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Washington Post Reports on Kentucky Controversy

by Hillary LaClair, Senior Editor

               The Washington Post has been following the controversial domain seizure case in Kentucky all of this week, providing an in-depth report of the proceedings. Staff writer Brian Krebs has kept the online casino community with all of the need-to-know info.

                Spokesperson for the Kentucky Justice Department Jennifer Brislin told the Post that the regional government, seeking to extend its jurisdiction to the physical locations of “digital property,” wants recompense for the damage that online casinos have caused. That is to say, because the U.S. does not allow internet casino gambling to be regulated, some $170 million in gaming revenue was not taxed by the state. The protectionist argument is that the unlawful online casino gambling profits should have been spent on legal horse racing bets.

                A handful of website domains have already been seized without notification or endorsement from state legislators, and the ruling of Judge Thomas Wingate to allow this has left a bad taste in the community’s mouths – some going so far as to say that the state is holding these domains for ransom.

                The state wishes to deliver a more devastating blow to the online gambling industry in forcing domain holders to effectively ban Kentucky residents, after paying a hefty fine to the state. According to Brislin, “We think it creates a tremendous disadvantage for our legitimate, licensed and taxed gaming interests, and there are some damages that are due to the commonwealth as a result.”

                It seems Brislin has not done her research, however, because most internet casino earnings are reported to the IRS and taxed by the U.S. government. Krebs shows both sides of the story, reporting the expert opinion of domain specialist and attorney Bret Fausett, who believes that Kentucky has no legal right to seize websites located and operated outside of the state.

                “This is a little bit like if the Home Shopping TV network was accused of fraud, and Kentucky decided to seize the show’s cameras and set even though HSN’s real location is nowhere near the state, he opined.

                Christine Jones of registrar, explains their stance on the issue, after 20 of their domains were confiscated.

                “We issued a registrar certificate to the state that says the court has jurisdiction over the issue, but it doesn’t have control over the domains, other than the ability to exercise judgement so that when there is a final adjudication on the merits of the case or a settlement by the parties, we will honor that outcome.”

                John Levine, author of “The Internet for Dummies,” told his opinion to the Washington Post as well. “The state’s legal arguments fail on so many levels that it’s truly bizarre that the court didn’t reject this case in the first place,” he said, noting that the UIGEA prohibits only the financial transactions of online casino gambling, and not the activity itself. In fact, Washington is the only U.S. state that specifically bans gambling online.

                A decision to either dismiss the case or allow it to proceed to a forfeiture hearing will be made in seven days.