|The following article was
originally published in Casino
Executive and is presented in Gaming floor with permission of the author.
Professor Rose can be reached at his web site: www.GamblingAndTheLaw.com
The Major Internet Gambling Case That Isn't
A recent decision by Manhattan Judge Charles Edward Ramos of the Supreme
Court of New York has created a minor panic in the Internet gaming
community. A company which designs software for on-line casinos
price of its stock plummet. Operators who had been taking bets
Yorkers wonder whether they have to avoid the state, or perhaps the
country. Owners of other gaming websites, who had prohibited
Americans, now fear being dragged into U.S. courts if undercover cops
about their addresses.
The decision does contain some rather startling language: "The Internet
site creates a virtual casino within the user's computer terminal."
Ramos held that because the user was in New York, the licensed Antigua
company could be sued in New York.
There are a few reasons not to be overly concerned about this decision.
fact, this supposedly major Internet gambling case is neither
primarily about Internet gambling.
This was actually a New York company doing business in New York, with
Despite its name, the "Supreme Court" of New York is only a trial court.
The decision is important to the parties involved in the law suit, but
is not of any precedence for anyone else.
Much of the opinion involves a discussion of federal law. While intellectually
interesting, the conclusions of this state trial judge are not binding.
The "user" was an undercover agent, who was automatically cut off when
she entered her address as New York. She logged on again and this
time typed in "Nevada." The opinion is misleading when it implies
that a foreign corporation can be forced to defend a law suit in a state
when its only contact with that state is created by a customer's intentional
The fact that the operator was licensed in Antigua was irrelevant; and
The fact that the operator's server was in Antigua was irrelevant; and
The fact that the operator was incorporated in Antigua was irrelevant;
because. . .
principals and assets in New York. The case revolved around allegations
that the defendants sold unregistered securities through a New York
room operation to New Yorkers. So, of course the courts of New
the power to seize a New York bank account and to enjoin activities
were found to have been run out of offices in New York.
Judges always write opinions as if the losing side had almost no facts
law on its side. So we do not know what evidence defendants'
presented which the judge may have ignored. But we do know that
found the following:
The defendants "are clearly doing business in New York..."
The corporation with the Antigua gaming license, Golden Chips Casino
("GCC"), is a wholly owned subsidiary of another corporation, World
Interactive Gaming Corp. ("WIGC"). Judge Ramos found GCC was
by WIGC that "he deemed GCC an alter ego of WIGC." As one example:
top employees were hired by and reported to WIGC."
Although WIGC was incorporated in Delaware, its entire business was
operated from its headquarters in Bohemia, New York. It was from
York office that defendants "fraudulently" and "actively solicited
to buy WIGC shares."
A court of appeals will undoubtedly find that it need not consider Judge
Ramos's discussion of Internet activities to and from Antigua, because
much of the gaming operation took place in New York.
"All administrative and executive decisions as well as the computer
research and development of the Internet gambling website were made
York." "From their New York corporate headquarters, they downloaded,
viewed, and edited their Internet casino website."
The casino website and its servers were purchased by the New York parent
Most damning, Judge Ramos held that the gaming website was actually
of New York, not Antigua. "The use of the GCC casino website
from WIGC's corporate headquarters" in New York.
"The evidence also indicates that the individuals who gave the
commands operated from WIGC's New York office."
It is said that bad cases make bad law.
Judge Ramos's decision that New York had power over these defendants
their bank account was correct. But his discussion of the Internet
general and Internet gambling in particular is an example of unnecessary
Let's hope no one will try to use this case to sue foreign companies
are truly not doing business in the states.
For if they do, we will have bad law making bad cases.
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