(WEB HOST INDUSTRY REVIEW) — Further prolonging a definitive ruling, the Kentucky state Court of Appeals has issued a stay on a forfeiture hearing for 141 online domain names due to a petition led by Washington, DC-based Internet trade association Interactive Media Entertainment and Gaming Association (www.imega.org).
The court has ruled for more time to make a potentially groundbreaking decision regarding dispute which began in September when Kentucky Governor Stephen Beshear and Secretary of Justice and Public Safety Michael J. Brown had sought the seizure of the domain names linked to Internet gambling. Originally scheduled to be resolved on November 17, the hearing was pushed back to December 3, and has now been delayed until December 12 when both side will present oral arguments before the Court of Appeals.
“Since the lower court elected to ignore Kentucky law, and instead reached back to a law the current one supplanted to find a rationale justifying these seizures, we have no choice but to go to the Court of Appeals.” iMEGA chairman and CEO Joe Brennan Jr. said in a statement.
iMEGA’s legal team, which has doggedly fought to protect the 141 domains, filed its response brief with the US 3rd Circuit Court of Appeals last week, challenging the constitutionality of the Unlawful Internet Gambling Enforcement Act of 2006. Specifically, that it misapplied Kentucky’s “gambling devices” law in order to provide a rationale for allowing the seizures. It also argues that the state’s violated the Commerce Clause of the US Constitution, and that Secretary Brown lacked the authority to initiate the seizure in the first place.
The appeals court decided to combine iMEGA’s petition with a petition filed by Vancouver-based Interactive Gaming Council, which also argues that the lower court lacked jurisdiction to order the domain seizures.
While Gov. Beshear has argued that taking down these sites protects citizens from gambling, however, the organization said that the state’s motivation was to protect the state’s own gambling industry from competition from online gambling sites. “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,” Brennan said.
“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.”
As Brennan notes, Kentucky could set a precedent that could let authorities tell registrars to effectively shutdown online gambling websites, which are mostly hosted overseas. This has also led to fears that letting the state shut down gambling websites will lead to the seizure of other websites.
The Internet Commerce Association denounced the Kentucky governor’s actions in a public statement. “The Internet Commerce Association is extremely disappointed in the decision issued by the Court this afternoon,” wrote ICA president Jeremiah Johnston. “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 Poker Players Alliance is also officially opposed to Kentucky’s online gambling regulation methods, suggesting alternatives including tighter regulation, taxation methods and more consumer protection for Internet gamblers. It does, however, support government involvement, endorsing the US House of Representatives Financial Services Chairman Barney Frank’s HR 2460 legislation that would specifically achieve regulatory goals of which it is in favor.
While the lawsuit has garnered strong opposition from the online community, Gov. Beshear stands by Judge Wingate, who initially ruled over the seizure, saying online gambling “leeches on our communities,” however, he maintains that state-condoned gambling at casinos and horse races should remain legal.
Earlier this week, in a similar effort to indirectly stop online gambling on American soil, the US Republican government was met by similar hostility when it issued recommendations aimed at banning Internet gambling by stopping money transactions at the bank level.
