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Kentucky Supreme Court Rules On Domain Case's Merits

By Christine V., Apr 26th 2010
Recently, the Kentucky Supreme Court upheld a decision made in a lower court that cleared the way for the state to seize domain names that were owned by online gaming site operators. The state Supreme Court agreed that the owners of the sites had to step forward and identify themselves in order to continue their defense against the state's claims.

Privacy and censorship issues were at the heart of the site owner's concerns, and a counterclaim was filed through an organization called iMEGA (Interactive Media Entertainment and Gaming Association), but the state asserted that iMEGA was not an injured party and therefore lacked legal standing. At long last, the owners of one poker site in particular have stepped forward and filed an affidavit that they are a member of iMEGA, which will now overcome the legal technicality and give the organization standing.

Now the case can be ruled upon based on its merits, and iMEGA officials were very hopeful that the Supreme Court was going to rule in favor of the gaming sites.

In mid-April, however, things went in another direction.

The State of Kentucky, in Franklin Circuit Court, filed suit against Pocket Fives, a company that was identified as the owner of Full Tilt Poker, for money purportedly lost by Kentucky residents between March 25, 2005 and September 25, 2009. The state claims jurisdiction over those entities that are non-residents for any monetary claims by residents. An oral statement that was given by the Interactive Gaming Council, in which it was mentioned that 13,000 Kentucky residents play poker online, was apparently the basis of the claim by the state's attorneys, and convinced them they had a "compelling interest" in exercising jurisdictional authority in this case.

It was September of 2008 when Kentucky's governor, Steven Beshear originally waged war against the online gaming industry. Citing an obscure law about gambling devices, which was interpreted to include domains, Beshear opened the door for 141 domain names to be seized and forfeited to the Commonwealth, the first time that had ever been done by an individual state. His statement at the time: “Unlicensed, unregulated, illegal Internet gambling poses a tremendous threat to the citizens of the Commonwealth because of its ease, availability and anonymity." .

The motives of Governor Beshear, a Democrat, are well-known. Initially elected in 2007, he has been on a continual crusade to expand gambling within the state, principally through "racinos" at race tracks (usually a section of race tracks devoted to casino games such as slots), with the goal of adding as much as $1.2 billion in revenue to the state over a five-year period. The online gambling operations would appear to be in the way of many of the interests who have contributed to his campaigns.

Beshear's 2007 gubernatorial campaign highlighted his plan for gambling, to such a degree that the Republican Party in the state ran an ad campaign that referred to his plan as "Fools Gold." An "independent" organization called the Bluegrass Freedom Fund was established by one of Beshear's operatives and raised over $2 million in advertising resources from gambling interests alone. The list of donors included many six-figure contributors who would be candidates for one of the casino licenses. The issue is still not resolved, and another cycle has started; Beshear is up for re-election in 2011.

Supposedly, the argument was that the online casinos and poker sites undermined the horse racing industry in Kentucky, promoted money laundering, lacked consumer protection, corrupted youth, etc.

That's a tired argument we've heard time and again, but this time a lot more is at stake than just rhetoric. Never underestimate a politician whose pockets are being filled by special interests with a lot of cash.

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