Ars Technica reports that federal government is allowing U.S. poker players to withdraw their accounts with the gambling websites targeted in last week’s indictment:
The government today announced an agreement with PokerStars and Full Tilt Poker under which it will return their domain names temporarily—so long as they agree not to allow US-based IP addresses to gamble for real money, and so long as they don’t allow any further US-based deposits.
Last night I had dinner with a friend who plays poker online. He wondered how easy it would be to use a non-U.S. IP address to access poker sites–the indictments target the companies’ U.S. gambling operations, not their legitimate operations in other countries. Ars Technica describes one U.S. player’s plan to evade the law by establishing a non-U.S. bank account and routing gambling access through non-U.S. channels. It’s not easy, and requires serious commitment to online poker.
. . . until online gambling is legal in the U.S. State governments need additional revenue sources to meet budget shortfalls and gaming is a no-brainer–putting aside the moral arguments against it. Chairman of the House Financial Services Committee Barney Frank supports repeal of the federal law that effectively bans online gambling, introducing legislation to legalize gambling and provide a regulatory structure to license online casinos. The path won’t be easy. Foes on the right and left consider gambling (take your pick) immoral, anti-religious, or exploitative of the poor and vulnerable. Existing casinos don’t want competition. The gambling appetite is not inexhaustible. At some point new gambling outlets will cannabilze the business of existing casinos, online or not. But I think the stars are aligning to clear away gambling’s legal impediments.
I think online gaming should be legal. I’m not a gambler and not a gambling fan. I’ve been in casinos twice, and once was just to scope out the scene in connection with a financing we were working on. It was at 10 AM on December 24th in the mid-1990s. Foxwoods was not full but busy. It was depressing. A colleague has a sign on his office window that reads “A lottery is a tax on people who are bad at math.” True. But it’s their choice. People will gamble whether or not it is legal. States might as well tax it.
Last fall the State of Kentucky convinced a trial court judge to order the seizure of 141 domain names belonging to Internet gambling sites (see posts here and here). The judge ruled that the domain names were gaming devices under state law. This week the Kentucky Court of Appeals overturned the trial court’s seizure order, holding that “it stretches credulity to conclude that a series of numbers of Internet address, can be said to constitute ‘a machine or any mechanical or other device . . . designed and manufactured primarily for use in connection with gambling.” The Court of Appeals declined reading “domain names” into the relevant Kentucky statute. Citizen Law Media Project has a more detailed post about the Court of Appeals decision.
Kentucky’s attempt to seize the names is motivated by money, not morality; the state believes the gaming sites “drained money away from Kentucky’s legitimate gambling.” The state announced that it will appeal the Court of the Appeals decision to the Kentucky Supreme Court.
Kentucky’s plan to seize domain names belonging to online gambling sites took a giant step forward this week when a state court judge ordered transfer of 141 domain names to the state in 30 days unless the sites block access by Kentucky residents. The judge ruled that the domain itself is a gaming device under Kentucky law. Kentucky has targeted the online gaming industry “because it was illegal and drained money away from Kentucky’s legitimate gambling.”
Consider what transferring the domain names to the state means. A user anywhere in the world who types, say, wildjack.com into his web browser will be directed not to http://www.wildjack.co.uk/?bTag= but to a Kentucky .gov subdomain bearing notice that the site has been seized. It won’t matter whether online gaming is legal where the user resides–he will not be able to access the site. If Wildjack.com does not find a way to block Kentucky residents it will be forced out of business. Domain name seizure would become a highly effective method for local governments to force their law on the world.
That’s a bad precedent.