Ky. Ct. of Appeals Overrules Seizure of Internet Gambling Domains

Details have emerged on the ruling handed down late Tuesday by the Kentucky Court of Appeals which overturned a decision by the Franklin Circuit Court to seize and possibly confiscate 141 online gambling domains belonging to owners throughout the world.
 
The Interactive Media Entertainment and Gaming Association (iMEGA), one of the main challengers to the Kentucky state government’s “unprecedented attempt to interfere with the freedom of the Internet”, has issued a statement giving details of the findings of the panel of three Appellate judges who considered the case.
 
In a 2-to-1 majority opinion, the court ruled against Judge Thomas D. Wingate (No. 2008-CA-002000-OA), by blocking the seizure orders issued by the Franklin circuit court judge for the domain names, all related to Internet gambling (Commonwealth of Kentucky, Franklin Circuit Court, Division II, 08-CI-1409).
 
Judge Michelle M. Keller, in her majority opinion, found that Internet domain names for online gambling Web sites were not illegal “gambling devices” by Kentucky law, as had been claimed by attorneys representing the Commonwealth, in their attempt to seize control of the names from their owners. Judge Keller stated that while the Kentucky legislature could have chosen to include Internet domain names in its gambling devices law, it had not, therefore the Commonwealth could not rightfully proceed with its forfeiture action.

“Regardless of our view as the advisability of regulating or crimininalizing Internet gambling sites, the General Assembly has not seen fit to amend KRS 528.010(4) so as to bring domain names within the definition of gambling devices,” the judge found. “Neither we, nor the Justice Cabinet, are free to add to the statutory definition. If domain names cannot be considered gambling devices, Chapter 528 simply does not give the circuit court jurisdiction over them.
 
“It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a “machine or any mechanical or other device…designed and manufactured primarily for use in connection with gambling,” Judge Keller wrote. “We are thus convinced that the trial court clearly erred in concluding that the domain names can be construed to be gambling devices.”
 
Judge Jeff S. Taylor, also writing for the majority, added that the Commonwealth could not seek a civil forfeiture based on a criminal statute when there had been no criminal proceeding. Since there had been no criminal proceeding or conviction against any of the Internet domain name owners, the Commonwealth could not take control of their property.
 
Judge Michael Caperton, in his dissenting opinion, wrote that the Internet domain names were one part of a larger mechanism for gambling, which included computers and Internet service, and thus, in his opinion, met the definition of a “gambling device” under Kentucky law.
 
“This decision confirms why we went the way we did with this suit,” said Jon L. Fleischaker, attorney for iMEGA and managing partner at Dinsmore & Shohl in Louisville. “We knew when we brought this to the Court of Appeals, that we would get justice for iMEGA and the domain names in Kentucky.”
 
Fleischaker had argued in a December 12, 2008 hearing before the Court of Appeals that the Internet domain names were no more than “billboards” for the Web sites, and not mechanisms for gambling. Fleischaker had also argued that the Commonwealth’s attorneys could not try to fashion a civil law remedy with a criminal statue to justify the seizure of the domain names.
 
“We are very happy with the court’s ruling today,” said Joe Brennan Jr., chairman of iMEGA, an Internet trade association in Washington, DC. “The judges clearly agreed with our interpretation of the law, and thankfully, this reverses what would have been a terrible precedent for our country and the Internet.”
 
The Court in its decision declined to review additional arguments submitted by the Interactive Gaming Council (IGC) and attorneys representing Sportsbook.com, also seeking to have the domain name seizures blocked.
 
“We are humbled by this decision and by the overwhelming support received from Internet businesses and free speech organizations everywhere,” said Jeff Ifrah, an attorney acting as part of a team representing the Interactive Gaming Council. “The Court of Appeals has now corrected a fundamental misunderstanding by the trial judge in this proceeding of the nature of the Internet and the legality of online poker in Kentucky. This is a very important decision for anyone doing business on the Internet.”
 
John Pappas, Executive Director of the Poker Players Alliance said: “This is a tremendous victory for Internet freedom and the rights of Kentucky residents who enjoy playing online poker.
 
“We are pleased that the appeals court has forcefully reversed Judge Wingate’s earlier ruling and confirmed many of the arguments that have been raised in opposition to the seizure effort. The Court of Appeals has agreed with the PPA’s position that Judge Wingate did not have jurisdiction to issue the order that he entered against these domains and that Secretary Brown has no legitimate right to deprive the citizens of Kentucky of the legal right to play poker online.”
 
Jay Blanton, a spokesman for Kentucky Governor Steve Beshear, said the state did not receive the ruling until late Tuesday. “We want to take some time to review it. No decision has yet been made on whether to appeal it to the state Supreme Court,” Blanton said.
 
Rich Muny, Kentucky state director for the Poker Players Alliance, said he hoped Beshear and Justice Cabinet Secretary Brown “will abandon this misguided effort and focus new energies into regulation and taxation of Internet poker.”
 
He added: “Rather than spending hard-to-find dollars on this case, the governor could actually turn this into a much-needed new revenue stream for the commonwealth.”
 
Beshear campaigned in 2007 to expand gambling in the state by opening casinos, but he contended that some of the most popular online gambling sites are bad for the state.

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