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Tuesday morning saw a significant turnout of legal representatives in the Frankfort Circuit Court, prepared to argue their position before Judge Thomas Wingate regarding the attempt last week by the state of Kentucky to seize 141 international domain names belonging to online gambling operations.
The legal teams, representing domain owners, registrars and civic organisations concerned about the impact of Kentucky's actions on freedom of speech and the Internet had earlier submitted legal briefs during a 7 day continuance granted by Judge Wingate.
First up was the legal representative for a number of online gambling companies and domain owners, Bill Johnson who delivered an articulate and cogent argument that Kentucky state officials had acted covertly and without giving the state legislature its right to review their initiative.
Johnson gave a factual summary of events to date and claimed that correct public policy was not followed, resulting in an issue where the state and its lawyers were asking the judiciary to legislate, contrary to the law and to public practice.
Lawyers for the Internet Gaming Council surmised that Kentucky officials were trying to hold domain owners to ransom, a reference to earlier comments by the state that its intention in launching the action to seize domains was aimed at getting owners to come forward and agree to block Kentucky players....and pay a fine for offering their products in the state.
The court was given the benefit of an expert description of how domains work, and the arbitrary definition by lawyers for the state of domains as "gambling devices" in terms of Kentucky laws was disputed. Counsel revealed that a mere handful of registrars were actually complying with the court's order to hand over domain certificates, and pointed out that the certificate is of limited practical value in halting operational conduct as the website and IP address remain outside the control of the certificate holder.
The representative pointed out that the requirements of due process had not been satisfied in the action, with domain owners denied proper notification by the state's servants. The potential for future and wider abuse of the Internet if a decision favouring Kentucky's action was given was emphasised.
iMEGA counsel addressed the definition of "gaming device", suggesting that it was limited to the mechanical gambling devices envisaged by the legislation. No specific updates to the law regarding domains or their inclusion in the "devices" definition had been implemented.
Counsel from the high powered Greenberg Traurig legal firm claimed that the action was flawed because online gambling is not implicitly illegal in the state of Kentucky.
Respected legal expert and author Lawrence Walters said he represented Golden Palace Casino and Golden Casino, who's domains had been impacted by the Kentucky action. He raised questions regarding the use by the state of outside lawyers on a contingency basis, claiming that the state attorney general had not been involved in the process. None of the domain registrars were located in Kentucky, and the action by state officials therefore lacked jurisdiction.
iMEGA's Edward Leyden raised the Constutional issues inherent in the action, specifically the commerce clause in relation to the global nature of Internet business and activity, which was recognised by the US Supreme Court. He argued that individual states may not regulate commerce, especially in the foreign commerce sense, an argument that had prevailed in precedents.
In the issue before the court there had been an attempt to initiate an enforcement measure on entities that were located outside the jurisdiction of the state of Kentucky, and therefore Kentucky does not have the authority to regulate or confiscate domains. In addition, he asserted, the confiscation sought by the state could have the effect of impacting the business activities of individuals in wider jurisdictions where the business concerned was within the law and policies of the governments concerned.
The iMEGA representative said that the Kentucky action is unusual and unprecedented, and went on to question the legal Internet betting taking place on the Kentucky-domiciled Twin Spires.com horseracing website. This raised questions of equity in a state where all forms of gambling had not been banned as was the case in Utah, and this again brought into play the commerce clause of the Constitution, which expressly prohibits states from engaging in commercial protectionism through discriminatory practices.
The time had come to dispel the false notion that the owners of the domains were renegades and criminals, he said, pointing out that the domain owner entities were companies that paid taxes, followed rules and were largely regulated by other jurisdictions. Some are publicly listed companies on leading stock exchanges in countries generally accepted as allies of the United States such as the United Kingdom, he said before concluding that the consequences of the Kentucky initiative could be far reaching and disastrous to commerce.
Presenting the Commonwealth of Kentucky argument in support of the action, Chicago lawyer Robert Foote reprised his contention that none of the opponents of the state in this matter had legal standing. None of the domain owners had presented themselves, instead relying on legal surrogates, he said, claiming that the reason for this was fear of cross examination on their revenues and the knowledge that offering online gambling to Kentucky residents was wrong.
He drew the court's attention to the fact that not one domain owner was personally present, pointing out that one lawyer was representing an unidentified registrar, another was speaking for 7 domain owners, and iMEGA for 58 owners. Other legal representatives arguing their cases had declined to identify their clients.
Foote went on to inform the court that the registrar for one online poker site had been directed by the domain owner not to comply with the court's order for certificates to be lodged with the court pending the outcome of the case. This was in defiance of the court's order. In another case, a registrar had advised that they would lift their lock on certain frozen domain names due to a conviction that the state of Kentucky had no right to force a confiscation. Foote asked how registrars could be persuaded to cooperate.
The Commonwealth's representative pointed to precedents in domain actions, citing the California 9th Circuit Court ruling that a domain name is property that can be seized, and a court decision in the state of Washington involving the Bodog domains, ordered in default to be confiscated in an action with First Technology. Foot also drew attention to enforcement practice in cocaine prosecutions, where seizures are only announced after the fact - clearly an answer to the arguments that domain owners were denied notice of the state's intentions.
Kentucky's intention was to gain possession of the domains, thus forcing the owners into discussions leading to two goals - blocking Kentucky residents from their websites and paying a fine to the state, he said, emphasising that online gambling is clearly regarded as illegal by the US federal authorities.
His statement that Kentucky was not trying to regulate free speech triggered a question from Judge Wingate regarding prohibition of advertising, to which Foote responded by saying that online gambling companies used the .net alternative site subterfuge to advertise, and this would not be affected by the confiscation of the .com domains.
By lunchtime the arguments had been heard and Judge Wingate advised that he would need a further 7 days to consider his judgement.
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