Playing out on the floor of the Kentucky Supreme Court this morning were oral arguments in a case pitting the state’s Justice and Public Safety Cabinet, headed by J. Michael Brown, against the Interactive Media Entertainment and Gaming Association (iMEGA), among other parties.
The hearing will determine the fate of 141 internet gambling domain names, including those belonging to industry giants like PokerStars and Full Tilt Poker. Commonwealth attorney Eric Lycan took to the podium shortly after 11:00am local time and noted that the lower court ruling ordering the sites in question to halt operations in Kentucky or risk losing their domains altogether has yet to bear fruit: “None of these domain names has been stopped from operating… When this action was filed, many of them attempted to take their domain names registered with registrars in the U.S. and transfer them to another overseas registrar.”
Lengthy comparisons were made to drug seizures and pornography throughout the proceedings. In terms of whether iMEGA and the Interactive Gaming Council (IGC) had standing to sue in the case, Lycan explained, “There is not a single person in this room who will claim to operate a domain name. You have illegal gambling trade associations.” One of the six justices in attendance retorted, “This is not like cocaine, which is inherently illegal.” The Kentucky Supreme Court grilled both sides with questions.
If successful, the domains would be inaccessible not only in Kentucky, but also around the world. On why the Commonwealth would remove access to the URLs for the rest of the world, Lycan explained, “That’s how Judge Wingate’s order was tailored and it’s only if they refuse to cease operations in Kentucky. It’s only those who continue to defy the Commonwealth that will be forfeited.” Lycan revealed that the domains would be put up for public auction if they were successfully forfeited.
Up for debate is whether the domain names were properly seized under the grounds that they were “gambling devices,” a term traditionally reserved for tangible objects like slot machines and roulette wheels that you’d find in an underground casino. Also argued were whether due process was violated and whether the Commonwealth had jurisdiction to act in the first place. Lycan noted that there have been instances of URLs being seized before: “They have been seized by the IRS and auctioned off. This is not a new thing that the Commonwealth has undertaken. It’s complicated by the fact that it’s not tangible property, but it’s still property.”
Lycan’s testimony lasted for 30 minutes and was followed by Bill Johnson’s oral arguments. Johnson, who represents a contingent that includes Sportsbook.com, argued that the case should not have proceeded as far as it has. He then noted that the State should have pursued a criminal case against domain name owners, not a “hybrid” civil forfeiture proceeding. Johnson also called out the Kentucky State Legislature for not clarifying the Commonwealth’s gambling laws: “Sometimes it’s necessary for the legislature to spell out what the law is. If the legislature had amended the statute, which it’s had the opportunity to do since 1974… our situation would be different.” Legal online wagering on horse racing appears to be legal in Kentucky, as TwinSpires.com, which allows such bets, is owned by the parent company of the Churchill Downs racetrack.
Jon Fleischaker, attorney for iMEGA, gave an animated argument that began with the following statement: “What the Commonwealth and what the Secretary are doing is really unheard of. They have taken a statute that has been repealed… and have tried to make it a hybrid with a criminal process for forfeiture. That is really wrong.” Fleischaker also blasted the State’s lack of due process, noting, “There has been no process. There has been no attempt at process. It was a secret proceeding. Nobody had standing at the proceedings in front of Judge Wingate.” Word spread of the seizure last September and Wingate upheld the Commonwealth’s actions in a decision released nearly one year ago to the day.
Finally, John Tate, attorney for VicsBingo.com and the IGC, asserted that the Commonwealth’s actions violated the 14th Amendment of the United States Constitution. He explained, “The internet did not arrive yesterday. We’ve wrestled with internet-based jurisdiction for some number of years now… The only jurisdictional bases for the assertion of in rem were manufactured by the Secretary.” Tate argued that the Commonwealth’s agents had to use an internet search to find VicsBingo.com, which should be frowned upon. Lycan countered that the appellate admitted 13,000 online poker players made their home in Kentucky as members of the Poker Players Alliance (PPA).
The proceedings lasted about 90 minutes and iMEGA expects a decision to be handed down within four months. Rich Muny, Kentucky State Director for the PPA, said the organization, which filed an amicus brief in the case, thought a decision would be rendered within 60 days.
