FRANKFORT — Kentucky, a haven for gamblers who want to bet on horse racing, has hit a setback in its efforts to stop unregulated online casino gambling.
In a 2-1 ruling Tuesday, the Kentucky Court of Appeals said the state does not have the jurisdiction to seize 141 online casinos' Internet domain names in an effort to keep them from operating in the state.
The ruling also said a Franklin Circuit Court judge cannot hold further hearings on the issue.
"This is a tremendous victory for Internet freedom and the rights of Kentucky residents who enjoy playing online poker," said John Pappas, executive director of the Poker Players Alliance, in a statement.
It has been estimated that about 13,000 Kentuckians play the online casinos.
Jay Blanton, a spokesman for Gov. Steve Beshear, said the state did not receive the ruling until late Tuesday.
"We want to take some time to review it. No decision has yet been made on whether to appeal it to the state Supreme Court," Blanton said.
The appellate court ruling said Kentucky lacks jurisdiction to block online gambling because state law does not define an Internet domain name as a gambling device subject to state authority.
"Regardless of our view as to the advisability of regulating or criminalizing Internet gambling sites, the General Assembly has not seen fit to amend (state law) so as to bring domain names within the definition of gambling devices," the court said.
In an unprecedented move last year, state Justice and Public Safety Cabinet Michael Brown, with Beshear's blessing, sued the Web sites. The state contended that the Web sites amounted to illegal gambling.
Franklin Circuit Judge Thomas Wingate agreed in November to allow the state to seize the domain names.
Rich Muny, Kentucky state director for the Poker Players Alliance, said he hopes Beshear and Brown "will abandon this misguided effort and focus new energies into regulation and taxation of Internet poker."
"Rather than spending hard-to-find dollars on this case, the governor could actually turn this into a much-needed new revenue stream for the commonwealth," Muny said.
The Interactive Gaming Council, a trade association for the international interactive gambling industry, applauded the state appellate court ruling. Many of the 141 domain names the state tried to seize are members of the group.
"This is a very important decision for anyone doing business on the Internet," said Jeff Ifrah, counsel for the Interactive Gaming Council.
Beshear campaigned in 2007 to expand gambling in the state by opening casinos, but he contended that some of the most popular online gambling sites are bad for the state.
He has said they create ways for children to gamble, undermine horse racing by creating untaxed competition, make it easier to launder money and lack protections to ensure that people actually receive their winnings.