INEQUITY AND COMMERCIAL PROTECTIONISM CLAIMED IN KENTUCKY ISSUE (Update)

10 October 2008

Opposition mounts against Governor Beshear's attempt to hi-jack international domain names

On the eve of an important court case that could have international consequences regarding Internet domain names, opponents of a move by the state of Kentucky to take over 141 domain names of online gambling operators held a discussion and press conference Monday afternoon, denouncing the move.

Hosted by the personal freedoms body the Bluegrass Institute, the event was attended by a wide range of industry and mainstream media, industry legal representatives and freedom of speech and the Internet advocates.

Among the organisations were Associated Press, iMEGA, the Poker Players Alliance, Americans for Tax Reform and the Media Freedom Project, Lexington-based WTVQ and WAVE 3 TV, the Internet Commerce Association, local CBS, NBC and ABC associates.

It has also emerged that on Monday out-sourced lawyers for the state officially advised opposing lawyers that the US-based domain registrar GoDaddy (which has a legal representative in attendance for the case) had cooperated with an earlier order from the Frankfort Circuit Court's Judge Thomas Wingate to relinquish to the court certain domain certificates pending the outcome of the case. Prior to this it had been claimed that the domain owners had not been informed by the State of its intentions and moves.

It is not yet clear which of the 141 domain certificates in dispute have been handed over, although some reports claimed that Tokwiro Enterprise's UltimateBet.com, Sportsbook.com associate CakePoker.com and Microgaming-powered DoylesRoom.com were among them, along with USABingo.com, SlotsofFortune.com and BingoWorkz.com.

Judge Wingate will preside when the hearing resumes on the morning of Tuesday October 7 in the Frankfort Circuit Court, where lawyers working for the state of Kentucky on a contingency basis first filed the state's attempt to commandeer the online gambling domains.

Last week the Judge granted a continuance to enable interested parties to establish standing and submit legal briefs on the issue.

Legal argument is likely to include whether the terms "gambling devices" in state law can be interpreted to embrace Internet gambling domain names.

The Poker Players Alliance has urged its members, and poker players generally, to communicate their opposition to the Kentucky action to state officials, with local PPA director Rich Muny and the PPA website claiming that some 1 800 letters have already been sent, many by the PPA's 16 000 strong Kentucky membership. The PPA claims a total membership of over a million poker players.

The organisation recommended a theme of: “Poker is not gambling, nor is it a crime. Poker is a game of skill that was unfairly and improperly included in this action, and I request the immediate removal of the poker-only sites from your list of domains to seize.”

Kentucky's action and its approval by Governor Beshear continued to come under attack Monday.

WTVQ quoted Derek Hunter of the Media Freedom Project: "This is a dangerous step in regulating what people can and can not access on the Internet. Who is to guarantee it will stop here?" He was responding to Governor Beshear's claim on the station that online gambling sites "prey on Kentucky citizens."

Earlier, Hunter said that the Kentucky action raises constitutional issues about due process, and that the government should not control Internet commerce.

Jim Waters, Director of Policy and Communications for the Bluegrass Institute said, “What happens here is being watched across the world.” In a seperate interview with Poker News Daily he said that the original seizure by officials in Kentucky was done secretly behind closed doors, adding: “People in Kentucky haven’t even had the opportunity to express their views to elected officials.”

A statement posted in iMEGA’s website proclaimed: “Should the actions of Kentucky’s chief executive stand, the harm to Internet freedom would be immense. What a powerful weapon would be placed in the hands of government: to arbitrarily seize politically, religiously, or culturally-based Internet domains that may run contrary to the views of those in power.”

"Nobody has been as reckless as Kentucky has on this," said Edward James Leyden, legal representative for the Interactive Media Entertainment & Gaming Association. Here's how I react to it [the attempt to confiscate media domains]. Governor Beshear needs to read the Constitution," he added.

Leyden pointed out to the Associated Press news agency that the Governor's action could be interpreted as an unprecedented attempt to limit competition in what should be a free marketplace. He used the Kentucky lottery and the Internet-based Twin Spires.com horserace betting operation in the state as examples of Internet gambling which operate with impunity, an inequity justified by state officials as allowed by federal law and regulated as online pari-mutuel wagering.

"I guess the perception is it's just out of staters and it's just people who aren't here in Kentucky, and then it's a free ride," said Leyden.

John Pappas of the Poker Players Alliance told AP that his group initially supported Governor Beshear's election due to his pro-gambling stance - the Governor has been a supporter of more land casino facilities in the state. In the current issue, the governor has been quoted as saying part of his motivation is to protect the state's gambling interests.

"Unlike casinos that operate on land or on riverboats in the United States, these operations pay no tax revenues, provide no jobs and yield no tourism benefits," Beshear is reported to have said, referring to online gambling operators as "leeches on our communities."

Following the current moves, however the PPA had a new message for the governor: "We would welcome any proposal for you to regulate and tax online poker. And in fact if you move forward with your casino plans and they don't include a regulation and taxing for online poker, we will oppose those casino plans because of your position against our pastime," said Pappas.

Joe Brennan Jr., chairman of the Internet Media Entertainment & Gaming Association, reiterated the claim that the state of Kentucky was indulging in commercial protectionism: "These are things that should trouble all Americans because this was all done in an effort to take out the competition," Brennan said.

"If this is allowed to stand, it will affect the entire Internet," Brennan stressed. "This can metastasize to other states. What the Governor has done is employed the ultimate weapon, a means of eliminating competition."

At Monday's discussion, he also criticised the governor's use of outside counsel and the covert manner in which the action has been initiated.

Jeremiah Johnston, a spokesman for the Washington D.C.-based Internet Commerce Association, told WZTV that Kentucky is exceeding its authority and jurisdiction in what should be a federal interstate commerce issue. Legal precedent set by the case could have a "chilling effect" on Internet businesses.

"If all of a sudden your company pops up on the radar in some state and they can just take your address, it's like someone swooping down onto Main Street and taking your building," Johnston told Associated Press. "You're out of business.";

The Louisville Courier newspaper carried a cartoon lampooning Governor Beshear as a Napoleon-like dictator attempting to control the Internet, and Domain Name Wire, published a statement against the Kentucky action, saying: "It's rather unsettling that the governor of one of the fifty U.S. states can decide to seize domain names, and all he needs to do is find one elected judge to say 'yeah, let's do this'.

"Scarier still is that the domain owners didn't really have any warning. The order was to seize the domain names first, then talk through the details later. At that point much of the damage has been done."

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