May 18th 2010
The Kentucky Supreme Court, not very long ago, upheld a decision that had been made in a lower court, one that had cleared the way for the state to seize domain names owned by online gaming operators. The state Supreme Court was in agreement that the owners of the sites had to come forward and identify themselves in order to sustain their defense against the state's claims.
A counterclaim was filed through an organization called iMEGA (Interactive Media Entertainment and Gaming Association), but the state claimed that iMEGA was not an injured party in this case and therefore lacked the legal standing to bring any actions. That was a legal glitch that could be overcome, and it was. The owners of a poker site stepped forward and filed an affidavit asserting that they are indeed a member of iMEGA, and now the case can be heard and ruled upon. Officials from iMEGA were actually very optimistic that the Supreme Court was going to rule in favor of the gaming sites.
In mid-April, however, the state's attorneys threw another curve ball out there.
The State of Kentucky, in Franklin Circuit Court, filed a lawsuit against Pocket Fives, the company that was named as the owner of Full Tilt Poker, for money that was supposedly lost by Kentucky residents on its sites during the period of March 25, 2005 to September 25, 2009. The state claims jurisdiction in these matters involving non-residents for any monetary claims by its own residents. An oral statement that was given by the IGC (Interactive Gaming Council), in which it was mentioned that 13,000 Kentucky residents play poker online, apparently added fuel to the fire, convincing state attorneys that they had a "compelling interest" in exercising jurisdictional authority.
In September of 2008, Kentucky's governor, Steven Beshear, originally launched his attack against the online gaming industry. Citing an law about gambling devices, and interpreting it to include gaming-related domains, Beshear opened the door for 141 names to be seized and forfeited to the Commonwealth, making Kentucky the first state to do that. “Unlicensed, unregulated, illegal Internet gambling poses a tremendous threat to the citizens of the Commonwealth because of its ease, availability and anonymity," is what he said at the time.
The motives of Governor Beshear have not exactly been secretive. Elected in 2007, he has been on a crusade to expand gambling within the state. This would principally work its way through "racinos" at pari-mutuel tracks, with the objective of adding as much as $1.2 billion in revenue over a five-year period. The online gambling operations would obviously be a form of competition for many of the interests who have contributed to Beshear's campaigns.
Beshear's 2007 gubernatorial bid accentuated his plan for gambling, to such a extent that the Republican Party in the state ran an ad campaign that referred to him as "Easy Money Steve." A supposedly "independent" organization called the Bluegrass Freedom Fund was established by one of Beshear's former operatives and raised over $2 million in 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 (Churchill Downs, for example, contributed $250,000). The issue is still on the table, and another election cycle has started; Beshear is running again in 2011.
Supposedly, the argument against slots casinos and other online gambling operators was that those sites undercut the horse racing industry in Kentucky, promoted money laundering, lacked consumer protection, corrupted youth, etc.
We've certainly heard that one before, but this time a lot more is at stake this time than perhaps ever before. One should never underestimate a politician who is on the "take" from a special interest.