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State Relies on Fear Factor But Industry: Online Gambling Fights Back

Written by:
C Costigan
Published on:
Sep/24/2008

The Commonwealth of Kentucky will be holding a hearing on Thursday to determine if it can seize up to 141 online gambling related domain names.

Gov. Steve Beshear said his administration has asked a Franklin County Circuit Court judge to give the state control of 141 gambling Web site domain names. Beshear said he's looking to restrict Kentuckians' access to Web sites with names that include some of the most popular gambling sites for U.S. players: bodoglife.com, doylesroom.com and fulltiltpoker.com.

Beshear referred to these online gambling firms as "blood suckers".

"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 said at a Monday afternoon Capitol press conference. "They are leeches on our communities."

But what might have seemed like a "cake walk" earlier will be met with a serious challenge.

"Some questions have arisen about how an entity that is potentially the target of this action by the Commonwealth of Kenucky can most effectively defend itself from this miscarriage of justice," expressed Edward Leyden, President of The Interactive Media Entertainment & Gaming Association (iMEGA.org). "It is vital to remember is that in mounting these kinds of attacks on the industry, one thing that both governmental prosecutors and private plaintiffs count on is the well-placed fear that overseas operators have of coming physically into the United States--and, after what we have seen happen to several high-profile industry figures, who can blame them."

The Justice Department has targeted a number of key industry figures as have individual states over the past two years. Most notably, the DOJ apprehended David Carruthers, a British national and CEO of what was once the most largest online sports book operating offshore while he was changing flights between London and Dallas, Texas.

The arrest of Sportingbet Chairman, Peter Dicks, reinforced the dangers of traveling in and out of the United States. A warrant was placed on Dicks by the state of Louisiana simply because it was claimed his company advertised there. In the end, the state of New York, where Dicks was taken into custody, refused to extradite the Sportingbet exec. He later settled with the state of Louisiana for an undisclosed amount.

Several months later, the founders of a powerful online gambling money transfer company, Neteller, were arrested and fined in the millions by US law enforcement.

"These state actors and private plaintiffs, thus, are betting that they'll, in essence, get a ‘free shot' because no one will be on the other side to fight back--that's what in essence happened in Franklin County last Thursday," Leyden points out.

iMEGA has assembled a team to represent the sector and its growing number of members at Thursday's hearing.

"The "equalizer" to this injust imbalance is iMEGA's judicially recognized standing. In fact, one of the factors that the District Court considered in granting iMEGA associational standing on behalf of the people and entities who run Interent gambling businesses is the imminent harm these folks face. In other words, we, iMEGA, have been designated to, sort of, ‘take a bullet' for those individuals and businesses whose interests are in grave jeopardy but who might face prosecution if they had to step forward to defend those interests themselves."

Even the powerful million plus member strong Poker Players Alliance appeared helpless to defend the industry in this type of judicial setting. That organization was hopeful to have some of its 13,000 Kentucky-based members on hand to protest the commonwealth‘s action.

John Pappas, executive director of the Poker Players Alliance (PPA), said yesterday that his group was outraged at the actions taken by Kentucky Governor Steve Beshear and the Franklin County Circuit Court to seize the domain names of Internet gambling websites.

"Many of Governor Beshear's arguments - that online poker is illegal, unregulated and without a mechanism to capture tax revenue - are false. Online poker is not illegal under Kentucky law, is regulated in its home jurisdiction and the Commonwealth of Kentucky chose not to license and regulate poker websites.

"If the Governor truly wants to implement tighter regulations, taxation mechanisms and consumer protections on Internet gambling, the PPA suggests he publicly support federal legislation by U.S. House of Representatives Financial Services Chairman Barney Frank, H.R. 2460, which would achieve those goals.

"Poker is a game of skill, a true American pastime and has a proud heritage in Kentucky. Simply because the game has evolved into the 21st Century, it should not be treated as suspect activity. Forcefully and secretly seizing control of websites that offer online poker games is not a sound public policy or a sound legal solution."

It was not immediately known if the state orchestrated this hearing at a time when much of the industry was assembling in Barcelona, Spain for a well publicized Internet gambling trade conference. The Kentucky action has been widely discussed at that conference.

"The Kentucky thing has people shaken up," Gambling911.com's own Jenny Woo reported from the Conference. "Some are putting a haughty face on it, making all sort of "Redneck" comments, but you can tell they're just saying that to convince themselves."

Last year, one of the industry's largest firms, Bodog, lost its domain name in a highly publicized trademark infringement suit. The company ignored orders to appear in a US Court of law.

"After Bodog lost their domain in that 1st Tech suit last year, they know that it can really happen, and they're all sh***** their well-tailored Italian suit pants as a result."

Woo was initially denied access to the conference by organizers but sneaked in wearing a wig and Sarah Palin "librarian" glasses along with a fake ID. Woo is gauging the "mood" at Barcelona all week.

Leyden, along with his team, were scheduled to fly to the Commonwealth on Wednesday. A law firm with license to practice in Kentucky would also be assigned to the matter if necessary.

"In exercising this standing, iMEGA has assembled what may be one of the most talented, experienced, and certainly well-respected white-collar defense teams in the country, BAR NONE.," Leyden reassured. "In short, we provide individuals and companies that may be affected by this Kentucky action with the highest quality of legal representation that is second to none while, at the same time, the opportunity to remain anonymous by letting iMEGA be the face before the court--which is precisely what associational standing is meant to accomplish."

----

Christopher Costigan, Gambling911.com Publisher

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