Poker sites fight to get domain names back from Kentucky

This is a novel legal strategy. And so far it's working. Last month, in an effort to preserve the state's monopoly on legal gambling, Kentucky Gov. Steve Beshear sued to have 141 online gambling sites' domains transferred to the state's control. According to the Washington Post, a big part of Beshear's election was based on bringing casinos to Kentucky.

Kentucky circuit court judge Thomas Wingate granted the request, ordering domain registrars to do just that. Wingate found that Kentucky's anti-gambling statutes allowed such a court order in that gambling website domains are "gambling devices" under the state's law.

But what jurisdiction does the Kentucky court have? Opponents say none, since none of the sites or the registrars are based in Kentucky. They had a chance to make their arguments to the judge yesterday and Judge Wingate says he will issue a final ruling next week. Bret Fausett, an attorney with the Los Angeles law firm of Adorno, Yoss, Alvarado & Smith, told the Post:

This is a little bit like if the Home Shopping TV network was accused of fraud, and Kentucky decided to seize the show's cameras and set even though HSN's real location is nowhere near the state.

But under the rules of personal jurisdiction, the inquiry is whether the defendants "intentionally availed" themselves of the benefits of doing business in Kentucky and whether there were "substantial" contacts (to simplify). Even if Kentucky does have jurisdiction, taking the defendants' property amounts to a Fifth Amendment "taking" and the websites should be entitled to just compensation.

Christine Jones, general counsel for GoDaddy.com, the registrar used by 20 of the 141 domains named in the judge's order, said the company tried to walk a line between complying with that demand and defending the rights of their customers.

"We issued a registrar certificate to the state that says the court has jurisdiction over the issue, but it doesn't have control over the domains, other than the ability to exercise judgment so that when there is a final adjudication on the merits of the case or a settlement by the parties, we will honor that outcome," Jones said.

Online gambling is one of main areas where local regulation or even federal laws prove ineffective due to the availability of offshore locations. But Kentucky's approach, while certainly innovative, goes too far in giving states control of private property, especially since it is a question of enforcing a state monopoly on a massively profitable business, not really protection of citizens at all.