Governor Beshear’s Attack on Web Domains Could Jeopardize Kentucky Growth

Written by:
C Costigan
Published on:
Kentucky Online Gambling Domains

Prosecutors representing the commonwealth of Kentucky argue that state law bans bans "illegal gambling devices" and, as such, the state has every right to seize up to 141 online casino, sports book and poker domains.

Lawyers for the Interactive Media Entertainment and Gaming Association countered:

"(The) seizing domain names would be unconstitutional and that domain names can't be construed to be devices."

Such is the dilemma that will be presented in Franklin Circuit Judge Thomas Wingate's courtroom on Tuesday when lawyers for several of these online gambling entities will be present to argue their case against Kentucky Governor Steve Beshear's actions.

Beshear may have run his campaign last year on the premise of legalized casinos, but few had any idea he would wage a full out assault on the Internet. And it's not just online gaming sites that need to worry. Beshear's actions have gained wide spread attention throughout the Internet community in general where websites such as expressed anger over the current situation.

The issue had Slashdot revolved around ICANN, the agency responsible for issuing of domain names to registrars.

Wrote one reader:

"This is EXACTLY why we (the US) should not control this resource. I love living in the US, and think it is a great country (yes, we make mistakes... but other countries do too.) But I don't think any 1 country should control this resource for exactly reasons like this."

The tasks of ICANN, which is headquartered in California, include responsibility for Internet Protocol (IP) address space allocation, protocol identifier assignment, generic (gTLD) and country code Top Level Domain name system management, and root server system management functions. More generically, ICANN is responsible for managing the assignment of domain names and IP addresses.

To date, much of its work has concerned the introduction of new generic top-level domains. The technical work of ICANN is referred to as the IANA function. ICANN's other primary function involves helping preserve the operational stability of the Internet; to promote competition; to achieve broad representation of global Internet community; and to develop policies appropriate to its mission through bottom-up, consensus-based processes.

On September 29, 2006, ICANN signed a new agreement with the United States Department of Commerce (DOC) that is a step forward toward the full management of the Internet's system of centrally coordinated identifiers through the multi-stakeholder model of consultation that ICANN represents.

A member of the European Parliament, William Newton-Dunn, has recently been addressing questions to the European Commission which asks whether ICANN is engaging in restraint of European free trade laws by imposing restrictions on who can operate a TLD and sell domain names. Some restrictions are considered insurmountable by many small business owners and individuals, such as the non-refundable $50,000 application fee.

Registrars and their attorneys will also be attending Tuesday's hearing in Frankfort, Kentucky. A press conference - expected to last up to four hours - has also been called for today and will feature the Bluegrass Institute, which refers to itself as an independent research and educational institution offering free-market solutions to Kentucky's most pressing problems.

They further claim that, by securing property rights, making government smaller and systematically reducing its tax and regulatory burden, Kentucky becomes the destination of choice for entrepreneurs.

Why Beshear feels threatened by online gambling establishments is not immediately known as his state takes in millions of dollars from the Kentucky Derby, quite possibly the most wagered on single day sporting event in the United States. The 157,770 in attendance was the second largest in Derby history. Approximately 57,000 pay $85 and up to watch the Derby. On the high end, celebrities like Michael Jordan pay over a million for the best seats (termed "millionaire‘s row").

Do the math and it's easy to understand why the Commonwealth of Kentucky should be one of the richest states in the union. It's not. Kentucky is sometimes referred to as a "poor state rich with court houses".

Kentucky has long been one of the poorest statesin the country. In 1939 Kentucky ranked 44th out of 48 states in terms of per capita personal income (Bauer, Schweitzer and Shane, 2006). In 1970 Kentucky ranked 44th out of 50 states in terms of per capita personal income and in 2004 Kentucky wa sstill the 6th poorest state in the union with a per capital in come of $27,151 compared to the average for the entire country of $33,041.

Kentucky remains mired at the bottom of the income distribution with a number of factors to explain this. One of the more prominent explanations has been the historically low level of education in Kentucky. Clearly this was part of the motivation behind the Kentucky Education Reform Act of 1990and the Post Secondary Education Reform Act of1997 (known as HB1). The education explanation appears credible since in 2005 Kentucky ranked 49thin the percent of the adult population with a high school degree and 47th in the percent of adults with acollege degree. Other explanations have focused on Kentucky's relatively low concentration of "hightechnology" employment as a contributor to our lowranking. Again, this argument is bolstered by a recent report from the Milken Institute (DeVol and Koepp2004) in which Kentucky ranks 48thin their State Technology and Science Index.

Other explanations have focused on Kentucky's relatively low concentration of "high technology" employment as a contributor to the state's low ranking. Again, this argument is bolstered by a recent report from the Milken Institute (DeVol and Koepp2004) in which Kentucky ranks 48th in their State Technology and Science Index.

But Beshear's backwards move in regard to his heavy handed efforts to eradicate online gambling domain names from the World Wide Web could scare tech companies from setting up in the commonwealth.

Dozens of lawyers representing the Internet gambling firms hope to have the issue resolved by Tuesday. The state has put on the table a settlement agreement that would allow the targeted firms to keep their domain names provided they pay a yet-to-be-determined fine. The attorneys representing i-Gaming have all turned down such a deal.


Christopher Costigan, Publisher

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