By Lily Kuo

NEW YORK, Aug 30 (Reuters) - A New York City zoning law designed to keep adult entertainment businesses away from schools, churches and residential neighborhoods was deemed unconstitutional by a New York state judge on Thursday.

Justice Louis York of the New York State Supreme Court in Manhattan said a set of amendments in 2001 meant to tighten the city's regulation of strip clubs, topless bars and adult video and book stores violated the constitutional protections of free and were unnecessary.

York said adult establishments today differ from their predecessors by having less garish signage and by segregating their erotica from more mainstream parts of their business, making them less conspicuous to the public.

"These entities no longer operate in an atmosphere placing more dominance of sexual matters over non-sexual ones," York said, ruling on two lawsuits lodged by a group of adult businesses against the city.

The ruling will have the biggest effect on the dozens of bars, restaurants, book and video stores that offer adult entertainment alongside non-X-rated services.

The 2001 amendments defined many of such establishments as "adult enterprises" that are barred from operating closer than 500 feet (150 metres) from other sexually oriented venues, or from schools, places of worship and homes.

Current city guidelines allow venues where less than 40 percent of space or inventory is devoted to sexually explicit activities to operate anywhere in the city.

York noted that studies presented to the court concluded that the presence of adult establishments did not increase crime rates or lower property value, as previously believed.

"Accordingly there is no need for the 2001 amendments ... they are a violation of free-speech provisions of the U.S. and state Constitutions," he said.

The ruling was a loss for city officials who have sought to crack down on what they call "sham compliance" by venues that employ methods such as piling stacks of children's videos on the floor in order to ostensibly devote 60 percent of their inventory to non-adult material.

Robin Binder, deputy chief of the administrative law division of the City Law Department, said her agency would appeal the decision.

"The city's ability to regulate adult establishments is critical to preserving neighborhood quality of life," Binder said in a statement.

Others called the ruling a triumph for freedom.

"The overarching thesis is that people have a right of choice," said Herald Price Fahringer, an attorney for video stores represented in the lawsuits. "If I want to go in and buy an erotic tape ... I have a right to do that." (Reporting by Lily Kuo; editing by Steve Gorman and Mohammad Zargham)

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