The three-judge panel is considering Beshear's attempt to seize the domain names of 141 gambling-related websites after Franklin Circuit Judge Thomas Wingate approved the move last month.
Currently, the seizure order has had no real effect as the state cannot control the website's content until the names are forfeited to the state — a hearing on which has been stayed pending the appeals court ruling.
In oral arguments, attorneys representing six domain names, two trade groups and The Poker Players Alliance, claimed the state's seizure attempt is flawed, root and branch. Their main arguments centering on jurisdictional issues; domain names being classified as gambling devices; the seizure of domain names without a criminal conviction or even prosecution of the website operators; and a prohibition in the U.S Constitution's commerce clause against states' regulating interstate or international commerce.
"We have Kentucky exercising worldwide jurisdiction," attorney William E. Johnson said of the proceedings, which have seen friend-of-the-court filings by the Electronic Frontier Foundation; the Center for Democracy and Technology; the American Civil Liberties Union of Kentucky; Network Solutions; and The Poker Players Alliance.
According to Erik Lycan, an attorney representing the state, gambling sites are engaged "in a massive offshore criminal conspiracy [masquerading] as a legitimate business."
"They can't bring that masquerade into Kentucky," Lycan said.
According to Larry Walters, an attorney representing Golden Palace in the underlying case, the precedent that could be set if the trial court is allowed to forfeit these URL's is staggering but the case doesn't seem to be going in the government's favor.
"The Oral Argument went about as well as we could have hoped," Walters told XBIZ. "At least two of the three judges seemed very skeptical of the government's case, and asked some stinging questions."
While Beshear campaigned in part on a promise to bring casinos to Kentucky, he now feels that some of the world's most popular gambling sites are bad for the state, claiming that the sites allow children to gamble; make it easier for criminals to launder money; and lack consumer protections. Critics argue that it's all a protectionist move to benefit the state's lucrative horse racing-based gaming industry.
According to Jon L. Fleischaker, an attorney for the Interactive Media Entertainment and Gaming Association, the state's move is a classic example of prior restraint. Fleischaker compared domain names to billboards and cited a Kentucky billboard advertising the Indiana-based Horseshoe Casino — which, on First Amendment grounds, is allowed to advertise within the state despite gambling being illegal. In Fleischaker's example, the state's seizing of domain names is akin to it seizing a casino's billboard.
While the state wants gambling sites, and potentially other adult-related content sites, to block access by Kentucky Internet users, opponents claim the required technology is both expensive and unreliable. The most important argument, however, is constitutional and revolves around the state's authority to regulate websites located in other jurisdictions, where their content is perfectly legal.
Interactive Gaming Council attorney John L. Tate warned of the repercussions of allowing individual localities to regulate a global medium such as the Internet. Such moves would justify, for example, China seizing U.S. domains that promote religion.
"If we can do it to them, they can do it to us," Tate said.
Also being contested is whether or not domain names can be classified as gambling devices, since they do not meet the legal definition of being a manufactured electronic device and as such covered under Kentucky's 1974 gaming statutes which predate the commercial availability of the Internet.
Two of the three judges reportedly expressed skepticism as to the case's merits; with Judge Jeff Taylor raising concerns over how the government could seize domain names without prosecuting the website operators and giving them their day in court.
Justice and Public Safety Cabinet Secretary J. Michael Brown "taught a law school class 27 years ago and he taught that there is a presumption of innocence until proven guilty," Taylor said.
Although Walters reported that no decision was rendered at the hearing, he remains hopeful that the interests of website owners will prevail.
"All of the Petitioners' lawyers were well-prepared, and recognized the potential precedent-setting nature of this case," he added.