Judge bans Internet gambling company from operating in Missouri
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Copyright © 1997 Nando.net Copyright © 1997 Kansas City Star
KANSAS CITY, Mo. (May 25, 1997 00:31 a.m. EDT) -- A Missouri judge on Friday banned an Internet gambling company from operating in the state.
The Jackson County ruling places Missouri in the forefront of an emerging national debate that will determine whether cyber gambling fades or evolves into a $10 billion-a-year business, as some industry analysts project.
Visiting St. Francois County Circuit Judge Stan L. Murphy also ordered that Interactive Gaming & Communications Corp. pay more than $66,000 in fines and legal expenses. Interactive Gaming has refused and plans to take its fight to federal court.
Among other terms Murphy imposed on Interactive Gaming, which operates out of Blue Bell, Pa.:
- Interactive Gaming cannot market, offer or promote gambling in Missouri.
- Interactive Gaming must post a notice on its home page that Missouri residents cannot register to gamble, and it must immediately reject any who try. It must also notify the state attorney general if anyone does try to register.
- At its expense, the company must provide any of its computer records or office records for any audits requested by Missouri Attorney General Jay Nixon.
The judge also found that Interactive Gaming's subsidiary, Global Casinos Ltd. in the Caribbean, is a mere "alter ego" of the Pennsylvania firm. Interactive Gaming uses offshore gambling accounts to try to circumvent Missouri law, he ruled. His ruling applies to only Interactive Gaming and Global.
About 20 offshore companies offer gambling on the Internet and more are coming, said Sue Schneider, managing editor of Rolling Good Times OnLine, an Internet news service. Slot machines, card games, roulette and other casino-style games can be played after establishing a cash account that is drawn on during play.
Nixon said he would watch for any other companies operating in Missouri and act on any complaints against them.
He said this was the first time in the United States that an ongoing Internet gambling operation had been sued and stopped. He said the company violated state gambling laws. The gambling business never gained momentum in the state, because Nixon last month filed a restraining order against it.
The issue of Internet gambling is getting attention elsewhere.
In Wisconsin, a state case is pending in which the state sued a company that was about to start. A federal case also is pending in Wisconsin in which a gambling company has sued to get a judgment on whether Internet gambling is legal. A bill to make Internet gambling illegal failed in Congress last year; a similar measure is pending this year.
As more Internet gambling companies open or announce plans to start, Nixon said, "they are watching our case and the one in Wisconsin."
Philadelphia lawyer Lawrence Hirsch, who represents the company, said Friday that the fight between Nixon and Interactive Gaming just started.
"We'll send them a lawsuit in federal court," Hirsch said. "They're trying to murder a legitimate business."
The company will put the warning on its Internet site that Missouri residents are forbidden to play, he said, "and we'll tell them why."
"Do the people of Missouri think they need to get Jay's permission to get on the Internet and spend $25?" he asked.
Murphy signed the default order following unopposed testimony Thursday in Kansas City from assistant Missouri attorneys general. Hirsch said he chose not to appear.
Assistant Attorney General J. Dale Youngs called witnesses, presented evidence and drove home his points for four hours. Highlights of the hearing included:
- On Feb. 25 an investigator called the web site and a woman named Marjorie assured him gambling would be legal. On March 17 he got a user ID number and the password "Daisy." He mailed in $100 to play in a slots tournament. Nixon soon filed against Interactive Gaming.
- On April 24, Interactive Gaming agreed not to accept business from Missouri residents and to put a warning to them on its home site.
- From May 9 to 20 another undercover investigator registered to gamble, mailed in $200 to start an account and gambled. That was unintentional, Hirsch said Friday,"stupidity by employees."
- Missouri strictly controls gambling and checks backgrounds of all companies that apply for licenses. The FBI had served a search warrant at Interactive Gaming headquarters in February. The company does not know the reason for the search and no charges have been filed, Hirsch said Friday.
- All the income from Interactive Gaming comes from gambling accounts that clients deposit in Grenada. If customers decided to suddenly withdraw all that money, the company would be more than $1 million short.
Hirsch said Friday that Interactive Gaming's only gambling accounts in Missouri came from the two investigators. He hopes for more later, he said, when courts establish that citizens or federal laws control Internet gambling.
"They say they're not under Missouri law," Nixon said, "but that hasn't prevented them from taking Missourians' money."
By JOE LAMBE, Kansas City Star
************************************************************************ Michael A. Geist Associate in Law, Columbia University, School of Law 435 West 116th Street New York, NY, 10027, U.S.A. e-mail: mag76@columbia.edu url: http://www.columbia.edu/~mag76
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