Congressman seeks delay in online gaming regulations

One of Congress’ leading supporters of online gaming urged Bush administration officials today to hold off on instituting regulations to outlaw the games in the final days of the presidency.

Democratic Rep. Barney Frank, chairman of the House Financial Services Committee, asked Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to postpone the “flawed” regulations until President-elect Barack Obama’s administration can review the rules.

Congress passed a bill in late 2006 essentially banning the online games, and the administration has drafted regulations needed to put the legislation in place. Frank’s committee passed a bill this fall that would stop the rules in favor of a new process.

“I am deeply disappointed to hear that your agency is proceeding with what I consider to be unseemly haste in issuing regulations implementing the Unlawful Internet Gambling Enforcement Act,” Frank wrote.

“This midnight rulemaking will tie the hands of the new Administration, burden the financial services industry at a time of economic crisis, and contradict the stated intent of the Financial Services Committee.”

Kentucky’s TwinSpires Goes From Internet Gambling Boycott to Ban

Governor Steve Beshear of Kentucky argues that online gambling is dangerous to children and consumers, so he is attempting to seize the domain names of 141 online casinos. Despite the muddied reasoning of his case, some in the federal government agree, and are pursuing the finalization of regulations implementing the UIGEA before the change of Presidencies.

The irony is that Beshear, whose ill-conceived court case has drawn calls across the Internet for boycotts of Kentucky industries in general and Churchill Downs and its online entity, TwinSpires, in specific, now faces a more complete move against online gambling than he desired. Beshear wanted to use protectionist policy to defend TwinSpires from competition, and excepted the site from his order.

But the feds have made no such distinction. Even though the UIGEA allows for horse race wagering online, banks have said part of their difficulty enforcing the payment ban is distinguishing legal from illegal online gambling. Thus, the regulations being reviewed give protection to banks who simply refuse all gambling payments, effectively including TwinSpires and other Internet racing sites.

Now Beshear finds himself in the unenviable position of defending TwinSpires as a legitimate, acceptable site for online gambling, while explaining how the sites facing his forfeiture order are any more dangerous to society than the home-grown Kentucky one.

As Beshear’s move was generated by money in the form of state taxes, the rumor is that undue pressure applied by a White House official acting to protect National Football League interests may be the cause of the sudden developments at Treasury. William Wichterman is currently a top aide in the White House, but as recently as March he was paid to lobby against online casinos for the NFL.

Beshear could escape the quandary of his position by dropping the pursuit of the order in Judge Thomas Wingate’s court and allying with the numerous Congressional Democrats supporting the legalization and regulation of online gambling. He would save face by using regulation as the reason for reversing his public position regarding protecting children and patrons. And TwinSpires would not be driven out of business.

Microgaming Online Gambling Software Website To Block All US Traffic

We have learned that effective Monday, Microgaming – a leading software provider for online casinos and poker sites based in South Africa and the Isle of Man – will begin blocking all US-based traffic.  The commonwealth of Kentucky has listed Microgaming among its web domain names to forfeit later this month.

Microgaming Software Systems Ltd has been a leading software providers to the online gambling industry, with just under 100 casinos listed on its website. Online casino operators such as the Carmen Media Group, Fortune Lounge Group, Ladbrokes, 32Red, Fairground Gaming, Vegas Partner Lounge and Golden Star Lounge are among those who use Microgaming’s software.

Microgaming also has an online poker subsidiary called Microgaming Poker, which is the network used by Doyles Room.   Doyles Room’s domain registrant, GoDaddy.com, already announced it had turned over the website’s operating certificate to the commonwealth of Kentucky.

The state of Kentucky claims that several dozen online gambling websites have cut into their economic well being and will hold a forfeiture hearing in two weeks.  Original reports suggested that Microgaming would only block Kentucky residents, however, the degree of difficulty in blocking a single state within a country appears too overwhelming for the firm.

There were no immediate indications that Microgaming would require its actual licensees to block US traffic as of press time.

Many Microgaming licensed companies restrict individuals from playing for real cash originating from certain states, however, the actual websites are not blocked.

China, Singapore and some Arab countries engage in similar blocking efforts and Australia is looking to follow suit.

Bush Treasury Seeks UIGEA Implementation On Online Gambling

Despite testimony from a rainbow cross-section of society, including leaders of financial institutions, government departments,Congressional members, Internet experts, and foreign policy observers, the Department of the Treasury is intent on implementing the UIGEA before the coming change of administrations.

Treasury officials finalized regulations which would define which online gambling activities were illegal to transact payments through banks and credit card companies. On October 21st, the new rules were forwarded to the Office of Management and Budget for review before implementation.

Representatives from various gambling industries, along with Treasury officials, are meeting all week with OMB personnel to voice opinions about the regulations before they are enacted. Letters signed by a group of Congressmen have asked that the implementation process be stopped.

Horse and dog racing industry reps have already had meetings to attempt to retain exemptions in the new definitions that were provided in the UIGEA. Members of the Interactive Gaming Council have also attended at least one discussion, and Executive Director John Pappas of the Poker Players Alliance is scheduled to have a say on Friday.

Pappas said, “It’s really remarkable that this administration would try to push this out given the burden it would place on financial institutions at this time of financial crisis.”

If the Treasury succeeds in placing definitions on what constitutes online gambling and improper payments, the transaction process for online casinos will become even more awkward and muddied for American players.

The Bush administration is following a tradition of imposing controversial regulations before the end of term, a process which allows the incoming administration a clear desk and no pressure to immediately deal with the liability of handling a hot potato. But there is also the belief that the Obama Executive Branch will be friendlier to Internet gaming, thus leading hardcore religious Republicans to push this agenda now.

Looking deeper into iMEGA’s Kentucky appeal

The first volley in what is anticipated to be a number of appellate challenges to the ruling in the Kentucky domain name case has been lobbed by the Interactive Media Entertainment and Gaming Association (iMEGA), the trade association representing many of the affected domain name registrants.

Last week iMEGA’s attorneys filed a 55-page writ seeking to overturn the ruling by Kentucky Circuit Court Judge Thomas Wingate granting forfeiture of 141 domain names to the Commonwealth of Kentucky, as well as his earlier seizure order which gave Kentucky control of the domain names. iMEGA is also seeking dismissal of the case its entirety.

“Gambling devices,” legal standing at issue

In its writ, iMEGA identifies a number of procedural and legal errors by Judge Wingate, beginning with the claim that the judge wrongfully found jurisdiction against the domain names despite the fact that they are not tangible and have no presence in Kentucky.

The writ also claims Judge Wingate erred by misapplying the Kentucky statue that pertains to the seizure of “gambling devices” which, iMEGA argues, refers only to physical items located in the state and not to intangible domain names.

The relevant Kentucky statute is unambiguous in its definition of a gambling device as being either a slot machine or: “Any other machine or any mechanical or other device, including but not limited to roulette wheels, gambling tables and similar devices, designed and manufactured primarily for use in connection with gambling and which when operated may deliver, as the result of the application of an element of chance, any money or property, or by the operation of which a person may become entitled to receive, as the result of the application.”

iMEGA argues that Judge Wingate exceeded his authority by expanding the definition to include domain names, in effect rewriting the statute.

The issue of Judge Wingate’s denial of iMEGA’s legal standing to represent any of the domain name registrants is also raised in the writ. iMEGA represents registrants, or “users,” of the domain names that are issued by a registrar, such as GoDaddy or Network Solutions.

iMEGA had appeared at the forfeiture motion on behalf of its member registrants, but the court ruled – contrary to the law, according to iMEGA – that it lacked legal standing to appear in court on their behalf.

Beyond additional jurisdictional arguments that were raised, the writ also invokes a number of constitutional issues. It argues that the Kentucky action results in prior restraint of commercial speech in violation of the First Amendment by taking away the domain names which are used to advertise the Web sites.

Further, the authors of the writ argue that Kentucky’s seizure of the domain names violates the Commerce Clause by interfering with interstate commerce, a protectionist move to benefit Kentucky’s gambling industry at the expense of the rest of the world.

The writ takes special objection to the manner in which the Commonwealth first obtained the seizure order, which iMEGA asserts was a violation of their members’ First Amendment and due process rights. The hearing was “ex parte,” meaning the defendants had no notice or opportunity to participate.

Only the Commonwealth presented evidence to the judge, and the entire court file including the seizure order itself was sealed until five days after the order was handed down. Thus, iMEGA argues, the members’ domain names were seized without any opportunity for them to defend themselves in court.

Attorneys for iMEGA indicated that they filed the writ now rather than waiting until after the Dec. 3 forfeiture hearing because of the “irreparable harm” which would be suffered by their members if the Commonwealth took control of the domain names and immediately moved to close them.

The respondents to the writ have 10 days to file a written response to iMEGA’s petition. When their response is filed, or when the 10 days has elapsed, the matter will be submitted to the three-judge appellate panel for its review.

If the appeals panel rules against iMEGA, their next step is to appeal to the Kentucky Supreme Court. Based on their allegation of “irreparable harm,” it is expected that iMEGA would then request a stay of the forfeiture hearing pending that appeal.

Next step

As of now, the judge has ordered the defendant domain names to prove to the court that they have geo-blocked their sites from Kentucky residents, or turn their names over to the Commonwealth. So far only one company, MicroGaming, has complied with the court’s order and geo-blocked Kentucky residents from accessing the online poker rooms that are part of its poker network.

Judge Wingate had originally set Nov. 17 as the date for the forfeiture hearing, but has moved the hearing to Dec. 3. This delay is a result of a request for a Motion for Stay made last week by another online gambling association, the Internet Gaming Council (IGC). Judge Wingate ended the hearing on IGC’s motion by stating he would “take the request under advisement.”

It is unclear what will happen on Dec. 3 if the foreign registrars simply refuse to come to court and hand over the domain name Web sites. One domain name registrant, Golden Palace, has submitted an affidavit asserting that it does not belong on the list of “unlawful gambling sites,” but the judge has indicated that a separate hearing on that issue will have to be scheduled.

There are dozens of other registrars located outside of the United States and without their cooperation it is unclear how Kentucky will actually take possession of their domain names.

Call for boycott

There has been a growing movement for an organized protest against the actions of the Commonwealth of Kentucky and, specifically, its governor, Steve Beshear, who spearheaded the domain name seizure action. Last week, Online Casino Advisory’s Senior Gaming Analyst Sherman Bradley called for a boycott of all gambling in the state of Kentucky.

The boycott was picked up by a number of Web sites, including domainnamewire.com which listed “ten ways to pressure Kentucky to drop its assault on the internet,” including boycotting Kentucky’s own online gambling Web site, TwinSpires.com, and its big sports/gambling event the Kentucky Derby. The site also suggests writing to Beshear’s office.

There is also a Web site devoted solely to the boycott, aptly named BoycottKentucky.com. As stated on the site, “BoycottKentucky.com was created to educate the public about the over-reaching and unconstitutional actions of Kentucky Governor Steve Beshear and to harness the economic, political and social pressure necessary to force a reversal of his actions”.

The site has a number of suggestions for ways to have an impact on various businesses operating in Kentucky who might then put pressure on the governor to drop the lawsuit. There is also a petition on the site for supporters of online gambling to sign and forward to the governor’s office.

In addition to the petition, BoycottKentucky.com is also organizing a call-in campaign for this Friday, Oct. 31, asking those opposed to Kentucky’s actions to flood Governor Beshear’s office with phone calls opposing Kentucky’s unprecedented and outrageous attack on the Internet.

Advise Your Online Gambling Clients to Block Kentucky?

Noted online gambling attorney I. Nelson Rose was recently quoted in Poker News Daily as saying he would want his clients to block access to the state of Kentucky.

A Franklin County Circuit Court judge ruled that 141 online gambling domain names are to be forfeited over to the commonwealth if they fail to block access to Kentucky citizens.

But are we talking about China or Kentucky here?

“I can’t decide if Nelson Rose is an idiot, a coward, or both,” commented an industry analyst who wished not to be named.

Rose: I would advise my clients to block Kentucky residents. There is no real downside to doing that. Kentucky isn’t a major market. The Judge made it clear if companies didn’t block Kentucky residents, then their name will be forfeited. You don’t want to become the test case. All you’re giving up is the little market of Kentucky. If a bunch of other states start copying, then you have to fight it, but for now, you have to leave the market even though Kentucky might be in the wrong.

“So, let’s get this straight: even though what Kentucky did was wrong, Rose recommends just going along with what Kentucky demands (blocking gaming traffic in and out of their state). But if more states do it, then you fight it?

“Great logic. Why fight one expensive, principled battle against an over-reaching government when you can fight multiple expensive, principled battles against over-reaching governments?

“Thank goodness most of the domain owners do not seem inclined to take that kind of legal advice.”

A Writ of Prohibition Filed In Connection With Kentucky Online Gambling Case

Writs have been filed by the Internet Gaming Council in response to a decision handed down by a Franklin County Circuit Court finding that the Commonwealth of Kentucky can seize some 141 domain names.

Acting on behalf of Sportsbook.com, MySportsbook.com, Sports Interaction and a few other entities made public in the filing, the IGC’s attorneys argue that a Writ of Prohibition is proper when a lower court lacks jurisdiction.

The IGC argues that jurisdiction is lacking “because the circuit court erroneously sought to predicate jurisdiction over Internet domain names that are not property subject to forfeiture, are not located in Kentucky and are not ‘gambling devices’ as defined in the very statute on which respondent sought to predicate subject matter jurisdiction.”

They also argue that a Writ of Prohibition is necessary even if it was determined that the domain names came under Kentucky jurisdiction in order to “prevent irreparable harm to petitioners and to the orderly administration of justice.”

“The Franklin County order flies in the face of Constitutional rights and limitations on the authority of government entities,” the IGC also argues.

Legal World Meets Gaming World

There has been a long standing legal battle between online gaming websites based outside of the United States and governmental agencies within the US borders. An epic battle centering on whether or not United States based players should be allowed access to online gaming websites is at hand. Both parties have presented strong arguments for their side and against their opponent. A judge has refereed the battle that took online games off the internet and into the courtroom.

Recent rulings have determined that lead state Kentucky government officials may block its players from accessing such gaming websites. Enforcement from these structures was expected to be handed down the moment the verdict was rendered. There has been an unexpected result that has come out of the legal battle as well.

Online game network giant Microgaming is taking steps to block United States based players from accessing its poker websites. Not all of the states are being blocked from use. At present time there are only 13 states on the banned list. Those states are as follows: Illinois, Indiana, Kentucky, Louisiana, Michigan, Nevada, New Jersey, New York, Oregon, South Dakota, Washington, Wisconsin and Utah. It should come as no surprise that Kentucky appears on the list. It is the governmental agencies in that state that started the battle in the first place.

The premise behind the Microgaming decision can be largely attributed to the legal decision handed down. A judge made the ruling that websites had a 30 day period to block United States players. Almost immediately Microgaming began taking the necessary steps to block a selection of player states from poker and casino gaming websites.

State of the art technology is being utilized by Microgaming to ensure regulations are followed. IP blocking software is in the process of being added to the network of websites. The purpose of the software is to detect IP computer addresses from US player computers in the banned list of states. Those users will be blocked from entering the websites for play. An added step is being placed into the blocking software.

Microgaming is utilizing the technology to block third party proxy servers as well. These are used by players in an attempt to bypass a blocking system that has been put in place to prevent access to a website. With these technological blockers put into place, United States players in those banned states will not have access to a variety of Microgaming websites. Among the list included are 32redpoker.com; Intertopspoker.com; Crazypoker.com; Pokertime.com; Royalvegaspoker.com and Pokerwize.com.

Site Advocating Boycott Adds Petition for Online Casinos Defense

Dr. Jeffrey Reynolds’ site, BoycottKentucky.com, has added a page allowing interested individuals to sign a petition asking Governor Beshear to stop in his efforts to force forfeiture of the domain names of 141 online casinos. The website, which Reynolds began in protest of the unconstitutional action without proper jurisdiction by the governor and a Kentucky court, lists ways to boycott aspects of Kentucky’s economy.

The petition states, “We, the undersigned, urge you to immediately cease and desist your efforts to undermine Internet commerce and civil liberties in your state and beyond. Your wanton seizure of 141 gaming-related domain names is capricious and has become a source of embarassment worldwide for the Commonwealth of Kentucky.

“As Kentucky endures the fiscal crisis sweeping the entire nation, we are apalled that taxpayers must foot the bill for your misguided crusade and we urge you to publicly disclose the total costs to date associated with your investigation and prosecution of this case. Please let us know that you will withdraw this case and re-focus your attention on governing responsibly and the multiple challenges facing Kentucky.”

Reynolds states the petition wil be delivered to the governor and to the presiding judge, Thomas Wingate, before the next hearing in the ongoing case.

Reynolds joined the call to boycott first suggested by Online Casino Advisory gambling analyst Sherman Bradley as news of the idea swept through the online gambling industry and expanded to sites dedicated to promoting Internet business and protecting Internet freedom from censorship.

Online Gambling Boycott Expands to Bourbon, Jack Daniels Smiles

Kentucky industries have been facing a growing movement to boycott products from the state. The ongoing attempt by Governor Beshear to crush constitutional rights and trample Internet freedom by seizing online casinos’ domain names has created a backlash.

Stirred by Online Casino Advisory’s Sherman Bradley, what began as a message to Beshear that offended individuals would not support his protectionist policy by shunning the state’s horse racing and online gaming has now become a wave of rejection of all Kentucky products.

The website BoycottKentucky.com continues to list more businesses to avoid as an expression of displeasure. The latest renowned Kentucky industry to be called on the carpet is the distilling business.

For a whiskey to be labeled bourbon, it must by law be distilled in Kentucky. To join the boycott, therefore, a good rule of thumb would be avoid bourbon. Similar taste can be found in Jack Daniels, which is sour mash; the Seagrams family of VO, Seagram’s 7,and Canadian Club, which are blended whiskeys; and Southern Comfort, a sweet liqueur.

BoycottKentucky.com provides a complete list of distillers and their contact information. In the meantime, Churchill Downs prepares to start live racing in the face of controversy, and TwinSpires.com refuses to provide data regarding business since the boycott was first suggested.