(CN) – The 4th Circuit exercised caution in reversing an injunction that prevents West Virginia from restricting the advertisement of video lottery machines, saying the sweeping ban could “eviscerate” money raised for education and infrastructure.
Video lottery machines were first legalized by the Racetrack Video Lottery Act of 1994 to inject vitality into the racing industry and to raise revenue for the state.
Around the same time, video gaming machines began springing up in bars, taverns and other private establishments outside the racetrack. Most were operating illegally until 2001, when the state Legislature passed the Limited Video Lottery Act.
The Act raises revenue for the state by allocating 30 to 50 percent of the gross profits to the Lottery Commission for distribution to municipalities and the State Excess Lottery Revenue Fund. In 2004, West Virginia received nearly $242 million from the limited video lottery.
But the Act also regulates the machines, requiring retailers to post gambling-addiction warnings, limiting the type of advertising they can use and placing a 21-year age requirement on players.
The West Virginia Association of Club Owners and Fraternal Services sued on behalf of its members, claiming the advertising restrictions violate their right to free speech under the First and 14th Amendments.
The district court granted a preliminary injunction, ruling that the regulation of private speech was likely unconstitutional.
The federal appeals court in Virginia took a step back, quoting the Supreme Court’s admonition that such challenges “often rest on speculation” and “run contrary to the fundamental principle of judicial restraint.”
“The state has a longstanding and substantial interest in regulating the implementation and promotion of its own lottery,” Judge Wilkinson 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.
“It is this interest in a balanced approach to lottery promotion that would be eviscerated by the wholesale invalidation of West Virginia’s advertising restrictions.”
The court reversed the injunction, allowing the state to continue regulating video lottery machines.