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Kentucky Attornies Appeal the Domain Seizure Ruling

by Hillary LaClair, Senior Editor
January 22, 2009

            Online casino gambling advocates may have celebrated too early this week when the Kentucky Court of Appeals ruled against the seizure of 141 gambling domains. The state of Kentucky will not agree to a cease fire on this one, as the legal team representing the Commonwealth filed an appeal in the matter of iMEGA v. Judge Thomas D. Wingate.

            The court ruled that online casinos were not considered “gambling devices,” on a 2-1 majority decision. It was also found that the Commonwealth of Kentucky had no authority to prosecute a criminal action in civil proceedings. Governor Steve Beshear had initially filed the lawsuit to protect the horse racing industry that provides substantial financial backing to Kentucky.

            “We’re not surprised that Gov. Beshear and Secretary (J. Michael) Brown filed their appeal,” said a confident Joe Brennan Jr., Chairman at iMEGA. “They both invested a lot of political capital in this suit. They likely feel they can’t back down.

            “Their attorneys took this on a contingency fee-basis, and have reportedly sunk over a million dollars of their own money in the suit, and other suits like this that they reportedly prepared for other states. Without a win in Kentucky, it will be hard to get those other suits off the ground, and they’ll have taken huge losses on their own gamble.”

            Beshear seeks to set a dangerous precedent with this appeal, not just for online casino gambling, but equally for net neutrality. The seizure of offshore domain names would leave the United States with a dubious authority to ban whatever contents it so chooses. iMEGA is not concerned that the appeal will change the ruling, as John L. Fleischaker, lead attorney in the case, has said.

            “We feel very good with where we’re at right now,” said Fleischaker. “The Court of Appeals was very clear in its ruling that you cannot use Kentucky’s ‘gambling devices’ law to seize internet domain names, because they do not meet the statutory definition.”

            In past World Trade Organization disputes involving the U.S., the U.S. was found guilty of more than one act of protectionism toward online gambling facilities, as horse racing remains the only form of wager that is accepted from the internet. A ruling in favor of the Governor would again set a dangerous precedent in cyberspace.

            “The lower court and the Commonwealth also erred when they attempted to get a civil forfeiture remedy – seizing control of the domain names – by applying it to a criminal statute that provided no such remedy,” Fleischaker noted. “There has been no criminal prosecution, no conviction, and thus no right to seize the owners’ property. You just can’t mash together a civil statute and a criminal statute to justify your actions.”

            The official date for the appeal hearing has not yet been set; however, there is speculation that it will take place in the spring of this year. It is also unsure if the hearing will interfere with iMEGA’s hearing at the U.S. 3rd Circuit Court of Appeal, scheduled to take place sometime in April.