Kentucky judge rules against gambling domains

Justice scales

In a stunning decision that is guaranteed to be appealed, in the Kentucky domain name seizure case, the court ruled against the domain name defendants and in favor of the state on virtually every issue.

Franklin County Circuit Court Judge Thomas Wingate gave the affected Internet gaming sites until Nov.17 in which to install some form of blocking software to prohibit access by Kentucky residents, or a hearing on the motion for forfeiture of those domain names will go forward and the domain names will be turned over permanently to the state.

In his 43-page opinion, Judge Wingate ruled that the court has jurisdiction over the 141 online gambling site domain names that were seized by the Commonwealth of Kentucky.

He further ruled that poker is "illegal gambling" under the Kentucky statute, and who wins and who loses is based entirely on luck - the cards they are dealt.

Finally, Judge Wingate held that the associations seeking to represent the domain names - the Interactive Gaming Council (IGC) and the Interactive Media Entertainment & Gaming Association (iMEGA) - did not have standing to represent any of the parties and would not be allowed to intervene on their behalf.

Those organizations, along with the Poker Players Alliance and other interested groups, will be permitted to continue to submit amicus curiae (friend of the court) briefs.

In addressing the defendants' arguments that by interfering with the domain names of various Internet sites, the floodgates would open and pandemonium would ensue, Judge Wingate stated that "this doomsday argument does not ruffle the Court." He concluded his ruling by noting that the Internet is not above the law and that any illegality or abuses of the Internet would be reined in.

Procedural background

By way of background, Judge Wingate noted that the complaint was filed by the Commonwealth on Aug. 26, and was accompanied by a request that the file be sealed until the hearing on the seizure motion. That request was granted; thus, none of the defendant domain names knew about the complaint or the plaintiff's seizure motion.

On Sept. 18, the Commonwealth presented evidence that computers located in Kentucky were, "through the use of domain names," able to access gambling Web sites over the Internet offering online slot machines, roulette and poker. They also introduced testimony from a cybercrimes expert that domain names were devices that allow Kentucky residents to engage in illegal gambling.

Based on the evidence and testimony presented, the court ordered seizure of the domain names. The court found probable cause existed to support a finding that the defendant 141 domain names were being used in connection with illegal gambling activity with the Commonwealth. It was at this point that the court required the service of the seizure order on each domain name registrar and any other person identified in the WHOIS information database as claiming ownership for each of the domain names.

The court scheduled a hearing for Sept. 26 to determine whether any party was entitled to return of their property or whether the domain names would be forfeited to the Commonwealth. After a brief continuance, the hearing went forward on Oct. 7 and, at the conclusion of the argument, the court took the matter under submission. Today, the judge issued the order.

Legal decision

In his opinion, Judge Wingate first addressed whether the court had subject matter jurisdiction over a civil forfeiture action involving Internet domain names. Without a finding of jurisdiction, the court would have no power to rule in this case.

Defendants claimed that since there was no finding of criminal activity by the domain names, they could not be the subject of seizure. In rejecting the defendants' arguments, the court ruled that it does have jurisdiction to issue a civil, not criminal, seizure order with respect to the domain names which the plaintiff claims are used "in connection with on-line or internet gambling activities available and accessible within the Commonwealth" in violation of KRS 528.

The court also found that it had "in rem" jurisdiction over the domain names - in other words, that they were "property" that could be seized. The defendants had argued that a domain name is like a telephone number or an address, just a collection of letters and numbers, and therefore, it could not be subject to seizure or forfeiture.

But Judge Wingate found that that the domain names were property since they had value - they have been auctioned and sold and assessed a value for tax purposes - and, further, that they had been the subject of forfeiture by the Department of Justice.

In a final rejection of defendants' jurisdictional arguments, the court ruled that the domain names had an actual presence in Kentucky and thus could be seized there. Specifically, the defense had argued that the domain names had no situs (i.e., physical presence) in Kentucky because none of the registrars or domain name authorities are located in Kentucky.

Judge Wingate disagreed, finding that the Web site the domain name is connected with interfaces with the player to entice the player to put money down and determined that those interfaces were "rooted in the domain name" and "ubiquitously present" in them.

The court reasoned that because the domain name was visible whenever anyone playing in Kentucky went on the Web site, that fact was enough to find "presence" in Kentucky.

The court was equally dismissive of the defendants' substantive arguments. Defendants had argued that domain names are not devices as intended in the Kentucky statute, where gambling devices are defined as tangible devices such as slot machines and roulette wheels. But the court rejected this argument, interpreting the intent of the Kentucky law and not limiting it to the literal meaning of the term "gambling device."

Thus, Judge Wingate concluded that the domain names, "by reason of their illegal or unlawful use," are gambling devices under Kentucky law. The court ruled that domain names are "virtual keys for entering and creating virtual casinos from the desktop of a resident in Kentucky," and, thus, can be seized the same as any machine.

Judge Wingate also rejected defendants' argument that poker is not gambling as defined by Kentucky law because it is a game of skill, not chance, and is played against other players and not the house. In its most confounding decision, the court ruled that chance "is the element which defines its essence," specifically finding that "no matter how skillful or cunning the player, who wins and who loses is determined by the hands the players hold."

Finally, in addressing the issue of standing (who had the right to appear in court on behalf of the parties) the court found that, contrary to the defendants' arguments, the Secretary of Justice and Safety Cabinet as opposed to the Attorney General of the Commonwealth of Kentucky was an appropriate law enforcement official to commence this action.

Industry organizations shut out

The court also ruled in favour of the plaintiff's argument that the PPA, the Internet Commerce Association (ICA), Network Solutions, Inc. (NSI), IGC and iMEGA, did not represent any party to the case and therefore lacked standing to argue in the court. However, the court indicated that it would continue to permit those entities to present amicus curiae briefs to help the court in making its rulings.

The court found that only parties such as, and seven others, who claim to be the domain names in question, have standing in court. However, the judge warned these parties, who have declined to identify their clients (the actual registrant or owner), that they would have to disclose the identity of their clients and describe the nature of the clients' interests at further hearings.

As for its ultimate holding, the court denied the defendants' motions to dismiss the action and instead modified its earlier seizure order to require that within 30 days, if any of the domain names, their registrants or agents, install applicable blocking software to prevent access to their site from within Kentucky, they will be relieved from the seizure order.

Thus, by Nov. 17, under the judge's order, the affected Internet gaming sites will have to install some form of software to prohibit access by Kentucky residents, or the domain names will be turned over to the state.

An appeal is expected. In fact, even before Judge Wingate's ruling today, the parties representing the online gambling industry promised to appeal any adverse decision.

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