Not long ago, the Kentucky Supreme Court upheld a decision that had been made previously in a lower court that paved the way for the state to seize domain names that were owned by
roulette casinos, poker and sportsbook site operators. The state Supreme Court were in agreement with the state's attorneys that the owners of the sites had to come forward and identify themselves in order to further their defense against what the state was claiming.
Privacy and censorship issues were primary concerns of the site owners, and a counterclaim was filed through iMEGA (Interactive Media Entertainment and Gaming Association), but the state made the claim that iMEGA was not an injured party in this case and therefore lacked legal standing to file. That was a technicality, but finally, the owners of one poker site came forward and submitted an affidavit stating that they are indeed a member of iMEGA, son the issue of standing is resolved, and now the case will be decided on its merits by the Supreme Court. iMEGA officials were very hopeful that the Supreme Court was going to rule in favor of the gaming sites.
In mid-April, however, things took another turn.
The State of Kentucky filed suit against Pocket Fives, a company that was identified as the owner of Full Tilt Poker, for money that was lost by Kentucky residents between March 25, 2005 and September 25, 2009 on the company's websites. The state claims jurisdiction over non-residents for any monetary claims that are made by residents. An oral submission given by the Interactive Gaming Council, in which it was stated that 13,000 Kentucky residents play poker online (not to mention the number of residents that
play roulette and other casino games online), was apparently the basis of the claim by the state's attorneys, convincing them they had a "compelling interest" in asserting their jurisdiction.
In September of 2008 Kentucky's governor, Steven Beshear, started to do battle against the online gaming industry. Using an obscure law about gambling devices, and interpreting it to include domains, Beshear asked that 141 domain names be seized and forfeited to the Commonwealth, the first time that had ever been done by an individual state.
The motives of Governor Beshear were nothing that was a secret. Having won election in 2007, he has been on a continual campaign to expand gambling within the state, with the goal of adding as much as $1.2 billion in revenue to the state over a five-year period. A lot of this would be done through “racinos” at some of the state's pari-mutuel establishments. The online gambling operations would appear to be untaxed, unregulated competition for many of the interests who have contributed to his campaigns, and that just wouldn't do.
Beshear's 2007 gubernatorial campaign accentuated his plan for gambling expansion, and it was so prominent an issue that the Republican Party in the state (Beshear is a Democrat) ran an ad campaign that referred to his plan as "Fools Gold." It was asserted that Beshear was firmly in the pockets of gaming interests. An "independent" organization called the Bluegrass Freedom Fund was founded by one of Beshear's operatives and raised over $2 million in campaign advertising money from gambling interests alone. The list of donors included many six-figure contributors who would be candidates for one of the casino licenses. One of them was Churchill Downs (home of the Kentucky Derby) that threw in $250,000. The gambling issue is still on the table, and Beshear is up for re-election again in 2011.
Supposedly, the argument was that the online gaming sites undermined Kentucky's horse racing industry, promoted money laundering, lacked consumer protection, corrupted youth, etc.
Some of that is just a tired argument, but this time there would appear to be a lot at stake. When you put politicians together with money, you never know what could happen.
