PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
WV ASSOCIATION OF CLUB
OWNERS AND FRATERNAL SERVICES,
INCORPORATED,
Plaintiff-Appellee,
v.
JOHN C. MUSGRAVE, in his official
capacity as Director of the State
Lottery,
No. 07-2032
Defendant-Appellant,
and
WEST VIRGINIA LOTTERY
COMMISSION,
Defendant.
Appeal from the United States District Court
for the Southern District of West Virginia, at Charleston.
Joseph R. Goodwin, Chief District Judge.
(2:07-cv-00122)
Argued: October 29, 2008
Decided: January 13, 2009
Before WILKINSON and DUNCAN, Circuit Judges,
and Richard D. BENNETT, United States District Judge for
the District of Maryland, sitting by designation.
2 WV ASSOCIATION v. MUSGRAVE
Reversed by published opinion. Judge Wilkinson wrote the
opinion, in which Judge Duncan and Judge Bennett joined.
COUNSEL
ARGUED: Katherine Ann Schultz, OFFICE OF THE
ATTORNEY GENERAL OF WEST VIRGINIA, Charleston,
West Virginia, for Appellant. Terri S. Baur, AMERICAN
CIVIL LIBERTIES UNION OF WEST VIRGINIA, Charles-
ton, West Virginia, for Appellee. ON BRIEF: Darrell V.
McGraw, Jr., Attorney General, Barbara H. Allen, Managing
Deputy Attorney General, OFFICE OF THE ATTORNEY
GENERAL OF WEST VIRGINIA, Charleston, West Vir-
ginia, for Appellant. Roger D. Forman, FORMAN &
HUBER, L.C., Charleston, West Virginia, for Appellee.
OPINION
WILKINSON, Circuit Judge:
Plaintiff, the West Virginia Association of Club Owners
and Fraternal Services, Inc., brought this suit on behalf of its
members which include certain clubs, restaurants, conve-
nience stores, and fraternal organizations with alcohol
licenses who are also state-licensed limited video lottery
retailers. Plaintiff sought invalidation of West Virginia’s
restrictions on limited video lottery advertising as a violation
of the First and Fourteenth Amendments of the United States
Constitution. The district court granted plaintiff’s motion for
a preliminary injunction and enjoined enforcement of the
advertising restrictions in all of their applications.
On the circumstances presented here, we must reverse. The
Supreme Court has cautioned that we not casually invalidate
state legislation on facial grounds, see Washington State
WV ASSOCIATION v. MUSGRAVE 3
Grange v. Washington State Republican Party, ___ U.S. ___,
128 S.Ct. 1184 (2008), for the simple reason that such chal-
lenges "often rest on speculation" and "run contrary to the
fundamental principle of judicial restraint." Id. at 1191. In this
particular context, we think that caution is especially advis-
able. The state has a longstanding and substantial interest in
regulating the implementation and promotion of its own lot-
tery. 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.
I.
A.
West Virginia has a long history of regulating lotteries
within its borders. From the time the state first entered the
Union in 1863, up until 1984, the West Virginia Constitution
banned all lotteries. In 1984, the Constitution was amended to
create a narrow exception to the ban. As amended, Article VI,
§ 36 of the West Virginia Constitution provides:
"The legislature shall have no power to authorize lot-
teries . . . for any purpose, and shall pass laws to pro-
hibit the sale of lottery . . . tickets in this State;
except that the legislature may authorize lotteries
which are regulated, controlled, owned and operated
by the State of West Virginia in the manner provided
by general law . . ."
W. Va. Const. Art. VI, § 36. Soon after the amendment was
ratified, the West Virginia legislature passed the State Lottery
Act, W. Va. Code § 29-22-1 et seq., which created a Lottery
Commission to conduct a state lottery to raise revenue for the
state. Over time, the lottery expanded, but West Virginia
4 WV ASSOCIATION v. MUSGRAVE
courts ensured that all lotteries within the state were autho-
rized, "regulated, controlled, owned, and operated" by the
state in accordance with the West Virginia Constitution. See
Club Ass’n of W. Va., Inc. v. Wise (Club Ass’n I), 156 F.
Supp. 2d 599, 604-09 (S.D.W.Va. 2001).
This case concerns West Virginia’s limited video lottery.
Video lottery machines were first allowed by the Lottery
Commission at a racetrack that entered into a contract with
the Commission to operate privately owned video lottery
machines. The West Virginia Supreme Court of Appeals
invalidated this video lottery as violating W. Va. Const. Art.
VI, § 36 because it was not specifically authorized by the
state. See W. Va. ex rel. Mountaineer Park, Inc. v. Polan, 438
S.E.2d 308, 318 (W. Va. 1993). In response, the state legisla-
ture passed the Racetrack Video Lottery Act (the "RVLA"),
W. Va. Code §§ 29-22A-1 et seq., in 1994 to legalize video
lotteries at racetracks in an effort to save the ailing racing
industry and the jobs and tourism revenues that it provided for
the state. See W. Va. Code § 29-22A-2(e).
At the same time, thousands of video gaming machines
were being operated illegally in private establishments other
than racetracks. These "gray" machines went largely unregu-
lated because they were only prima facie illegal and conse-
quently it was difficult to enforce the restrictions against
them. According to a government commissioned report, the
number of illegal "gray" machines reached 13,524 by 2001.
To combat the problem of "gray" machines and to capitalize
on video lottery revenues at a time of budgetary pressure,
Governor Robert Wise proposed legalizing, restricting, and
regulating video gaming machines in his 2001 State of the
State Address. He specifically wanted to use video lottery rev-
enues to fund education and infrastructure in West Virginia.
Following the Governor’s suggestion, and after extensive
debate, the legislature passed the Limited Video Lottery Act
(the "LVLA"), W. Va. Code §§ 29-22B-101 et seq., in April
WV ASSOCIATION v. MUSGRAVE 5
2001 during a special session. See Club Ass’n I, 156 F. Supp.
2d at 606-08 (detailing history).
The LVLA raises revenue for the state. Based on a sliding
scale determined by daily revenues, the LVLA allocates thirty
to fifty percent of gross profits to the Lottery Commission for
distribution to municipalities and the State Excess Lottery
Revenue Fund. See W. Va. Code § 29-22B-1408. The LVLA
also distributes two percent of gross terminal income to the
Lottery Commission for its costs. See W. Va. Code § 29-22B-
1408(a)(1). A portion of this two percent goes directly to the
compulsive gambling treatment fund created by the state. Id.
In fiscal year 2004, the state received almost $242 million in
revenue from the limited video lottery. 512 F. Supp. 2d at
435.
The LVLA legalizes and regulates the video lottery by pro-
viding a licensing scheme for video lottery machines that is
administered by the Lottery Commission. See W. Va. Code
§ 29-22B-402. A brief overview of the LVLA demonstrates
that it closely regulates the video lottery. First, it allows the
Lottery Commission to distribute non-transferable licenses for
only 9,000 terminals for use in restricted access adult-only
facilities, W. Va. Code § 29-22B-1101(a), id. at § 29-22B-
203(2); it allows individual retailers to have only five video
lottery terminals on their premises, id. at § 29-22B-1101(c);
and it prohibits two retailers from locating in the same build-
ing or within 150 feet of each other, id. at § 29-22B-1202.1
The LVLA also requires retailers to provide phone numbers
for state-approved providers of gambling treatment and sup-
port services, and to post a sign that reads: "CAUTION: Gam-
bling and playing this machine can be hazardous to your
health, your finances, and your future." Id. at § 29-22B-1112.
Additionally, the Act prohibits retailers from providing access
1
There are minor exceptions to these provisions for certain non-profit,
fraternal, and veteran’s organizations. See § 29-22B-1101(c); id. at § 29-
22B-1202(b).
6 WV ASSOCIATION v. MUSGRAVE
to ATMs and from accepting credit cards or debit cards as
payment for playing the video lottery machine. Id. at § 29-
22B-702(10). Finally, the LVLA prohibits people under
twenty-one years old from playing the video lottery machines
and subjects retailers to civil penalties if they allow underage
participation. Id. at § 29-22B-1602(a) to (b).
The LVLA also attempts to curb the use of illegal "gray"
video lottery machines by making restrictions on video gam-
bling machines easier to enforce than they previously were.
The LVLA makes unlicensed video gambling machines per se
illegal, subject to seizure, and subject to criminal penalties.
See W. Va. Code § 29-22B-1801; id. at § 29-22B-1703 to
-1705.
In addition, and similar to the RVLA, the LVLA provides
specific legislative findings that the limited video lottery is a
"lottery" within the meaning of W. Va. Const. Art. VI, § 36
and that the state has constitutional authority to establish a lot-
tery that is "regulated, controlled, owned and operated" by the
state. See W. Va. Code § 29-22B-201. The legislative findings
declare that the state can "control, own and operate a video
lottery by possessing a proprietary interest in the main logic
boards . . . memory chips . . . and software . . . necessary for
the video lottery system to be operated."2 Id. at § 29-22B-
2
The legislative findings further provide that (2) the state "may possess
a proprietary interest in video lottery game software, for purposes of this
article, through outright ownership or through an exclusive product license
agreement with a manufacturer whereby (A) the manufacturer retains
copyrighted ownership of the software, (B) the product license granted to
the state is nontransferable, and (C) the agreement authorizes the state to
run the software program, solely for its own use, on the state’s central
equipment unit and electronic video terminals networked to the central
equipment unit;" and (3) the state "can control and regulate a video lottery
if the state (A) restricts licensure to a limited number of video lottery ter-
minals at qualified locations, (B) extends strict and exclusive state regula-
tion to all persons, locations, practices and associations related to the
operation of licensed limited video lottery facilities, and (C) provides
comprehensive law-enforcement supervision of limited video lottery activ-
ities." W. Va. Code § 29-22B-202.
WV ASSOCIATION v. MUSGRAVE 7
202(1). Based on these legislative findings, the West Virginia
Supreme Court of Appeals held that both the RVLA and
LVLA satisfy the state ownership and control requirements of
W. Va. Const. Art. VI, § 36. See West Virginia ex rel. Cities
of Charleston and Huntington v. West Virginia Economic
Development Authority, 588 S.E.2d 655, 670 (W. Va. 2003).
The RVLA and LVLA differ on the important matter at
issue in this case: the LVLA regulates video lottery advertis-
ing more strictly than the RVLA does.3 The LVLA prohibits
the Lottery Commission and limited video lottery retailers
from conducting "video lottery advertising or promotional
activities." See W. Va. Code § 29-22B-702(13); id. at § 29-
22B-404; see also W. Va. Code R. § 179-5-33.2; id. at § 179-
5-33.1 (prohibiting licensed operators from advertising).
Advertising is defined as "a media advertisement, an outdoor
sign, or a sign inside the licensee’s premises that may be seen
from the outside of the premises, that conveys to the average
reader or hearer that limited video lottery gaming is available
at the retail establishment or from the licensed operator." W.
Va. Code R. § 179-5-2.1. The LVLA further prohibits the use
of "the words ‘video lottery’ in the name of the approved
location, or in any directions or advertising visible from out-
side the retailer’s establishment." See W. Va. Code § 29-22B-
702(14); see also W. Va. Code R. § 179-5-33.3. Rules pro-
mulgated under the LVLA also prohibit limited video lottery
retailers from using words "commonly associated with gam-
bling" in their names, W. Va. Code R. § 179-5-33.4, and from
using "gambling symbols . . . on any sign or in any directions
or advertising visible from outside the licensed retailer’s
establishment," id. at § 179-5-33.5. The rules do permit retail-
ers to display a 12 inch by 12 inch uniform sign, distributed
by the Lottery Commission, which states "West Virginia Lot-
3
The RVLA provides that a racetrack can advertise its video lottery if
it receives prior written approval of the director of the Lottery Commis-
sion. See W. Va. Code § 29-22A-9(f)(12).
8 WV ASSOCIATION v. MUSGRAVE
tery Products available here." See W. Va. Code R. § 179-5-
33.2.
B.
The West Virginia Association of Club Owners and Frater-
nal Services, Inc. filed this suit on behalf of its members on
February 27, 2007, to challenge the limited video lottery
advertising restrictions. Plaintiff filed a complaint seeking
declaratory and injunctive relief, and a motion for a prelimi-
nary injunction against the West Virginia State Lottery Com-
mission and John C. Musgrave in his official capacity as
Director of the State Lottery. Plaintiff claims that the restric-
tions on advertising contained in the LVLA and the Limited
Video Lottery Rules violate plaintiff’s right to free speech
under the First and Fourteenth Amendments of the United
States Constitution and under Article III, § 7 of the West Vir-
ginia Constitution.4 The Lottery Commission was subse-
quently dismissed from the suit.
The district court granted plaintiff’s motion for a prelimi-
nary injunction. The court held that plaintiff had established
a likelihood of success on the merits of plaintiff’s federal con-
stitutional claims. The court reasoned that it was likely that
the speech being regulated was private speech by limited
video lottery retailers and that the advertising regulations
impermissibly restricted the retailers’ right to engage in com-
mercial speech under Central Hudson Gas & Electric Corp.
v. Public Service Commission of New York, 447 U.S. 557
(1980). The court held that the other preliminary injunction
requirements were met and therefore enjoined the defendant
from enforcing any of its advertising restrictions.5 See West
4
The district court did not rule on the West Virginia constitutional
claims.
5
The district court opinion only specifically lists "the advertising ban
contained in West Virginia Code § 29-22B-702(13) and (14) and West
Virginia Code of State Rules § 179-5-33.1 to 4" as enjoined. 512 F. Supp.
WV ASSOCIATION v. MUSGRAVE 9
Virginia Ass’n of Club Owners and Fraternal Services, Inc.
v. Musgrave, 512 F. Supp. 2d 424 (S.D.W.Va. 2007). Defen-
dant appeals. A panel of this court granted defendant’s motion
for a stay pending this appeal. See Order, November 26, 2007.
We review the district court’s grant of a preliminary injunc-
tion for abuse of discretion. Accordingly, we review factual
findings for clear error and legal conclusions de novo. See
East Tennessee Natural Gas Co. v. Sage, 361 F.3d 808, 828
(4th Cir. 2004). In order to receive a preliminary injunction,
a plaintiff "must establish that he is likely to succeed on the
merits, that he is likely to suffer irreparable harm in the
absence of preliminary relief, that the balance of equities tips
in his favor, and that an injunction is in the public interest."
Winter v. Natural Res. Defense Council, Inc., ___ U.S. ___,
slip op. at 10 (2008). As the district court noted, in the context
of an alleged violation of First Amendment rights, a plaintiff’s
claimed irreparable harm is "inseparably linked" to the likeli-
hood of success on the merits of plaintiff’s First Amendment
claim. 512 F. Supp. 2d at 429. See also Newsom v. Albemarle
County School Bd., 354 F.3d 249, 254-55 (4th Cir. 2003).
Therefore, we focus our review on the merits of plaintiff’s
First Amendment claim.
II.
West Virginia contends that the speech being regulated—
limited video lottery advertising—is government speech and
2d at 448. However, plaintiff also included W. Va. Code R. § 179-5-33.5
in its complaint and the district court noted that "when I discuss the State’s
limitations on advertising, I am referring to the statutory prohibitions on
advertising in W. Va. Code § 29-22B-702 and the limitations on the
actions of LVL retailers contained in W. Va. Code R. § 179-5-33.1 to -
33.5," id. at 430 n.3, and did not distinguish § 179-5-33.5 in its application
of Central Hudson to the advertising restrictions. We therefore take the
district court to also enjoin W. Va. Code R. § 179-5-33.5, the prohibition
on the use of gambling symbols.
10 WV ASSOCIATION v. MUSGRAVE
therefore can be restricted by the government free from First
Amendment scrutiny. Plaintiff contends that the speech at
issue is private speech by the limited video lottery retailers
and therefore can only be restricted in accordance with the
First Amendment. The speech at issue does not fit neatly into
either category: it is hybrid speech. As this court recognized
in Planned Parenthood of South Carolina, Inc. v. Rose, 361
F.3d 786 (4th Cir. 2004), some speech is "mixed" speech
because it has aspects of both private speech and government
speech. Id. at 794. To say it is all one or the other is to over-
simplify.
Some aspects of the limited video lottery advertising sug-
gest that it is government speech. First, the government is
conveying a message, which is a prerequisite to a finding of
government speech. By requiring that the lottery only be
advertised through uniform signs and by prohibiting all other
advertisements, the state is conveying a message supporting
measured use of the video lottery. The district court erred
when it rejected this as a message because, in its view, any
message was "mixed at best." 512 F. Supp. 2d at 436. Here,
however, the government is not conveying a mixed or incon-
sistent message—it is conveying a message of balance.
For this reason, a similar argument was rejected in Johanns
v. Livestock Marketing Association, 544 U.S. 550 (2005),
where the Court stated: "[t]he beef promotions are perfectly
compatible with the [government dietary] guidelines’ message
of moderate consumption — the ads do not insist that beef is
also What’s for Breakfast, Lunch, and Midnight Snack." Id.
at 561 n.5. Likewise, here the uniform advertisements convey
a message of "moderate consumption" rather than an induce-
ment to overindulgence that might result if advertisers were
given free rein. We also reject plaintiff’s argument that the
state was not conveying a message because defendant con-
ceded in a memorandum to the district court that it "has not
taken any action to promote an anti-gambling position." See
Plaintiff’s Brief at 10-11. The state’s message is not an anti-
WV ASSOCIATION v. MUSGRAVE 11
gambling message—it is a message of permitting gambling
within bounds.
The state is politically accountable for this message
because it conducts the video lottery program. The fact that
the state is conveying a message for which it is politically
accountable suggests that the speech at issue is government
speech. See, e.g., Board of Regents of the University of Wis-
consin System v. Southworth, 529 U.S. 217, 235 (2000)
("When the government speaks, for instance to promote its
own policies or to advance a particular idea, it is, in the end,
accountable to the electorate and the political process for its
advocacy."). This rationale can apply even when the govern-
ment "use[s] private speakers to transmit specific information
pertaining to its own program." See Rosenberger v. Rector
and Visitors of Univ. of Va., 515 U.S. 819, 833 (1995).
However, the fact that the government is conveying a mes-
sage does not automatically qualify that message as govern-
ment speech. It is also relevant whether the government is
conveying its message by restricting its own speech or by
restricting private speech. On the one hand, the speech being
restricted here is government speech because it falls within
the scope of the video lottery program. That program is one
in which the state has a significant revenue interest, W. Va.
Code at § 29-22B-1408, maintains the central equipment, id.
at § 29-22B-305, has a proprietary interest in the software, id.
at § 29-22B-202, and has been found by the state’s highest
court to satisfy the West Virginia constitutional requirements
of state ownership and control. See West Virginia Economic
Development Authority, 588 S.E.2d at 670. Therefore, in one
sense, all speech by retailers that advertises the video lottery
is within the scope of the video lottery program and the
owner-licensee relationship because it relates directly to the
use of the video lottery. See Garcetti v. Ceballos, 547 U.S.
410, 421-23 (2006) (holding that speech made by government
employee pursuant to official duties is government speech);
Rust v. Sullivan, 500 U.S. 173, 194-200 (1991) (upholding
12 WV ASSOCIATION v. MUSGRAVE
restrictions on speech made within limits of government pro-
gram).
The speech being restricted also has attributes of private
speech. It is privately funded, which distinguishes it from the
publicly funded speech at issue in Rust and Garcetti.6 More-
over, the retailers are the literal speakers — they would
design the advertisements, they would display the advertise-
ments, and they own the retail outlets as well as the state-
licensed video gaming machines. Prior government speech
cases have identified these factors as supporting a finding of
private speech. See Sons of Confederate Veterans, Inc. v.
Commissioner of the Virginia Department of Motor Vehicles,
288 F.3d 610, 618 (4th Cir. 2002) ("the identity of the ‘literal
speaker’" is one of four factors to determine the government
or private nature of speech); Rose, 361 F.3d at 792-93 (same).
These private speech attributes suggest that the government is
not only affirmatively speaking, or even just restricting its
own speech, but instead is trying to convey its message
through private speakers that it did not fund or provide with
a means of communication. For these reasons, we cannot des-
ignate the speech at issue as pure government speech.
In sum, the speech at issue in this case shares some aspects
of government speech and some aspects of private speech. For
that reason, neat categorizations cannot alone resolve the
questions and the parties are wrong to suggest that they can.
But regardless of where the speech may fall on the govern-
ment/private speech spectrum, a challenge brought to enjoin
large swaths of a comprehensive regulatory scheme is some-
thing a court should consider with caution—"[f]acial invalida-
tion is, manifestly, strong medicine," and such challenges are
6
This case also differs from Summum v. Pleasant Grove City, 483 F.3d
1044 (10th Cir. 2007), because the tension between the free speech clause
and the establishment clause of the First Amendment is simply absent
here.
WV ASSOCIATION v. MUSGRAVE 13
disfavored. See National Endowment for the Arts v. Finley,
524 U.S. 569, 580 (1998) (internal quotations omitted).7
III.
Plaintiff asks the court to declare the advertising restric-
tions "unconstitutional, illegal, and void" under Central Hud-
son and seeks to enjoin enforcement of each of the statutes
and regulations in all of their potential applications against
plaintiff’s members. See Plaintiff’s Complaint at 5. Plaintiff
asks too much. While one can always quibble over terminol-
ogy, most of the disadvantages of facial challenges are present
here. Plaintiff did not bring this challenge in the context of a
specific enforcement action and, more critically, its meat-axe
approach has deprived the court of the contextual underpin-
ning that normally informs judicial consideration of statutory
and regulatory applications.
Instead, plaintiff seeks an unrestricted right to advertise.
Plaintiff therefore asks us to evaluate claims based on specu-
lation and to "formulate a rule of constitutional law broader
than [might be] required by the precise facts to which it is to
be applied." Washington State Grange v. Washington State
Republican Party, ___ U.S. ___, 128 S.Ct. 1184, 1191 (2008)
(quoting Ashwander v. TVA, 297 U.S. 288, 347 (1936)).
Despite plaintiff’s claim that it seeks a limited right to engage
in truthful advertising, see Plaintiff’s Brief at 1, plaintiff
asked the district court to "enjoin[ ] the Director from enforc-
ing the state’s ban on advertising and promotions against
plaintiff’s members," without restriction. See Plaintiff’s Com-
plaint at 5. And the district court granted a blanket injunction
7
Our analysis would have been better served if West Virginia, instead
of relying solely on its argument regarding government speech, had
appealed the district court’s ruling that West Virginia’s restrictions on
advertising did not pass the intermediate scrutiny test articulated in Cen-
tral Hudson. We are, however, compelled to discuss the Central Hudson
standard because the hybrid nature of the speech presented necessarily
calls it into play.
14 WV ASSOCIATION v. MUSGRAVE
preventing defendant from enforcing any of the advertising
prohibitions. See 512 F. Supp. 2d at 448. Plaintiff was thereby
permitted to take a whack at the state’s comprehensive regula-
tory scheme and disembody it in one fell swoop. But the
Supreme Court recently reminded in Washington State
Grange, that "facial challenges threaten to short circuit the
democratic process by preventing laws embodying the will of
the people from being implemented in a manner consistent
with the Constitution. We must keep in mind that ‘[a] ruling
of unconstitutionality frustrates the intent of the elected repre-
sentatives of the people.’" 128 S.Ct. at 1191 (quoting Ayotte
v. Planned Parenthood of Northern New Eng., 546 U.S. 320,
329 (2006)).
We thus think the course of prudence lies in avoiding
wholesale interference with a program at the core of state
expertise and interest. Whether a particular regulation or
application is in some sense infirm is not something we need
to ask. This is a question for the future. For as the Court said,
"[a]s-applied challenges are the basic building blocks of con-
stitutional adjudication," see Gonzales v. Carhart, 127 S.Ct.
1610, 1639 (2007) (quoting Fallon, As-Applied and Facial
Challenges and Third-Party Standing, 113 Harv. L. Rev.
1321, 1328 (2000)), and "[a]lthough passing on the validity of
a law wholesale may be efficient in the abstract, any gain is
often offset by losing the lessons taught by the particular," see
Sabri v. United States, 541 U.S. 600, 608-09 (2004). For these
reasons, we hesitate to throw out rules and statutory prohibi-
tions that are carefully threaded throughout a comprehensive
state regulatory scheme.
This general perspective — recognizing the inadvisability
of dispatching regulatory regimes wholesale — makes appli-
cation of the Supreme Court’s analysis in Central Hudson
Gas & Electric Corp. v. Public Service Commission of New
York, 447 U.S. 557 (1980), more straightforward. Our analy-
sis is limited to the narrow category of cases where the chal-
lenged regulations only restrict promotion of a government-
WV ASSOCIATION v. MUSGRAVE 15
created product. The speech at issue lies at the intersection of
government speech, which is unprotected by the First Amend-
ment, and private commercial speech, which is deserving of
a real but still "lesser protection" under the First Amendment.
See Johanns, 544 U.S. at 553; Central Hudson, 447 U.S. at
563. The regulations do not inhibit the ability of people to
engage in political speech about government programs—
everyone is still free to debate the merits and demerits of the
lottery to a fare-thee-well. The regulations also do not prevent
private entities from advertising purely private products; the
context therefore differs from the Central Hudson line of
cases. In this case, the state’s interest is higher because the
state has an ownership interest, not just a regulatory interest,
in the video lottery. We continue to use Central Hudson as a
guide, but we note that in this narrow circumstance the gov-
ernment speech aspects of the commercial speech at issue
provide additional weight in favor of upholding the state’s
regulations that is simply not present in other commercial
speech cases.
We recognize of course the importance of commercial
speech—it "not only serves the economic interest of the
speaker, but also assists consumers and furthers the societal
interest in the fullest possible dissemination of information."
Central Hudson, 447 U.S. at 561-62. Given the important
informational value of commercial speech, the Court has
articulated a four-part intermediate scrutiny test to determine
the constitutionality of restrictions on commercial speech: (1)
to receive any First Amendment protection, commercial
speech "must concern lawful activity and not be misleading;"
(2) the government must assert a "substantial" government
interest to justify its regulation; (3) the regulation must "di-
rectly advance[ ] the governmental interest asserted;" and (4)
the regulation must not be "more extensive than is necessary
to serve that interest." Id. at 566. The Court later explained,
"[t]he four parts of the Central Hudson test are not entirely
discrete. All are important and, to a certain extent, interre-
lated: Each raises a relevant question that may not be disposi-
16 WV ASSOCIATION v. MUSGRAVE
tive to the First Amendment inquiry, but the answer to which
may inform a judgment concerning the other three." Greater
New Orleans Broadcasting Ass’n, Inc. v. United States, 527
U.S. 173, 183-84 (1999).
A.
First, the speech at issue in this case — limited video lot-
tery advertising — concerns a lawful activity and we shall
assume that it is not misleading. The speech relates to the
video lottery which was legalized by the LVLA in 2001. See
W. Va. Code §§ 29-22B-101 et seq. We assume that the
speech is not misleading because, as the district court found,
the speech is not inherently misleading, defendant has not
provided evidence that the speech is actually misleading, and
there is no evidence that the advertising restrictions were
enacted to prevent the dissemination of misleading informa-
tion. 512 F. Supp. 2d at 440-41. However, the fact that we are
required to make this assumption is a drawback to facial
invalidation. We have no idea whether the advertisements will
be misleading. Plaintiff asks us to rely on speculation about
the informational value of potential advertisements to enjoin
enforcement of the restrictions against all advertisements. To
rely on such speculation would not be prudent and so we
again proceed with caution.
B.
Second, the government has a substantial interest in con-
ducting a lottery program that raises revenue for the state but
remains moderate in nature and balanced in its essence. The
state’s asserted interest is to advance the purposes of the
LVLA. As the district court noted, "[t]he avowed purpose of
[the LVLA] was to establish a single state owned and regu-
lated video lottery thus allowing the State to collect revenue
therefrom, control the operators of the machines, and stem the
proliferation of gambling in the State." 512 F. Supp. 2d at 427
(quoting Club Ass’n v. Wise, 293 F.3d 723, 724 (4th Cir.
WV ASSOCIATION v. MUSGRAVE 17
2002)); see also West Virginia Economic Development
Authority, 588 S.E.2d at 667.
The history of the LVLA supports this purpose. In 2001,
Governor Wise initially proposed legalizing the video lottery
in order to "reduce, restrict, and regulate" the over 13,000 ille-
gal "gray" machines available in private establishments and to
generate revenue to finance education and infrastructure proj-
ects in West Virginia. See Club Ass’n I, 156 F. Supp. 2d at
607 (quoting Governor Wise). By legalizing a limited video
lottery, the state sought to bring video gambling out into the
open so that it could better enforce regulations that prevent
the social ills associated with gambling while not relinquish-
ing its revenue-generating benefits.
The district court erred in considering the state interests as
distinct purposes when in fact they are an interrelated whole.
512 F. Supp. 2d at 442. When considered in its entirety, the
LVLA has the perfectly coherent goal of creating a lottery
that raises revenue without preying on the vulnerabilities of
the impecunious and those prone to gambling addictions.
The state’s interest in conducting the lottery also falls
squarely within the state’s historic interest in regulating gam-
bling pursuant to the state police power. It is well recognized
that regulating gambling is at the core of the state’s residual
powers as a sovereign in our constitutional scheme. In the
commercial speech context specifically, the Court has consis-
tently recognized that governments have a substantial interest
in reducing the negative effects of gambling. See Greater New
Orleans Broadcasting, 527 U.S. at 185 ("reducing the social
costs associated with ‘gambling’ or ‘casino gambling’" is a
substantial interest); Posadas de Puerto Rico Associates v.
Tourism Co. of P.R., 478 U.S. 328, 341 (1986) (reducing
demand for casino gambling in order to prevent harmful
effects on the health, safety, and welfare of citizens is a sub-
stantial interest).
18 WV ASSOCIATION v. MUSGRAVE
It matters, therefore, that West Virginia has decided to per-
mit only lotteries that are "regulated, controlled, owned and
operated by the State of West Virginia in the manner provided
by general law." W. Va. Const. Art. VI, § 36; see also West
Virginia Economic Development Authority, 588 S.E.2d at
670. The state constitutional mandate reflects the state’s con-
clusion that a purely private lottery driven by profit would not
be beneficial, but a state-run lottery that balances the positive
and negative effects of gambling would be. The LVLA thus
aims to raise revenue, but not at all costs. Instead, West Vir-
ginia seeks quite legitimately to have the best of both worlds
by limiting the scope of the lottery through a licensing scheme
that includes the various advertising regulations at issue here.
It is this balance that plaintiff seeks to upset by eliminating
a crucial part of the program. To be sure, a broad-brush inval-
idation 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.
The consequences of facial invalidation of West Virginia’s
advertising restrictions would thus be staggering. Other states
have lotteries similar to West Virginia’s—they too seek to
raise revenue, but not to an extent that causes gambling to
proliferate in a manner that exacerbates serious social prob-
lems.
C.
Third, the advertising restrictions must "directly and mate-
rially advance[ ] the asserted governmental interest." Greater
New Orleans Broadcasting, 527 U.S. at 188. "‘This burden is
not satisfied by mere speculation or conjecture; rather, a gov-
ernmental body seeking to sustain a restriction on commercial
speech must demonstrate that the harms it recites are real and
that its restriction will in fact alleviate them to a material
degree.’" Id. (quoting Edenfield v. Fane, 507 U.S. 761, 770-
71 (1993)). The Court later explained: "We do not, however,
require that ‘empirical data come . . . accompanied by a sur-
WV ASSOCIATION v. MUSGRAVE 19
feit of background information . . . . [W]e have permitted liti-
gants to justify speech restrictions by reference to studies and
anecdotes pertaining to different locales altogether, or even,
in a case applying strict scrutiny, to justify restrictions based
solely on history, consensus, and ‘simple common sense.”"
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 555 (2001)
(internal citations omitted). Accordingly, we do not simply
defer to defendant’s contention because it is a legislative
judgment. See Anheuser-Busch v. Schmoke (Anheuser-Busch
II), 101 F.3d 325, 327 n.1 (4th Cir. 1996). Instead, we inde-
pendently evaluate defendant’s assertion that the advertising
restrictions advance the state’s interest, and we rely on the
valid sources of history, consensus, and common sense.
Much of what was said in the preceding section pertains to
this prong of the inquiry as well. In many interrelated ways,
the advertising restrictions serve the state’s interest in con-
ducting its video lottery in a manner that raises revenue but
avoids amplifying the social ills associated with gambling.
The advertising restrictions prevent retailers from having
names, signs, and advertisements that might prey on those
prone to gambling addiction. The restrictions also limit the
spread of the private establishment video lottery and reduce
demand for it.
In contrast, an unlimited right to advertise video lotteries
poses the risk of spreading the negative effects of lotteries
throughout the state. This potential expansion is why the state
treats the racetrack video lottery differently from the private
establishment video lottery. Compare W. Va. Code § 29-22A-
9(f)(12) (allowing government approved advertisements for
the racetrack video lottery) and id. at § 29-22B-702(13) (pro-
hibiting advertisements for the private establishment video
lottery). Racetracks are limited in number and location. They
are inherently linked to gambling; indeed that explains the
presence of many of the patrons there. The history of the
RVLA and LVLA suggests that the state had different pur-
poses in mind when it legalized the two video lotteries. The
20 WV ASSOCIATION v. MUSGRAVE
RVLA was enacted to preserve the racetrack industry and the
jobs and state tourism revenue that go along with it. See id.
at § 29-22A-2(e). In contrast, the LVLA was enacted to get
control of the thousands of illegal "gray" machines throughout
the state and to raise revenue in a more tempered way. The
comprehensive scheme for lottery advertising in West Vir-
ginia reflects the differences in the types of lotteries involved.
In so doing, it directly serves the state’s interest in a modu-
lated approach to the area of gambling.8
The advertising restrictions also serve the state’s interest by
reducing demand for the video lottery in private establish-
ments. Of course this makes perfect sense. If advertising did
not increase demand, commercial establishments would be
loathe to pay for it. This very linkage between advertising and
demand led the Court to recognize that in some instances a
reduction in advertising could directly advance the govern-
ment’s interest in reducing demand for a product. See Loril-
lard Tobacco, 533 U.S. at 557, 561 (holding that advertising
restriction on tobacco products advances government interest
and collecting cases "acknowledg[ing] the theory that product
advertising stimulates demand for products, while suppressed
advertising may have the opposite effect"). This is one such
instance. Here the state’s interest would be difficult if not
impossible to achieve without some reduction in demand —
indeed the promotions restrictions are precisely designed to
keep demand at a level that raises revenue, but does not mag-
nify the more negative effects of increased gambling.
8
The West Virginia Code of State Rules also provides: "Nothing con-
tained in this section prohibits the advertising on radio and television of
scratch off ‘instant’ lottery games, online numbers games such as power-
ball, racetrack video lottery games or new lottery games other than limited
video lottery games." W. Va. Code R. § 179-5-33.6. Racetrack gambling
is treated differently than the video lottery for the reasons discussed, and
the qualitative difference is apparent between video lottery games and
other games such as powerball and instant scratch-off lottery games.
WV ASSOCIATION v. MUSGRAVE 21
To be sure, the linkage between advertising and demand is
not enough to save a restriction of commercial speech in
every instance. The Court has struck down restrictions in
cases where the program is irrational, see Greater New Orle-
ans Broadcasting, 527 U.S. at 190; Rubin v. Coors Brewing
Co., 514 U.S. 476, 488 (1995), or where there is specific evi-
dence that goes against the claimed linkage, see 44 Liquor-
mart, Inc. v. Rhode Island, 517 U.S. 484, 506 & n.17 (1996)
(Stevens, J., concurring); Edenfield, 507 U.S. at 771-73. But
these infirmities are not present in this case. Here, the state
has enacted a comprehensive licensing scheme to conduct a
state-created program. Moreover, facial invalidation of an
array of regulations is bound to implicate the linkage between
advertising and demand to the greatest possible extent —
even to the point of raising demand to a degree that would
damage the balance that underlies the program.
Given the ways that the restrictions advance the state’s
interest, we cannot say that the link between the advertising
restrictions and the state’s interest fails because it is "mere
speculation or conjecture." See Edenfield, 507 U.S. at 770. To
the contrary, the link is supported by "history, consensus, and
‘simple common sense.’" See Lorillard Tobacco, 533 U.S. at
555 (internal citations omitted). Invalidation of the large
range of regulations that plaintiff challenges is not only sub-
versive of the state’s interest but of the means that directly
and substantially advance that interest. In other words, the
breadth of the invalidation here dismembers the state’s lottery
program from stem to stern.
D.
Finally, the restrictions must not be more extensive than
necessary. While the restrictions do not need to be the "least
restrictive means conceivable," they do need to have a "rea-
sonable" fit with the government’s interest — a fit "that repre-
sents not necessarily the single best disposition but one whose
scope is in proportion to the interest served." Greater New
22 WV ASSOCIATION v. MUSGRAVE
Orleans Broadcasting, 527 U.S. at 188 (quoting Board of
Trustees of State University of New York v. Fox, 492 U.S.
469, 480 (1989)). Accordingly, the government must consider
alternatives to regulating speech to achieve its ends. In this
regard, any commercial speech restrictions must be "a neces-
sary as opposed to merely convenient means of achieving [the
government’s] interests. . . . regulating speech must be a last
— not first — resort." Thompson v. Western States Medical
Center, 535 U.S. 357, 373 (2002). The scope of the restriction
is permissible, however, if the government "‘carefully calcu-
lated’ the costs and benefits associated with the burden on
speech imposed by its prohibition." Greater New Orleans
Broadcasting, 527 U.S. at 188 (quoting Cincinnati v. Discov-
ery Network, Inc., 507 U.S. 410, 417, (1993)); Lorillard
Tobacco, 533 U.S. at 561.
We do not believe the fourth prong of the Central Hudson
inquiry requires these regulations to be struck as facially
infirm. The Court’s case in Greater New Orleans Broadcast-
ing is instructive. There, the Court held that a federal prohibi-
tion on broadcast advertisements of private casino gambling
was unconstitutional as applied to radio and television stations
located in Louisiana where private casino gambling was legal.
527 U.S. at 176. The Court reasoned that the prohibition
failed the Central Hudson test because, among other things,
Congress’s failure to directly regulate private casinos through
"practical and nonspeech-related forms of regulation" under-
mined the government’s asserted justifications for the adver-
tising prohibition. Greater New Orleans Broadcasting, 527
U.S. at 192. Just as in Coors Brewing, the government did not
enact obvious conduct regulations "which could advance the
asserted interests ‘in a manner less intrusive to [petitioners’]
First Amendment rights.’" Id. at 193 (quoting Coors Brewing,
514 U.S. at 490-91). See also Thompson, 535 U.S. at 372-73
(striking down restriction where "there is no hint that the
Government even considered" directly regulating conduct to
achieve its interest).
WV ASSOCIATION v. MUSGRAVE 23
Here, by contrast, West Virginia directly regulates the con-
duct of video lottery retailers in many ways. The LVLA
restricts the total number of video lottery terminals. See W.
Va. Code § 29-22B-1101. It restricts the number of terminals
that any one retailer can have. Id. And it restricts how close
together video lottery retailers can locate. Id. at § 29-22B-
1202. It prohibits people under twenty-one years old from
playing the video lottery. Id. at § 29-22B-1602. It also prohib-
its retailers from providing access to an ATM and from
accepting credit or debit cards. Id. at § 29-22B-702(10).
The state has taken advantage of virtually all of the non-
speech alternatives suggested in other cases. See Greater New
Orleans Broadcasting, 527 U.S. at 192 (suggesting "a prohi-
bition or supervision of gambling on credit; limitations on the
use of cash machines on casino premises; controls on admis-
sions; pot or betting limits; location restrictions; and licensing
requirements—that could more directly and effectively allevi-
ate some of the social costs of casino gambling"). The state
has even gone beyond conducting an educational campaign as
suggested in 44 Liquormart, 517 U.S. at 507 (Stevens, J., con-
curring), by requiring that retailers display a caution sign
directly on the video lottery machines. See W. Va. Code § 29-
22B-1112. The LVLA also requires retailers to provide con-
sumers with information about gambling treatment and sup-
port services, id., and it provides funding for a compulsive
gambling treatment fund, id. at § 29-22B-1408(a)(1).
The state has thus not only considered, but has imple-
mented regulations that are alternatives to regulations on
speech. But the state concluded, and we independently agree,
that its objectives would be compromised if advertising for
the video lottery contradicted, rather than supplemented, its
conduct restrictions and educational initiatives. At least West
Virginia might permissibly reason that its conduct restrictions
and education initiatives might be undermined by flashing
neon lights for video lotteries on the premises of retail estab-
lishments or other advertisements scratching too aggressively
24 WV ASSOCIATION v. MUSGRAVE
the itch to "get rich." In the lottery context, the means are pro-
portionately tailored to the state’s plain objectives if they
complement non-speech alternatives in a fashion that pro-
duces a coherent and comprehensive regulatory program.
The scope of the regulations is permissible because the
state "carefully calculated" the costs and benefits of the regu-
lations at issue. At the outset we noted that the government
interest is stronger here, and the private interest is weaker,
than in typical commercial speech cases because the state par-
tially owns the lottery. The retailers therefore have less of an
interest in "conveying truthful information about their prod-
ucts" than in the typical case because it is not entirely their
product. See Lorillard Tobacco, 533 U.S. at 564. The aug-
mented strength of the government’s interest and the dimin-
ished strength of the retailers’ interest weighs in favor of
finding that the scope of the regulations does not "unduly
impinge" on their rights, id. at 565, and is "in proportion to
the interest served." See Greater New Orleans Broadcasting,
527 U.S. at 188 (quoting Fox, 492 U.S. at 480).
The fact that the state carefully considered the scope of its
regulations is evidenced by the specific regulations the state
enacted. The state prohibits retailers from video lottery adver-
tising, W. Va. Code § 29-22B-702(13) and W. Va. Code R.
§ 179-5-33.2, and from using the words "video lottery" in
their names, W. Va. Code § 29-22B-702(14) and W. Va.
Code R. § 179-5-33.3, but permits retailers to display a uni-
form sign indicating that West Virginia lottery products are
available, W. Va. Code R. § 179-5-33.2. This achieves the
state’s goal of balance: it informs consumers that lottery prod-
ucts are available, but it does not prey on vulnerable popula-
tions. The state also prohibits retailers from using "words
commonly associated with gambling" in their names, id. at
§ 179-5-33.4, and from using "gambling symbols including
but not limited to playing cards, roulette wheels, slot
machines or dice" in advertising visible from outside of the
retailer’s establishment, id. at § 179-5-33.5. These restrictions
WV ASSOCIATION v. MUSGRAVE 25
complement the state’s restrictions on video lottery games
themselves, which prohibit casino gambling themed games.
See W. Va. Code § 29-22B-332(7).
Plaintiff seeks to have all of these restrictions throughout
the program declared unconstitutional, but they are not sus-
ceptible to such sweeping rejection, for the scope of the regu-
lations represents a comprehensive and "carefully calculated"
effort by the state to achieve its interest in conducting a mod-
erate video lottery without unduly restricting speech. The dan-
ger of getting too deep into the fourth Central Hudson prong
of tailoring is that it enmeshes federal courts in a wealth of
subsidiary lottery issues, which have historically been left to
the state legislatures and agencies that create and implement
these programs. Eventually, we would be asked to approve or
disapprove very specific forms of advertising: colors and
designs; sizes and location of signs and billboards; mediums
of communication that are permissible and those that are not.
Soon, we would become a quasi-lottery board ourselves. Such
a searching inquiry is beyond our proper role as judges and
would go against the Court’s direction that "[t]he Government
is not required [under Central Hudson] to employ the least
restrictive means conceivable." Greater New Orleans Broad-
casting, 527 U.S. at 188.
What we have before us at this time is an order enjoining
each and every one of West Virginia’s video lottery promo-
tional regulations and, conversely, conveying on the plaintiffs
an unrestricted right to advertise. The context of this case sug-
gests the need for prudence, caution, and a respect for the
entirety of the effort upon which the state of West Virginia
has embarked. The effect of the preliminary injunction is to
unwind the lottery program which relies on a public/private
partnership and interrelated complementary features to
achieve the objectives of revenue production, educational and
infrastructure improvement, and promotion of the public wel-
fare that lie at the heart of a state’s role in our constitutional
order. Because the preliminary injunction before us now is
26 WV ASSOCIATION v. MUSGRAVE
inconsistent with these aims, it must be vacated and the judg-
ment of the district court reversed.
REVERSED