Kentucky Quarter

Split Outcome on Kentucky Domain Seizure Appeals

kentucky-quarterTwo separate appeals-court decisions were issue on Friday in connection with the long-running saga of the Commonwealth of Kentucky’s 2008 attempt to seize 141 internet domain names connected to online gambling.  That seizure attempt hinged on a tortured judicial reading of Kentucky law that held that internet domain names were “gambling devices,” and thus ripe for seizure, regardless of where the domains themselves were housed.

In the first decision, a three-judge Kentucky appellate panel agreed with an argument brought by attorneys for the Interactive Gaming Council, which had long sought broad-based associational standing in the case.  The IGC had previously been granted standing only in connection with one of the case’s defendants — Pocket Kings Ltd, an ownership group behind the original US-owned Full Tilt Poker.

The previous decision regarding IGC’s involvement was reversed, with the case being remanded back to the docket of Franklin Circuit Court Thomas D. Wingate.  Wingate issued the original 2008 decision that allowed the attempted Kentucky seizures to move forward.

In the second decision, Jazette Enterprises was unsuccessful in an appeal seeking a delayed acceptance of a motion to contest the ordered forfeiture of three Jazette-owned domains: Sportsbook.com, MySportsBook.com and PlayersOnly.com.  Following a years-long series of appeals in the case, Jazette and its legal counsel missed a 30-day window that was issued in 2012 to protest a Wingate-ordered seizure of the Jazette domains by Kentucky officials.

Kentucky had previously issued numerous seizure orders to internet domain registrars in an attempt to force the transfer of the contested domains to the commonwealth’s control.  Only a small number of US-based registrars complied, and the seizures themselves were rendered somewhat moot when most of the affected domains relocated to non-US registrar services and stopped using “.com” domains.

Friday’s decision allows the seizure of the old Jazette domains to stand, even though the domains for those have already been transferred.  Sportsbook.com, for instance, currently resolves to Sportsbook.ag, housed in Antigua and Barbuda.

Both of Friday’s opinions were written by Appellate Judge Allison E. Jones.  Both opinions represented unanimous concurring votes of the three-judge panel.

The reversal involving the Interactive Gaming Council’s attempts to seek standing, like the Jazette appeal, represents an issue of decreasing relevance, since most of the domains have moved offshore, while others have become defunct.  One or two small settlements between offshore gambling operators and Kentucky’s third-party prosecuting effort were reached, but the case’s primary importance remained its state-level assault on internet freedom and international online business, drawing protests from such entities as the EFF (Electronic Freedom Foundation).

Nine of the original 141 domains named in the state’s complaint were dropped from the seizure efforts, including the federal-level “Black Friday” indictments of 2011.  The nine domains originally named by Kentucky but later dropped were FullTiltPoker.com, PokerStars.com, AbsolutePoker.com, UltimateBet.com, DoylesRoom.com, TruePoker.com, Bookmaker.com and Bodog.com.

The Black Friday indictments also included a separate (and far more sucessful) seizure and takedown of four prominent US-facing online poker domains: FullTiltPoker.com, PokerStars.com, AbsolutePoker.com and UltimateBet.com.  Kentucky even filed a claim in the DOJ’s Black Friday case against seized corporate assets, which was one of the contributing factors in why it’s taken federal officials nearly three years to complete the remission process for former US-based customers of Full Tilt, with payments in that matter scheduled to begin arriving later this week.

Kentucky refused to relinquish its claims without a whitemail payoff, and successfully negotiated that with the DOJ’s own prosecutors in June of 2012.  Despite court filings by Preet Bharara’s USAO office that Kentucky’s seizure attempts were both “unconstitutional” and ineffective, Kentucky refused to drop its seizure attempt, and ultimately wrested a $6 million payoff to drop Full Tilt and PokerStars from its case.  That money came directly from the PokerStars settlement with the DOJ which itself was reached in 2012.

Kentucky’s cases against the other 132 domains continued to drag on, including several different appeals and remands to Wingate’s circuit court, which has yet to issue a decision other than in complete accordance with Kentucky’s wishes.  That led to the ongoing appeals by IGC and the now-defunct iMEGA group, both of which had sought the associational standing on behalf of the gambling domains’ offshore owners.

In reversing Wingate’s denial of that standing, the appellate court noted that Wingate and the Kentucky prosecutors wanted to have the law work for them in both ways, by filing a collective action against the 141 targeted domains but demanding individual and direct responses from defendants, rather than a group defense.

Wrote appellate judge Jones, in her opinion, “The Commonwealth cannot now turn the tables and ask the court to require each domain name owner to come forward individually and assert virtually identical legal arguments through separate counsel to resolve threshold, purely legal issues that affect the validity of the entire forfeiture procedure.”

The IGC and a prominent third-party gaming attorney assisting in the matter, A. Jeff Ifrah, quickly proclaimed the decision as a victory.  Ifrah, who has represented the IGC since 2008, issued a brief release via his independent Ifrah Law business, stating, “Trying to force 141 domain name owners to pursue their claims individually — filing extremely similar, but distinct motions and appeals—would be burdensome and inefficient.  Now that associational standing has been demonstrated, we will seek to reinstate the earlier Court of Appeals decision that domain names are not ‘property’ subject to forfeiture and do not constitute ‘gambling devices.’”

Separately, IGC CEO Keith Furlong also issued a victory statement for an AP wire report on the appellate decision.  “Obviously, we consider this a win,” said Furlong. “We are also proud to be a catalyst for this decision which provides guidance to all associations seeking to represent their members in the Commonwealth of Kentucky.”

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