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10|17|2008 03:32 am EDT

Kentucky Circuit Court Dismisses Objections to Seizure of Gambling Domains

by Chad Kettner in Categories: Legal Issues

The Kentucky Circuit Court has dismissed all objections raised by the representatives of the 141 gambling domains that are subject to seizure by the Commonwealth of Kentucky.

Last month, the Commonwealth of Kentucky seized a number of gambling domain names because the “domains were being used in connection with illegal gambling activity.” The names included widely popular online destinations such as PokerStars.com, FullTiltPoker.com, BodogLife.com, GoldenPalace.com, Bet21.com, DoylesRoom.com and also Rick Schwartz’ IndianCasino.com.

In the official decision (.pdf), Circuit Court Judge Thomas D. Wingate addressed and dismissed the objections raised by the domains’ legal counsel who were attempting to have the seizure dropped. According to Fox 17, the judge will hear arguments on November 17th before making his final decision.

On whether or not the court has jurisdiction over civil forfeiture action involving domain names:

“The Commonwealth has presented overwhelming evidence that KRS Chapter 528 prohibits gambling in the Commonwealth; that the Defendants 141 Domain Names have been and are being used in connection with on-line or internet gambling activities available and accessible within the Commonwealth; and that KRS 528.100 authorizes forfeiture actions of gambling devices. Based on the foregoing, this Court finds sufficient bases to exercise its authority and hear and adjudicate the civil forfeiture claim presented by the Commonwealth against the Defendants 141 Domain names.”

On whether or not the Court has in rem jurisdiction over the Defendants 141 Domain Names:

“Property is about the relationship of people with respect to things, both tangible and intangible. The analogy commonly used to describe property is the bundle of rights concept. Those rights include the right to possession, management and control (the right to exclude), the right to income and capital, the right to transfer inter vivos and on death, and the right to the protection under the law.

Considering the foregoing, this Court finds the Defendants 141 Domain Names are property and therefore subject to this Court’s in rem jurisdiction or to possible civil forfeiture.”

On whether the Defendants 141 Domain Names have a presence in Kentucky:

“The Court agrees that the maintenance of a website or Internet advertisement alone, without more, is not enough to constitute presence for purposes of state court jurisdiction alaysis…Thus, the Court recognizes that as to any of the Defendants 141 Domain Names that identifies websites which are providing information only, the Seizure Order must be appropriately rescinded and will be rescinded in due course…

…For now, however, and considering the foregoing discussion and based o nthe other evidence offered by the Commonwealth during the seizure hearing on September 18, 2008, the Court finds that the Commonwealth has established a prima facie case that the presence of the operators of the casino websites and the Internet domain names which identify these gambling operators with is continuous and systematic, constituting reasonable bases for the exercise of this Court’s jurisdiction. As the evidence in the record stands, teh Defendants 141 Domain Names transport the virtual premises of an Internet gambling casino inside the houses of Kentucky residents, and are not providing information or advertising only. The Defendants 141 Domain Names perform a critical role in creating and maintaining connection by way of the various interfaces to transact a game or play…Therefore the Court has reasonable bases to assert its jurisdiction over them.”

On whether domain names, by reason of their illegal or unlawful use, are gambling devices:

“The Court is aware that the Domain Name System was never intended to avoid compliance with or violate International or Municipal laws, the fact remains that Domain Name System is not (or at least not yet) full-proof from vice and abuse. The Defendants Domain Names here were used and are still being used in connection with Internet gambling transactions in violation of the spirit of KRS Chapter 528. Accordingly, the Defendants 141 Domain Names fall within the meaning of a gambling device and are subject to seizure and possible forfeiture as a gambling device.”

On whether poker is “gambling” as defined by KRS 528.010(3):

“KRS 528.010(3) does not require that chance be the only factor in the outcome of a gamgbling enterprise; just as ‘no owner of a racehorse or a rooster would ever guarantee a winner’ of a race or a fight, even a master poker player cannot guarantee victory. Chance, though not the only element of a game of poker, is the element which defines its essence. In the end, no matter how skillful or cunning the player, who wins and who loses is determined by the hands the players hold. “

On whether the Commonwealth, through the Secretary of Justice and Safety Cabinet, has standing to bring this civil forfeiture action:

“Considering the foregoing discussion, the Court is satisfied that the law enforcement interest of the Commonwealth, to curb Internet casino gambling, is a judicially cognizable interest sufficient to bring this suit. The Commonwealth has shown that there was a violation of KRS Chapter 528 that is ongoing. Thus, the Commonwealth’s interest is neither remote nor speculative.”

Judge Wingate’s final decision gives the affected domain owners 30 days to institute geographic blocks on their websites in order to have their domain names removed from the forfeiture portion of the case, with a final hearing scheduled for November 17, 2008.

Jeremiah Johnson, the President of the Internet Commerce Association who earlier condemned the seizure, has responded to the court’s decision with displeasure:

“The Internet Commerce Association is extremely disappointed in the decision issued by the Court this afternoon. This is a dangerous decision not just for domain name investors and developers but for all who value commerce and free speech on the Internet. The Court has incorrectly held that domain names are a form of property subject to in rem jurisdiction anywhere on the face of the Earth where their associated websites may be viewed on a computer screen…The remedy proposed by the court – geographic blocking so that none of the subject websites can be viewed from within Kentucky – is infeasible for individual domain names which could be subject to different laws and regulation in thousands of jurisdictions worldwide.”

This ruling is extremely significant to the domain industry since it is setting a precedent in domain law. Will this open the way for any and every jurisdiction to seize domain names they deem violating their laws or rules?  The precedent this is setting implies that any jurisdiction could have this right and that website/domain owner must conform to local laws, not just Kentucky but world-wide or in every region that a website/domain can be accessed.  Not doing so could lead the owner to have their domains seized as well. This is a very important decision and one that needs to be fought for the sake of all internet businesses. What are your thoughts?

[via PokerNews.com & ICA]

Further Reading:

Kentucky Seizes 141 Gambling Domain Names

ICA Responds to Kentucky Seizure of Gambling Domains

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12 Comments

Michael Castello

October 17, 2008 @ 4:27 am EDT

The logic of the Kentucky court might make sense within the state’s borders. The state of New York was able to tax those sites doing business within its borders. American Internet businesses need some kind of federal protection without local restrictions.

On a global scale this logic would be akin to a site that sells bikinis having its domain name seized by a country like Kuwait or Dubai for violating its cultural laws. This is a slippery slope. We at least have to have that protection here in the US. This is more about whether a state or country wants to filter out and censure content. There is no way for a site owner to limit where a site can or cannot be seen.

Justin Hitt

October 17, 2008 @ 7:26 am EDT

How about Kentucky requiring sites to block traffic from within Kentucky or have a state restriction on sign up? It’s the citizen who broke local law.

Will they shutdown businesses outside their borders who might be accessed by citizens who cross state lines to acquire things illegal to be sold in their own state? In effect this is what they are doing.

Best,

Justin

Chris Nielsen

October 17, 2008 @ 12:52 pm EDT

My first thought is that if Kentucky doesn’t want it’s ISPs to provide access to gambling sites, that the Kentucky ISPs should be required to block access. This way, as Kentucky residents complain to the ISPs, ALL offensive sites can be blocked, and they really will be blocked. If the gambling sites block all Kentucky IPs, residents can just go to the sites anyway by using proxy servers like say AOL.com, which I’m sure most of them do…!

On the other hand, perhaps this is the beginning of the end of the free Internet as we know it?

No, I don’t really think so. Those domain owners, online casino owners, and many others (Gamblers) will be whipped into a frenzy will all band together and put Kentucky in it’s place. After all, they have more money and resources that any one state. :-)

Meanwhile, those of us with proxy domains need to decide if we are going to put them up for sale or build out sites…!

steve

October 17, 2008 @ 1:08 pm EDT

this is why control of the domain/www system needs to be moved outside of the US. A more stable country with better personal rights laws should be used to protect these assets from parasites.
At least move your best domains to registrars outside of the US. Clean generics are at risk as well in the US. If they want it they will take it, it’s obvious for the last 8+ yrs.

Adam Strong

October 17, 2008 @ 3:57 pm EDT

“A more stable country with better personal rights laws should be used to protect these assets from parasites.”

What utopian country would this be ?

Frank Michlick

October 17, 2008 @ 4:43 pm EDT

Moving to registrars in other jurisdictions is not a great long term approach to solving this problem – after all ICANN is still under US law for all purposes, so the next step for someone trying to enforce local laws is going to to the registry or the regulator (ICANN) in order to take domains off the Internet.

Steve

October 17, 2008 @ 11:39 pm EDT

Utopian I doubt, but many countries do protect individual rights a bit better. England and Canada are a bit safer, I’m sure there are many others. It seems most larger corps have located their assets as far away from Uncle Same as possible, offshore and de-regulated. Regular business practice.
ICANN away from US law and US control asap would be a good start.

Best Regards.

Steve

October 17, 2008 @ 11:41 pm EDT

How crazy is it that the US lets people gamble in one region (Las Vegas) and arrests people and seizes assets in another (Kentucky) Crazy.

:)

David

October 20, 2008 @ 7:23 am EDT

Canada are a bit safer

Well, here’s something probably new for you: one of Canada’s prosecution laws might prevent you from posting online details of a pending criminal case. While I’ve yet to read of anyone’s domain name seized for that sort of thing, strange things have happened.

Various jurisdictions, if not every one of them, is going to have some possibly “strange” law people might not be aware of, especially if you’re outside there and what you have is subject to their laws. There’s always the risk someone is going to try to hold you liable somehow, although we live with that risk everyday anyway.

Oh, and maybe go for Switzerland, the Bahamas, etc. :D

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