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8/5/2004
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Suit Charges Search Companies With Aiding Online Gambling

The class-action suit filed in San Francisco names 13 companies, including Yahoo and Google.

A class-action lawsuit filed in San Francisco Superior Court targets 13 Internet search companies, including Google and Yahoo, for advertising and facilitating illegal Internet gambling in California.

The suit, filed Tuesday, alleges that "defendants expressly sell rights to advertise based on such search terms as 'illegal gambling,' 'Internet gambling,' and 'California gambling,'" and that they expressly target such ads at users in specific locations, such as California. The suit seeks to have advertisements for Internet gambling declared illegal, to prevent advertisements for unlicensed gambling in the state, and to recoup related revenue for redistribution to licensed gambling operations, gambling victims, and the state treasury. "The lawsuit is about stopping search engines from being active advertisers of illegal gambling," explains Ira Rothken, an attorney for the plaintiffs--one of whom lost more than $100,000 gambling on the Internet. "We're not saying that a search engine cannot be a passive intermediary [that finds such sites by algorithm]," he says, noting that the search companies named in the suit actively promote illegal gambling with sponsored listings, and in so doing forfeit any immunity provided under the law.

A spokesperson for Yahoo declined to comment on pending litigation. An advertising salesperson at Yahoo, reached by telephone, said the company doesn't accept ads for online gambling or adult content. However, the lawsuit alleges that the company's Overture subsidiary sells online gambling ads that appear when someone searches for gambling-related keywords such as "Internet casino."

Federal and state agencies have made considerable efforts to rein in Internet gambling, an industry that earned an estimated $5 billion in revenue last year. One consequence is that many financial institutions now decline to process online gambling payments. But it's uncertain whether such policing is consistent with international trade obligations.

Earlier this year, the island nations of Antigua and Barbuda successfully challenged the United States' position on Internet gambling before the World Trade Organization, which found that the U.S. ban violated its trade commitments. The United States is negotiating a possible solution.

Adam Thierer, director of telecom policy at the Cato Institute, a libertarian research foundation, says he finds the lawsuit troubling. "It makes one wonder whether California or other states will attempt to regulate the Internet based on content," he says. "How far and wide can California cast this sort of legal net?"

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