Kentucky Governor Stephen Beshear and Michael J. Brown, the state's Secretary of Justice and Public Safety, had sought the seizure of the domain names, most related to Internet gambling, in an effort to protect the state's own gambling industry from competition by online gambling sites.
iMEGA asked the appeals court to stay the forfeiture hearing ordered by the district court judge scheduled for December 3rd, until the appeals court had an opportunity to consider iMEGA's petition to have the lower court seizure ruling overturned. A hearing to consider that petition has been scheduled for December 12th in Louisville.
"We're pleased that the Court of Appeals has given us the opportunity to challenge these seizures," said Joe Brennan Jr., iMEGA's chairman. "The commonwealth has tried to take these domains for their own financial gain, violating Kentucky law, exceeding their jurisdiction, and setting a terrible precedent in the process."
The appeals court also decided to combine iMEGA's petition with a narrower petition filed by Interactive Gaming Council (IGC), of Vancouver, BC, an international online gambling trade group.
Both groups contended that the lower court lacked jurisdiction to order the domain seizures. iMEGA contends that the lower court misapplied Kentucky's specific "gambling devices" law in order to provide a rationale for permitting the seizures. iMEGA also argues that Kentucky's actions violate the Commerce Clause of the US Constitution, and that Secretary Brown lacked the authority to initiate the seizure action in the first place.
"This matter has generated concerns across the online world about abuse of governmental power," said Brennan. "Kentucky is opening the door for any government - state and local, foreign and domestic - to use what amounts to blackmail to achieve its ends. If this precedent is allowed to stand, it's not hard to imagine a government like China utilizing this kind of seizure power to prevent free media, like the New York Times, from reaching their citizens."
None of the 141 domain names are owned by individuals or companies are located in Kentucky. Gov. Beshear claimed the Internet gambling sites were sapping money from the state's own gambling businesses, calling them "leeches on our community".
In an interesting peripheral development, Kentucky Attorney General Jack Conway has apparently distanced himself from the domains case. Part of the argument in the original case was the acceptability or standing of the Secretary of Justice and Public Safety bringing the case forward, rather than the state Attorney General. The case was actually outsourced by Governor Beshear to Chicago lawyers, reportedly on a 'no win, no fee' basis.
On Friday it emerged that the Attorney General had asked to have his name removed from the Interactive Media Entertainment & Gaming Association's court filings in the matter. Reports earlier this year claimed that the AG had refused to be drawn into, or comment on, the issue.
The legal bills are likely to be substantial in the matter, especially on Governor Beshear's side unless the 'no win, no fee' reports are true. In analysing the 43 page Wingate ruling, PC World found the interesting nugget of information that investigators spent 500 hours surfing gambling Web sites and engaging in online gambling!
Judge Wingate's ruling is also being challenged by Net Freedom organisations. This week the Center for Democracy and Technology, the Electronic Frontier Foundation and the American Civil Liberties Union of Kentucky filed a petition with the Kentucky Court of Appeals, asking the court to overturn rulings on the domain seizure issue made on September 18th and October 16th by Franklin Circuit Judge Wingate.
The three civil liberties groups argued that Wingate's order raises serious free-speech concerns and violates the Commerce Clause of the U.S. Constitution, which says the U.S. Congress has the power to regulate commerce between U.S. states. The judge also does not have the jurisdiction to force domain name registrars to turn over the domain names, and the decision to target domain names is an odd way to shut down Web sites, the three groups wrote in their brief.
Domain names are simply addresses pointing Web users to the proper Web sites, lawyers for the groups wrote.
"If allowed to stand, the court's flawed order would needlessly create uncertainty about the basic rules governing the operation of the Internet as well as the authority of courts both inside and outside of the United States to affect behavior in other jurisdictions," the groups wrote. "Moreover, if carried to its logical conclusion, the trial court's order could well impose literally billions of dollars of additional costs on individuals and businesses throughout the world that have no significant contacts with Kentucky."
On the downside, the up-and-coming Cake Poker Network has apparently barred its services to Kentucky players, who on trying to log on found the notice: "You are trying to use the application from a location that prohibits gaming activity. It is illegal to wager from this location."
Curious players were informed by Cake's support centre: "Thank you for your email. Due to recent events in the Commonwealth of Kentucky we will no longer be accepting any players from the state of Kentucky. I can confirm this applies for all players from Kentucky. Any funds in your account will be cashed out, any RakeBack due has been paid into your account as well as the value of any outstanding tournament tickets. We will now cashout your funds or you may transfer them to a non Kentucky account if you so wish. Thank for your custom at CakePoker and best of luck for the future."
PokerStars, always feisty in matters pertaining to the United States, remains convinced that it is within its rights to continue operations in the country. In a statement, the world's largest online poker venue said:
"In regards to the Kentucky case, as this case is ongoing, we are limited in what we can say. All we can do at this point is confirm our belief that PokerStars is not breaching any laws in providing our service to residents of Kentucky. We cannot comment on the reasons other sites have taken a particular action. As there is ongoing legal action in this case, we cannot discuss this any further at this time."
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