RICHMOND, Va. — A federal appeals court yesterday reinstated West Virginia's video-lottery advertising restrictions, ruling that the state has a legitimate interest in raising money without contributing to compulsive gambling.
A three-judge panel of the Richmond, Va.-based 4th U.S. Circuit Court of Appeals unanimously ruled in WV Association of Club Owners v. Musgrave that a federal judge erred in declaring that the restrictions infringed on lottery parlors' free-speech rights.
U.S. District Judge Joseph R. Goodwin had issued a preliminary injunction against enforcement of the regulations, which ban the use of words such as "casino," ''chance," ''kitty," ''luck," ''dollar" and "dough" in the names and advertising of video-lottery parlors.
Other prohibited wording includes known casino destinations, such as Las Vegas or Atlantic City, or names of casinos, including the MGM Grand or the Tropicana.
"The state has a long-standing and substantial interest in regulating the implementation and promotion of its own lottery," 4th Circuit Judge J. Harvie Wilkinson III wrote. "It has done so by attempting to raise revenues necessary for education and infrastructure without magnifying the social maladies often associated with gambling addictions."
He said the restrictions reflect "a balanced approach" that would be undermined by invalidation of West Virginia's lottery restrictions.
"To be sure, a broad-brush invalidation of the advertising rules might stimulate more enticing signage and hence raise more revenue, but it would literally destroy the balance at the heart of the state-created program," Wilkinson wrote.
The American Civil Liberties Union sued the West Virginia Lottery Commission on behalf of the state Association of Club Owners and Fraternal Services, which includes businesses and fraternal organizations licensed by the state to operate video-lottery machines.
John Melton, the Lottery Commission's managing general partner, said the agency appealed Goodwin's decision because "it is our duty to show that it was a properly passed law. It didn't really violate the First Amendment."
Jesse Bane, a spokesman for the club owners' association, called the appeals court's decision disappointing and said he would consult with members to determine what to do next. The association could ask the full appeals court to rehear the case or appeal the ruling to the U.S. Supreme Court.
Meanwhile, he said he hoped the Lottery Commission would be willing to work with video-lottery retailers on advertising.
Melton said the commission might have some "wiggle room" by redesigning the 12-by-12-inch sign that state regulations allow video parlors to post. Those signs simply state: "West Virginia Lottery products available here."
Anthony "Herk" Sparachane, president the West Virginia Amusement & Limited Video Lottery Association, said he agreed with the appeals court's ruling — and with the state's desire to impose reasonable restrictions.
"It only takes a few to ruin it, to start putting the word 'casino' and stuff like that up. That's something we never wanted," said Sparachane, who represents most of the 37 operators that lease machines to retailers.
The 2001 Limited Video Lottery Act allows for 9,000 video-poker machines in bars, private clubs and other adult settings across West Virginia. Former Gov. Bob Wise pushed the legislation as a way to eradicate similar "gray machines" that had operated for years without regulation or taxation.
But as the licenses were sold, the new clubs began changing the landscape, with many declaring themselves "casinos" on flashy outdoor signs that included billboards along highways. Legislators approved the sign and ad restrictions in 2004.
Sparachane said the bright lights and glitzy oversized signs were not needed for an industry that's now eight years old. Operators also want to show respect for the vocal contingent of gambling opponents in West Virginia, he said.
"You've gotta respect the other side," Sparachane said. "We don't want to rub it in their faces."
Wilkinson was joined in the opinion by 4th Circuit Judge Allyson Duncan and visiting U.S. District Judge Richard D. Bennett of Maryland.