a result of the UIGEA.
To the extent that Plaintiff speculates that when the forthcoming regulations are implemented -
15
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 25 of 46
since the Act itself has been in effect since October 2006 - members will suffer financial ruin,
such rank speculation is also insufficient for standing purposes.
2. Plaintiff lacks standing to challenge the UIGEA’s alleged violation of
a WTO order.
Plaintiff lacks standing to maintain Counts Four and Five of the Complaint. See Compl.
¶ 85 (alleging that "the various Defendants, or each or all of them,.., were, and remain so,
acting ultra vires by enacting and/or implementing the Act after the WTO had ruled the actions
of the United States violated a treaty to which the United States is a signatory"); Compl. ¶¶ 90-91
(alleging that adoption of the Act is an "illegal and restrictive trade practice[]" that the "WTO
has directed the United States to cease and desist"). Both Counts purport to challenge the
UIGEA as inconsistent with a WTO order. By statute, however, "[n]o person other than the
United States" may bring such an action) See 19 U.S.C. § 3512(c)(1)(A) (providing that "[n]o
person other than the United States... shall have any cause of action or defense under any of the
Uruguay Round Agreements or by virtue of ~ongressional approval of such an agreement");4 19
U.S.C. § 3512(c)(1)(B) (providing that "[n]o person other than the United States... may
challenge, in any action brought under any provision of law, any action or inaction by any
3 Last month, in light of the developments in the WTO dispute that Plaintiff identifies,
"the United States [] decided to make use of the established WTO procedures to correct its
schedule in order to reflect the original U.S. intent - that is, to exclude gambling from the scope
of the U.S. commitments under the GATS." 72 Fed. Reg. 38846, 38846 (July 16, 2007)
("Request for Public Comment on the Negotiations for Compensatory Adjustments to U.S.
Schedule of Services Commitments Under WTO General Agreement on Trade in Services
(GATS) in Response to Notice of the United States of Intent to Modify Its Schedule Under
Article XXI of the GATS").
4 The WTO is incorporated under the Uruguay Round Agreements. See Uruguay Round
Agreement Act, Pub. L. 103-465, Title III,§ 101(d), 108. Stat. 4945 (Dec. 8, 1994).
16
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 26 of 46
department, agency, or other instrumentality of the United States... on the ground that such
action or inaction is inconsistent with such agreement"). Plaintiff accordingly is not a proper
plaintiff and therefore is not likely to succeed on Counts Four and Five as both Counts should be
dismissed for lack of standing.
3. Plaintiff lacks standing to challenge the UIGEA as an ex post facto
law.
Plaintiff has not alleged any injury sufficient to confer standing to challenge the UIGEA
under the Ex Post Facto Clause. As already discussed, none of Plaintiff’s allegations
demonstrates that its members face imminent danger of criminal prosecution under the UIGEA -
let alone its retroactive application to already completed conduct. See Compl. ¶ 99 (alleging that
"[e]nactment of the Act constitutes an ex post facto criminalization of iMEGA members’
activities as well as those activities of the members of the public"). Thus, Plaintiff has no
likelihood of success on its ex post facto claim as that claim too should be dismissed for lack of
standing.
4. Plaintiff lacks standing to challenge the UIGEA under the Tenth
Amendment.
Plaintiff clearly is an improper party to advance a claim that the UIGEA unlawfully
encroaches on states’ sovereign power. See Compl. ¶ 105 (alleging that "[t]he Act violates the
Tenth Amendment by unconstitutionally arrogating to the United States such express and implied
reserved powers to the individual states to regulate gambling and the financial transfers, content
neutral or not, associated therewith for the purpose of betting or wagering"). The Supreme Court
long ago suggested that private parties lack standing to assert such a claim under the Tenth
Amendment. See Tennessee Elec. Power Co. v. Tennessee Valley Auth., 306 U.S. 118, 144
17
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(1939) (concluding that a private company, "absent the states or their officers, has no standing in
this suit to raise any question under the [Tenth] amendment"). Lower courts since have held that
until Tennessee Electric Power is overruled, private parties cannot bring a Tenth Amendment
claim. See Brooklyn LegalServs. Corp. v. LegalServs. Corp., 462 F.3d 219, 236 (2d Cir. 2006)
(concluding that "Tenn. Elec. here controls, and the district court erred by ruling otherwise and
by failing to dismiss the plaintiffs’ Tenth Amendment claim pursuant to Rule 12(b)(1)");
Medeiros v. Vincent, 431 F.3d 25, 34, 35 (lst Cir. 2005) (concluding that the "United States
Supreme Court has held that private citizens lack standing to maintain Tenth Amendment
claims" and expressing "reluctan[ce] to second-guess the continuing viability of TVA regarding
so complex an issue"); see also Pierce County, Washington v. Guillen, 537 U.S. 129, 147 n.10
(2003) (declining to reach question "whether private plaintiffs have standing to assert ’states’
rights’ under the Tenth Amendment"). That conclusion, alternatively, follows as a prudential
matter.
In addition to its constitutional components, the doctrine of standing is comprised of
prudential components. See Oxford Assocs. v. Waste System Auth. of East Montgomery County,
271 F.3d 140, 145 (3d Cir. 2001). The prudential components "address the need for judicial
restraint" to ensure that "the plaintiff is a proper party to invoke judicial resolution of the dispute
and the exercise of the court’s remedial powers." Mariana v. Fisher, 338 F.3d 189, 204 (3d Cir.
2003). The Third Circuit has established a three-part test for determining whether a plaintiff
satisfies prudential standing: (1) whether plaintiff is "assert[ing] his or her own legal interests
rather than those of a third party;" (2) whether plaintiff’s claim presents "abstract questions of
wide public significance amounting to generalized grievances;" and (3) whether plaintiff’s
18
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"interests are arguably within the ’zone of interests’ that are intended to be protected by the
statute, rule, or constitutional provision on which a claim is based." Id. at 205. Plaintiff’s Tenth
Amendment claim clearly fails that test.
Fatal to Plaintiff’s claim of prudential standing is that the alleged Tenth Amendment
violation asserts states’ legal interests not those of Plaintiff. See Mariana, 338 F.3d at 205
("prudential standing requires that a litigant assert his or her own legal interests" (emphasis
added)); see also Compl. ¶ 105 (alleging that UIGEA "unconstitutionally arrogat[es] to the
United States such express and implied reserved powers to the individual states"). Plaintiff’s
claim additionally raises a generalized grievance concerning the extent to which the federal
government can assist in enforcement of state criminal laws; yet another reason for this Court to
exercise judicial restraint. Notwithstanding the Tenth Amendment’s reference to "the people,"
Plaintiff’s claim is clearly based on the provision having only to do with the states, (Compl. ¶
105), and thus Plaintiff is not within its zone of interest. See Const. Amend. X ("The powers not
delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved
to the States respectively, or to the people."). Since Plaintiff’s Tenth Amendment claim satisfies
none of the requirements of prudential standing, that claim should be dismissed and accordingly
has no reasonable likelihood of success.
B. Plaintiff’s Claims Should Be Dismissed as Unripe.
The "concepts of standing and ripeness require related but distinct inquiries." Pic-A-State
Pennsylvania, Inc. v. Reno, 76 F.3d 1294, 1298 n.1 (3d Cir. 1996). Whereas, "standing focuses
on who may bring a[n ] action," "ripeness is concerned with when an action may be brought." Id.
The ripeness requirement prevents "courts, through avoidance of premature adjudication, from
19
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 29 of 46
entangling themselves in abstract disagreements." Wyatt Virgin Islands, Inc. v. Government of
Virgin Islands, 385 F.3d 801,806 (3d Cir. 2004). In making that determination, the Court "must
consider the fitness of the issues for judicial decision and the hardship to the parties of
withholding court consideration." Id. (internal quotations omitted). A dispute is unripe if it rests
upon contingent future events or is based upon assumed potential invasions of rights. Id.
(characterizing as "not ripe for judicial determination," a dispute "that rests upon contingent
future events that may not occur as anticipated, or indeed may not occur at all" or "[c]laims based
merely upon assumed potential invasions of rights" (internal quotations omitted)). Since the
instant action is such a dispute, Plaintiff’s claims are unlikely to succeed on that independent
ground and should be dismissed for lack of ripeness.
Plaintiff’s challenge here is an exercise in speculation. While aclcnowledging that the
regulations the Act contemplates the Federal Reserve Board and the Secretary jointly will
prescribe have yet to issue, (e.g., Compl. ¶¶ 54b, 65b, 78b, 88b, 93b), Plaintiff seeks an order
fi’om this Court enjoining those regulations as violative of the Constitution and WTO. See P1. Br.
at 14, 18 (recognizing that "[a]s of this date, no regulations have been introduced by the Board,
the Commission, or the Attorney General" nor "adopted by any of the Agencies required to do
so" yet requesting a "Temporary Restraining Order to restrain the enforcement of any...
regulatory authority under the Act"). Only by speculating along with Plaintiff as to what those
regulations will prescribe can this Court possibly make that determination. Moreover, while
prosecution of Plaintiff’s members under the UIGEA itself- as opposed to the forthcoming
regulations - is theoretically possible, Plaintiff has not alleged that any of its members has been
tba’eatened with such prosecution. Thus, there is no factual context whatsoever for this Court to
20
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consider Plaintiff’s as-applied constitutional challenge. See Compl. ¶ 53 (alleging that the "Act,
as applied to these facts, is unconstitutional thereby"). This Court is again left to speculate as to
that context or alternatively decide this action on an inadequate record. The ripeness doctrine,
however, dictates that this Court do neither and instead dismiss this action as unripe.
C. Plaintiff’s Claims Should Be Di

[Jay Cohen]

C. Plaintiff’s Claims Should Be Dismissed for Failure to State a Claim.
Even if this Court concludes that it has jurisdiction over Plaintiff’s claims, those claims
nevertheless have no reasonable likelihood of success as they should be dismissed for failure to
state a claim.5 See Fed. R. Civ. P. 12(b)(6). Although in deciding a motion to dismiss for failure
to state a claim, the Court must accept "all facts alleged in the complaint and all reasonable
inferences that can be drawn from them.., as true," the Court "need not credit bald assertions or
legal conclusions alleged in the complaint." Malia v. General Elec. Co., 23 F.3d 828, 830 (3d
Cir. 1994); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997); In re
5 To the extent Plaintiff purports to challenge unidentified statutory provisions, Plaintiff
has failed to put Defendants on sufficient notice of those claims. See Baldwin County Welcome
Ctr. v. Brown, 466 U.S. 147, 149-50 n.3 (1984) (noting that "the pleadings [must] give the
defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests");
Borawski v. Henderson. 265 F. Supp. 2d 475,481 (D.N.J. 2003) (same); see, e.g., Compl. ¶ 54c
(requesting an order restraining Defendants "from enforcing the provisions of any other Act,
statute, law, rule and/or regulation of the United States but not limited to the Wire Act, 18 U.S.C.
§ 1084"). If by that allegation, Plaintiff intends to challenge the Wire Act, 18 U.S.C. § 1084, that
challenge fails for the reasons discussed in the text. Numerous courts - often after little analysis
- have rejected such challenges to the Wire Act. See, e.g., Truchinski v. United States, 393 F.2d
627, 634 (8th Cir. 1968) ("the provisions of Section 1084 do not trespass on the first amendment
guarantee of free speech"); United States v. Kelley, 254 F. Supp. 9, 14-15 (S.D.N.Y. 1966)
(same), rev’d in part on other grounds, 395 F.2d 727 (2d Cir. 1968); United States v. Borgese,
235 F. Supp. 286, 296 (S.D.N.Y. 1964) (upholding the Wire Act against a constitutional
challenge because "[t]he First Amendment is not applicable where criminal conduct is
involved"); United States v. Smith, 209 F. Supp. 907, 918 (E.D. Ill. 1962) (the Wire Act "do[es]
not restrict freedom of speech; [it] merely prohibit[s] the use of interstate facilities to certain
conduct which the Congress has declared to be illegal.").
21
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Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997); see also Church of
Human Potential, Inc. v. Vorsky, 636 F. Supp. 93, 95-96 (D.N.J. 1986) (holding that plaintiff’s
conclusory allegations were insufficient to state a claim). A complaint can withstand such a
motion only "if the material facts as alleged, in addition to inferences drawn from those
allegations, provide a basis for recovery." Emerson v. Thiel College, 296 F.3d 184, 188 (3d Cir.
2002). None of the bases on which Plaintiff seeks recovery is well founded. Thus, Plaintiff’s
claims cannot withstand dismissal and therefore are unlikely to succeed on the merits.
1. Plaintiff Has not Stated a Claim of a First Amendment Violation.
Plaintiff completely misconstrues the UIGEA in an effort to bring it within the purview of
the First Amendment. See P1. Br. at 24 (asserting that "the first reason that the court should
restrain any further enforcement of the UIGEA is because it unconstitutionally interferes with
private conduct"); P1. Br. at 29 (inviting the Court to "focus, not on the anecdotal public morality
arguments advanced to support the UIGEA’s enactment, but on the zone of fundamental privacy
guaranteed by the Constitution where Internet gambling occurs"); P1. Br. at 35 (alleging that the
UIGEA "strikes too broad, too deep, too wide into private conduct"); see also Compl. ¶ 56
(alleging that "[t]he bettors who seek entertainment by and through iMEGA members’ Internet
Casinos engage in such conduct by computer through the Internet, and overwhehningly from the
privacy of their personal computers"). Although "[i]t is possible to find some kernel of
expression in almost every activity a person undertakes.., such a kernel is not sufficient to bring
the activity within the protection of the First Amendment." Dallas v. Stanglin, 490 U.S. 19, 25
(1989). Indeed, courts have rejected "the view that an apparently limitless variety of conduct can
be labeled ’speech.’" United States v. O’Brien, 391 U.S. 367, 376 (1968). The conduct
22
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regulated by the UIGEA - the knowing acceptance by a gambling business of the proceeds of an
illegal internet gambling transaction - is not protected. See, e.g., Louisiana v. NAACP, 366 U.S.
293,297 (1961) (noting that "criminal conduct [] cannot have shelter in the First Amendment").
Moreover, Plaintiff does not - nor can it - allege that such conduct either "contain[s] or
manifest[s] protected expression." Pi Lambda Phi Fraternity, Inc. v. University of Pittsburgh,
229 F.3d 435,446 (3d Cir. 2000); see, e.g., Compl. ¶ 48c (alleging that the UIGEA
"criminaliz[es] content-neutral conduct"); Compl. ¶ 59 (alleging that "the Act punishes as a
criminal act any content-neutral transmittal of the funds used for a bet or wager if the originating
point or end point makes Internet gambling illegal").
As a regulation of unprotected conduct that itself neither contains nor manifests protected
expression, the UIGEA is not subject to First Amendment scrutiny at all. See Pi Lambda, 229
F.3d at 446; see, e.g., Arcara v. Cloud Books, 478 U.S. 697, 707 (1986) (concluding that "the
First Amendment is not implicated by the enforcement of a public health regulation of general
application against [an adult bookstore]"); Barnes v. Glen Theatre, Inc., 501 U.S. 560, 572
(1991) (Scalia, J., concurring in the judgment) ("a general law regulating conduct and not
specifically directed at expression, [] is not subject to First Amendment scrutiny at all"). Even if
protected expression is indirectly affected by such a regulation, "no First Amendment violation
ha[s] occurred, because ’[a]ny other conclusion would lead to the absurd result that any
government action that had some conceivable speech-inhibiting consequences.., would require
analysis under the First Amendment." Pi Lambda, 229 F.3d at 446; see also Arcara, 478 U.S. at
708 (O’Connor, J., concun’ing). Thus, the Court can easily reject Plaintiff’s attempts here to
subject the UIGEA to such analysis. See P1. Br. at 23 (erroneously asserting that strict scrutiny
23
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applies here); see also P1. Br. at 30-35 (alleging that the UIGEA is unconstitutional because it is
not "the least restrictive means to regulate private consensual conduct on the internet").6
a. The UIGEA is not an unconstitutional interference with
Plaintiff’s right of association.
Plaintiff has failed to a state a claim of a violation of its right of expressive association.
The First Amendment’s "protection of expressive association is not reserved for advocacy
groups." Boy Scouts of America v. Dale, 530 U.S. 640, 648 (2000); see also Pi Lambda, 229
F.3d. at 443 (noting that "It]he Supreme Court has cast a fairly wide net in its definition of what
comprises expressive activity"). An organization, however, "must do more than simply claim to
be an expressive association in order to receive the benefits of constitutional protection." Id. at
444. Plaintiff here claims to be an expressive association. See Compl. ¶ 39 (alleging that the
UIGEA interferes with "activities, such as lobbying, marketing and publication, which are
calculated to advocate for public and private rights of its members and those private individuals
who use iMEGA members’ Internet Casinos to engage in legal Internet Casino gambling"). That
claim, however, is not substantiated by any specific facts.
But even if the Court credits that unsubstantiated assertion, the UIGEA does not
unconstitutionally interfere with Plaintiff’s expressive activities. That determination requires the
Court to consider whether the Act significantly affects Plaintiff’s ability to advocate its
viewpoints. See, e.g., Pi Lambda, 229 F.3d at 447 (concluding that plaintiffs’ expressive rights
6 Strict scrutiny is reserved for direct regulations of speech or expression. See Pi
Larnbda, 229 F.3d at 445-56 (noting that "[t]he most rigorous standard of review is triggered
when the [govermnent] action directly burdens expressive rights"). To survive strict scrutiny, a
statute "must be narrowly tailored to further a compelling state interest." United States v.
Extreme Assocs., Inc., 431 F.3d 150, 153 n.7 (3d Cir. 2005); see also Griswold v. Connecticut,
381 U.S. 479, 497-98 (1965).
24
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were not unconstitutionally infringed by a state sanction of activities "that themselves had no
protective expressive element" and only indirectly affected those rights).
Clearly, the UIGEA does not interfere with Plaintiff’s ability to engaged in its alleged
expressive activities: "advocat[ing] for public and private rights of its members.., to engage in
legal Internet Casino gambling.’’7 Compl. ¶ 39 (emphasis added). At best, there is only an
indirect relationship between the UIGEA’s prohibitions and Plaintiff’s expressive association.
See, e.g., Pi Lambda, 229 F.3d at 446 (characterizing the relationship between a regulation and
protected expression as "indirect" where the regulation "does not require [plaintiff] to associate
with anyone, nor is... directed on its face at [plaintiff’s] expressive associational activities").
The UIGEA therefore does not unconstitutionally infringe on Plaintiff’s expressive association.
See id. at 447 (holding that where "the effect of the state action on the expressive rights was
indirect [] there is thus no constitutionally impermissible infringement on the [] right of
expressive association"). Thus, Plaintiff has failed to state a claim of such a violation.
7 Plaintiff improperly characterizes the UIGEA as imposing "restrictions [on]...
providing any information regarding on-line gambling in 31 U.S.C. 5362(1)(D)." P1. Br. at 33.
That provision is merely part of the statutory definition of "Bet or wager" and not a description of
conduct prohibited by the UIGEA. See 31 U.S.C. § 5362(1)(D) (defining "Bet or wager" as
"includ[ing] any instructions or information pertaining to the establishment or movement of
funds by the bettor or customer in, to, or from an account with the business of betting or
wagering").
25
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b. The UIGEA does not violate Plaintiff’s right of privacy.
Plaintiff contends that the UIGEA infringes bettors’ right of privacy because internet
gambling is conducted "overwhelmingly from the privacy of their personal computers." Compl.
¶ 56; see also Compl. ¶ 62 (alleging that "[t]he Act impermissibly interferes with the personal
privacy and consensual activities of those members of the public who wish to avail themselves of
iMEGA members’ services"). That contention extends the right of privacy too far. Two types of
privacy interests have been recognized: "One is the individual interest in avoiding disclosure of
personal matters, and another is the interest in independence in making certain kinds of important
decisions. The latter decisions have encompassed matters relating to marriage, procreation,
contraception, family relationships, and child rearing and education." American Future Sys., Inc.
v. Pennsylvania State Univ., 688 F.2d 907, 915 (3d Cir. 1982) (internal quotations omitted); see
also Paul v. Davis, 424 U.S. 693,713 (1976). The right of an individual to engage in internet
gambling is hardly of the same ilk. But even if that activity is a protected privacy interest, the
UIGEA does not reach such activity.
Plaintiff’s attempt to recast the UIGEA as analogous to the anti-sodomy law in Lawrence
v. Texas, 539 U.S. 558 (2003), is therefore disingenuous. See P1. Br. at 23-30. That law
prohibited consensual sodomy between members of the same sex in the privacy of their own
home. As Plaintiff acknowledges, the Court in those circumstances recognized that "[1]iberty
presumes an autonomy of self that includes freedom of thought, belief, expression, and certain
intimate conduct." P1. Br. at 23 (quoting Lawrence, 539 U.S. at 562). Internet gambling clearly
does not implicate those same freedoms.
26
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 36 of 46
Plaintiff also suggests that the UIGEA is "squarely on all fours with Lawrence" because
sponsors of the Act regarded "gambling on the Internet, as a moral dilemma," which the
Lawrence Court rejected as justification for the anti-sodomy law. P1. Br. at 24. The Third
Circuit, however, has rejected such an argument in cases challenging regulations on the
distribution of obscenity. See Extreme Associates, 431 F.3d at 161 (holding that it was
"impermissible for the District Court to strike down the statutes at issue based on speculation that
?.. other pivotal obscenity cases appear[] to rest on reasons rejected in Lawrence" (internal
quotations omitted)). Thus, Lawrence is clearly not dispositive of the issue here. Plaintiff
accordingly has not stated a claim that the UIGEA violates individuals’ privacy interests.
c. The UIGEA does not regulate commercial speech.
Plaintiff’s final invitation to subject the UIGEA to First Amendment scrutiny also should
be rejected. See Compl. ¶¶ 66-78 (alleging that the UIGEA interferes with iMEGA members’
protected commercial speech). The Constitution protects "speech which is commercial in nature,
and truthful and non-misleading about lawful activities." LCN Enterprises, 197 F. Supp. 2d at
151. Such speech "may be broadly defined as expression related to the economic interests of the
speaker and its audience." U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d
914, 933 (3d Cir. 1990). The test for determining whether a regulation is an unconstitutional
restriction on comanercial speech is set forth in Central Hudson Gas & Electric Corporation v.
Public Service Commission, 447 U.S. 557 (1980):
For commercial speech to come within (the First Amendment), it at least must
concern lawful activity and not be misleading. Next, we ask whether the asserted
govermnental interest is substantial. If both inquiries yield positive answers, we
must determine whether the regulation directly advances the government interest
asserted, and whether it is not more extensive than is necessa13~ to serve that
27
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interest.
Id. at 566. Here again, Plaintiff fundamentally misapprehends the law in construing the UIGEA
as a regulation on commercial speech.8 See Compl. ¶¶ 67-71 (alleging that Plaintiff advertises its
activities in various media and that the UIGEA "criminalizes as false the representation by
iMEGA members that they operate legally"). But even if the UIGEA were such a regulation, it
satisfies Central Hudson.
The government’s interest in providing an effective mechanism for "enforcing gambling
laws on the Internet" where "such gambling crosses State or national borders" is clearly
substantial. See 31 U.S.C. §5361(4). In furtherance of that interest, the UIGEA prohibits a
person engaged in the business of betting or wagering from knowingly accepting monetary
instruments (e.g., credit, electronic fund transfer, check) "in connection with the participation of
another person in unlawful Internet gambling." 31 U.S.C. § 5363.. That provision’s scienter
element and illegality requirement ensure that the prohibition is not more extensive than
necessary. Indeed, the UIGEA makes plain that it is not intended to "alter[], limit[], or extend[]
any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling
within the United States." 31 U.S.C. § 5361(b). Thus, even if Central Hudson were applicable,
Plaintiff has failed to state a claim of an unconstitutional regulation of commercial speech.
8 The Supreme Court has identified three factors the Court should consider in deciding
whether speech is commercial: "(1) is the speech an advertisement; (2) does the speech refer to a
specific product or service; and (3) does the speaker have an economic motivation for the speech.
An affirmative answer to all three questions provides ’strong support’ for the conclusion that the
speech is commercial." U.S. Healthcare, 898 F.2d at 933 (citation omitted); see also Bolger v.
Youngs Drug Prods. Corp., 463 U.S. 60, 66-67 (1983). Applying these factors to a gambling
business’s acceptance of a credit, check, or like instrument in connection with unlawful Internet
gambling - the conduct regulated by the UIGEA - does not provide such support for that
conclusion.
28
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2. Plaintiff’s Allegation of an Inconsistency Between the UIGEA and a
WTO Ruling Fails to State a Claim.
Counts Four and Five of the Complaint are variations on the same theme, namely, that the
UIGEA should be enjoined because it violates a WTO ruling. See Compl. ¶ 85 (alleging that
"[t]he Congress of the United States, in enacting the Act, and the United States in agreeing to be
bound by the Act, and the various Defendants, or each or all of them, by enforcing, investigating,
proposing and/or enacting regulations, rules or procedures pursuant thereto, were, and remain so,
acting ultra vires by enacting and/or implementing the Act after the WTO had ruled the actions
of the United States violated a treaty to which the United States is a signatory"); Compl. ¶¶ 90-91
(alleging that "[t]he WTO has directed the United States to cease and desist in its illegal,
restrictive trade practices.., including the adopting of the Act"). That contention is predicated
on the flawed assumption that WTO rulings have priority over domestic law.
Although, whenever possible, "courts should interpret U.S. law.., in a manner
consistent with international obligations," such obligations do not "trump[] domestic legislation."
Corus Staal BVv. Department of Commerce, 395 F.3d 1343, 1347-48 (Fed. Cir. 2005). Indeed,
by statute, "[n]o provision of any of the Uruguay Round Agreements, nor the application of any
such provision to any person or circumstance, that is inconsistent with any law of the United
States shall have effect." 19 U.S.C. § 3512(a); see also. 19 U.S.C. § 2504(a) ("No provision of
any trade agreement.., nor the application of any such provision to any person or circumstance,
which is in conflict with any statute of the United States shall be given effect under the laws of
the United States."). Thus, even if the UIGEA is inconsistent with a WTO ruling, this Court
cannot properly give that ruling binding effect. See Corus Staal, 395 F.3d at 1348 ("WTO
29
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 39 of 46
decisions are not binding on the United States, much less this court." (internal quotations
omitted)); see also Tirnken Co. v. United States, 354 F.3d 1334, 1344 (Fed. Cir. 2004) (same).
Counts Four and Five of the Complaint are therefore without merit and should be dismissed for
failure to state a claim.
3. The UIGEA Is a Constitutional Exercise of Congress’ Authority
Under the Commerce Clause and Therefore Does Not Violate the
Tenth Amendment.
Plaintiff’s contention that the UIGEA "violates the Tenth Amendment by
unconstitutionally arrogating to the United States [] express and implied reserved powers to the
individual states to regulate gambling and the financial transfers.., associated therewith" is
unfounded. Compl. ¶ 105. It is well settled that the Tenth Amendment "does not operate as a
limitation upon the powers delegated to the Congress by the Commerce Clause." United States
v. Barrou,, 363 F.2d 62, 65 (3d Cir. 1965); see also United States v. Parker, 108 F.3d 28, 31 (3d
Cir. 1997) ("If Congress acts under one of its enumerated powers - here its power under the
Commerce Clause- there can be no violation of the Tenth Amendment"). That is so even if the
exercise of that authority "is attended by the same incidents which attend the exercise of the
police power of the states." United States v. Darby, 312 U.S. 100, 114 (1941).
The "power of Congress to regulate commerce has been used before to prohibit the use of
interstate facilities to effect an illegal purpose." Gilstrap v. United States, 389 F.2d 6, 8 (5th Cir.
1968); see also United States v. Ceraso, 467 F.2d 653,657-58 (3d Cir. 1972) (agreeing with
other courts that federal regulation of gambling is "within the power granted the Federal
Government under the Commerce Clause"). Thus, courts repeatedly have upheld such regulation
against Tenth Amendment challenges. See, e.g., Gilstrap, 389 F.2d at 8 (upholding 18 U.S.C. §
30
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1952, which prohibits the use of freight, telephone, and telegraph facilities in interstate
commerce with intent to carry on unlawful gambling, against Tenth Amendment challenge);
United States v. Villano, 529 F.2d 1046, 1056 (10th Cir. 1976) (same); United States v. Avarello,
592 F.2d 1339, 1345 (5th Cir. 1979) (upholding 18 U.S.C. § 1995, which prohibits conducting an
illegal gambling business, against a Tenth Amendment challenge). That same result is compelled
here.
The UIGEA is plainly an exercise of Congress’s power under the Commerce Clause. See
152 Cong. Rec. H7905, H8029 (Sept. 29, 2006) (regarding UIGEA as a "new mechanism[] for
enforcing gambling laws on the Internet... because traditional law enforcement mechanisms are
often inadequate for enforcing gambling prohibitions on the Internet, especially where such
gambling crosses State or national borders" (emphasis added)). Moreover, in several of its
sections, the Act disavows any intent or design to encroach upon states’ authority. See 31 U.S.C.
§ 5361 (b) ("No provision of this subchapter shall be construed as altering, limiting, or extending
any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling
within the United States"); 31 U.S.C. § 5362(10)(B) (excluding from definition of"Unlawful
Internet Gambling" intrastate transactions). The Court accordingly should uphold the UIGEA
against Plaintiff’s Tenth Amendment challenge.
4. The UIGEA Does Not Apply Retroactively and Therefore Does Not
Violate the Ex Post Facto Law.
Plaintiff’s contention that the UIGEA is an ex post facto law plainly misapprehends that
prohibition. See Compl. ¶ 96 (alleging that the Act is an ex post facto law because it prohibits
conduct that "courts had previously declared... [wa]s not an illegal act under then existing laws
31
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 41 of 46
of the United States"). "The ex post facto prohibition forbids the Congress and the States to
enact any law which imposes a punishment for an act which was not punishable at the time it was
committed; or imposes additional punishment to that then prescribed." Weaver v. Graham, 450
U.S. 24, 28 (1981). For a criminal law to be ex post facto, two critical elements must be present:
"it must be retrospective, that is, it must apply to events occurring before its enactment, and it
must disadvantage the offender affected by it." Id. at 29; see also Richardson v. Pennsylvania
Bd. of Probation & Parole, 423 F.3d 282, 287-88 (3d Cir. 2005). "With no retroactivity, there
c[an] be no Ex Post Facto Clause violation." Johnson v. United States, 529 U.S. 694, 699
(2000). Nothing in the UIGEA indicates that it applies retroactively, and Plaintiff has alleged no
That absence is fatal to Plaintiff’s ex post facto claim and compels itsfacts to the contrary.
dismissal.
II. PLAINTIFF HAS NOT ESTABLISHED THAT IT WILL SUFFER
IRREPARABLE HARM IN THE ABSENCE OF AN INJUNCTION.
Apparently misapprehending the applicable legal standard, Plaintiff gives short shrift to a
necessary element of preliminary relief- irreparable harm. See P1. Br. at 20. A plaintiff must
demonstrate irreparable harm in order to obtain such relief. See Adams v. Freedom Forge, 204
F.3d 475,484 (3d Cir. 2000); Acierno v. New Castle County, 40 F.3d 645,653 (3d Cir. 1994).
Plaintiff here makes no attempt at such a demonstration. Instead, Plaintiff assumes that
irreparable harm is established by virtue of the assertion of First Amendment violations. See P1.
Br. at 20 ("Such being the case, however, ’It]he loss of First Amendment freedoms for even
minimal periods of time, unquestionably constitutes irreparably injury’"). Although courts have
remarked that even a brief loss of First Amendment freedoms is irreparable harm, that statement
32
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 42 of 46
speaks only to the requisite duration of a deprivation. Nothing in that statement signals an intent
"to do away with the traditional prerequisites for injunctive relief simply because First
Amendment freedoms [a]re implicated." Anderson v. Davila, 125 F.3d 148, 164 (3d Cir. 1997);
see also Hohe v. Casey, 868 F.2d 69, 72-73 (3d Cir. 1989) (observing that "the assertion of First
Amendment rights does not automatically require a finding of irreparable injury"). Thus, even
when such rights are asserted, as here, a plaintiff must demonstrate irreparable harm to obtain
preliminary relief. See Adams, 204 F.3d at 487 ("We have repeatedly insisted that the use of
judicial power to arrange relationships prior to a full determination on the merits is a weighty
matter, and the preliminary injunction device should not be exercised unless the moving party
shows that it specifically and personally risks irreparable harm.").
Plaintiff has utterly failed to do so. Other than purportedly addressing the merits of its
constitutional claims and asserting the truism about the requisite duration of a First Amendment
deprivation, Plaintiff’s motion contains no discussion of the irreparable harm Plaintiff will suffer
in the absence of an injunction. See P1. Br. at 42 (asserting in the Conclusion that "the threatened
injury to First Amendment protected rights outweighs the lack of damage if the UIGEA is not
restrained"). As already discussed, Plaintiff’s claims of constitutional violations are unfounded
and therefore not even a brief loss of First Amendment freedoms has been shown.
In a single sentence, Plaintiff additionally implies that its members will suffer substantial
economic loss from enforcement of the Act. See P1. Br. at 20 ("An act that threatens an ongoing
business with destruction causes that business irreparable injury, whether viewed as an injury not
compensable in monetary terms or as one which cannot be reduced to monetary value with
’sufficient accuracy to make damages an adequate substitute’ for injunctive relief."). However,
33
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 43 of 46
not even significant economic loss constitutes irreparable harm. See Acierno, 40 F.3d at 653.
"Mere injuries, however substantial, in terms of money.., are not enough." Sampson v. Murray,
415 U.S. 61, 90 (1974); Acierno, 40 F.3d at 653 (same); Roman Chariot, LLC v. JMRL Sales &
Serv., Inc., 2006 WL 4483165, at *5 (D.N.J. 2006) (same). Since nothing in Plaintiff’s motion
comes close to establishing the requisite irreparable harm, Plaintiff’s request must be denied.
III. THE BALANCE OF HARMS AND PUBLIC INTEREST DO NOT SUPPORT AN
INJUNCTION.
Since Plaintiff failed to demonstrate either a likelihood of success on the merits or
irreparable injury, this Court need not consider the remaining elements for a preliminary
injunction. See Hoxworth, 903 F.2d at 197 ("To obtain a preliminary injunction, the moving
party must demonstrate both a likelihood of success on the merits and the probability of
irreparable harm if relief is not granted."). Such consideration, however, supports denial of
preliminary relief.
The congressional findings that precipitated the enactment of the UIGEA demonstrate
that its enforcement is clearly in the public interest. See 152 Cong. Rec. H8029 (concluding that
"Internet gambling is a growing cause of debt collection problems for insured depository
institutions and the consumer credit industry"). While the Act does not "have the effect of
changing the legality of any gambling-related activity in the United States," the UIGEA is a "new
mechanism" for enforcing gambling laws already in existence. 152 Cong. Rec. H8026. Thus,
the UIGEA will provide much needed assistance to states and the federal government in their
effort to enforce gambling prohibitions. See 31 U.S.C. § 5361 (a)(4) (concluding that "[n] ew
mechanisms for enforcing gambling laws on the Internet are necessary because traditional law
34
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 44 of 46
enforcement mechanisms are often inadequate for enforcing gambling prohibitions or regulations
on the Internet, especially where such gambling crosses State or national borders"). An
injunction therefore certainly cannot be justified as in the public interest. The balance of harms
compels that this Court deny Plaintiff’s request.
CONCLUSION
For the foregoing reasons, Defendants respectfully request that the Court deny Plaintiff’s
motion for a tempora12¢ restraining order, grant Defendants’ cross-motion, and dismiss this
action.
August 21, 2007 Respectfully submitted,
CHRISTOPHER J. CHRISTIE
United States Attorney
PETER D. KEISLER
Assistant Attorney General
VINCENT M. GARVEY
Deputy Branch Director
/s Jacqueline Coleman Snead
JACQUELINE COLEMAN SNEAD
(D.C. Bar No. 459548)
Trial Attorney
United States Department of Justice
Civil Division, Federal Programs Branch
20 Massachusetts Avenue, N.W., Rm 7214
Washington, DC 20530
Tel: (202) 514-3418
Fax: (202) 616-8470
jacqueline.snead@usdoj.gov
Counsel for Defendants
35
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CERTIFICATE OF SERVICE
I certify that on this 21st day of August 2007, I caused a copy of the foregoing
Defendants’ Opposition to Plaintiff’ s Motion for Temporary Restraining Order and
Memorandum in Support of Defendants’ Cross-Motion to Dismiss to be filed electronically and
that the document is available for viewing and downloading from the ECF system.
/s Jacqueline Coleman Snead
JACQUELINE COLEMAN SNEAD
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 46 of 46

[Uglyowl]

I'm glad I'm not a judge or lawyer... holy cow.

[oldbookguy]

That is a lot to read.

I am struck by two things within the reply:

[ QUOTE ]
~ The Department of Justice publicly has stated that it does not believe that the Interstate
Horseracing Act amended or repealed existing federal criminal statutes. See Internet Gambling
Prohibition Act of 2006: Hearing on H.R. 4777 Before the Subcomm. on Crime, Terrorism, and
Homeland Security of the H. Comm. on the Judiciary, 109th Cong. 10 (2006) (statement of
Bruce G. Ohr, Chief, Organized Crime and Racketeering Section, Criminal Division, United
Case 3:07-cv-02625-MLC-TJB Document 8 Filed 08/21/2007 Page 14 of 46

[/ QUOTE ]

Though prededing is later in the reply it seems this portion alleges that even Horse Racing is illegal still.

Prior to the above we read:

[ QUOTE ]
The Act is in
furtherance of states’ existing gambling prohibitions. Indeed, the UIGEA expressly provides that
nothing in the Act should be construed as "altering, limiting, or extending any Federal or State
law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United
States." 31 U.S.C. § 5361(b).

[/ QUOTE ]

It seems they are arguing state laws prevail (see above, states HAVE regulated HR Wagering under the HR Act)and also limits the UIGEA concerning poker and other Internet Wagering to states that have passed prohibitions.


So, am I reading the convoluted argument correct, they want it both ways?

obg