The case involves a move by Kentucky Governor Stephen Beshear and state Secretary of Justice and Public Safety, Michael J. Brown, to seize domain names belonging to online gambling websites. As a result, Franklin County Circuit Judge Thomas Wingate ordered a forfeiture hearing; while the Justice Cabinet also asked the court to order domain name registrars to transfer the targeted names to the state in advance of the forfeiture hearing.
"Unlicensed, unregulated, illegal Internet gambling poses a tremendous threat to the citizens of the commonwealth because of its ease, availability and anonymity," Beshear said. "The owners and operators of these illegal sites prey on Kentucky citizens, including our youth, and deprive the commonwealth of millions of dollars in revenue. It's an underworld wrought with scams and schemes."
Brown echoed Beshear's sentiments, and added another reason why the state should be allowed to seize these websites — to protect the children:
"Illegal Internet gambling poses a unique threat to our commonwealth. For individuals — particularly our youth — it is tantamount to a virtual home invasion. For some of our vital and most venerable legitimate enterprises, it undermines their exemplary regulatory compliance and siphons away their constituents," Brown said. "We are hopeful that once this litigation is concluded, the commonwealth will be off limits to these illegal purveyors."
Critics of the state's "block Kentucky residents from your website or have it seized" tactics, however, claim that the real motivation behind the seizure attempt is financial, as the comments by Brown about the "vital and most venerable legitimate enterprises" that have shown "exemplary regulatory compliance" (meaning, horse racing), illustrate. What is really happening is that the state is making way for established race track betting to go online, and wants to clear away the competition, which it sees as "siphon[ing] away their constituents" — and thus, tax income.
Washington-based Internet trade association Interactive Media Entertainment & Gaming Association (iMEGA) petitioned the appeals court to stay the forfeiture hearing while the lower court seizure ruling was appealed. The appeals court combined iMEGA's petition with one filed by the Interactive Gaming Council (IGC) of Vancouver, B.C.
"We're pleased that the Court of Appeals has given us the opportunity to challenge these seizures," Joe Brennan Jr., iMEGA's chairman, said. "The commonwealth has tried to take these domains for their own financial gain, violating Kentucky law, exceeding their jurisdiction, and setting a terrible precedent in the process."
The groups assert that the lower court did not have the jurisdiction to order the seizures and that it misused the state's "gambling devices" law to provide an excuse for permitting the seizures, among other claims.
"This matter has generated concerns across the online world about abuse of governmental power," Brennan said. "Kentucky is opening the door for any government — state and local, foreign and domestic — to use what amounts to blackmail to achieve its ends."
According to iMEGA, none of the 141 contested domain names are owned by individuals or companies located in Kentucky.
"If this precedent is allowed to stand, it's not hard to imagine a government like China utilizing this kind of seizure power to prevent free media, like the New York Times, from reaching their citizens," Brennan added.
A comment by "JMG" on the Techdirt blog summed it up nicely: "Kentucky has a bipolar disorder when it comes to gambling. On- and off-track horse race betting — good," JMG wrote. "Any other form of legalized gambling leads to organized crime, prostitution, broken homes and families, and other evils that harm the children."