Grimes' defense of online gambling domains brings issue to Senate race

09/25/2014 02:20 PM

When the state took the unprecedented move to seize 141 Internet domains accused of operating illegal online gambling websites in September 2008, it sparked a complicated legal case that continues to this day.

On one side of the courtroom stood attorneys for the state. On the other, amid an army of lawyers representing holders of the domains snatched by the government, stood Democratic U.S. Senate candidate Alison Lundergan Grimes.

Grimes, then an associate with Stoll Keenon Ogden, was one of three attorneys from the Lexington-based firm representing two of the seized domains, according to court records. Less than three years after first helping and navigate Kentucky’s legal process, she left the firm in 2011 during her successful run for secretary of state.

Grimes’ representation of the online gaming industry, which Gov. Steve Beshear said at the time deprived Kentucky horse tracks of gambling revenue and posed “a tremendous threat” to Kentuckians, not only adds fodder to an already contentious race against U.S. Senate Minority Leader Mitch McConnell, but also injects the murky issue of Internet gambling into the November election.

Bipartisan pieces of legislation outlawing online gambling are pending in Congress, and the bills exempt Internet wagering on horse races in an apparent attempt to improve their chances of appeasing McConnell.

Court battle continues sans Grimes

Six years since Kentucky’s Justice and Public Safety Cabinet filed suit against the holders of 141 website domains allegedly running illicit online gambling portals in Franklin Circuit Court, both sides remain entangled in a legal battle. The state’s Court of Appeals and Supreme Court have opined on a number of issues surrounding the case, most recently a February ruling by the appeals court allowing the Interactive Gaming Council to intervene in the case, court records show.

The state has won some battles along the way. In June 2013, The Lexington Herald-Leader reported that two of the domains seized by the Beshear administration, PokerStars and Full Tilt Poker, had agreed to a settlement with federal prosecutors, $6 million of which went to Kentucky in June 2013. That same month, Beshear announced a $15 million settlement in a separate lawsuit against the domain, according to the newspaper.

The Beshear administration contends that the sites operate illegal gambling activities in Kentucky, where residents can only bet on horse races or in charitable settings. The online gaming industry, however, has argued that the state overstepped its authority in seizing the domains and that the websites are not considered gambling devices under state law.

Grimes, in defense of and, argued that the sites act as an advertising portal to other gambling websites and that Internet domains are not considered property, thus the state erred in its seizures. In a Franklin Circuit Court appearance in October 2008, she also said the secretary of the Justice and Public Safety Cabinet lacked legal authority to seize the domains, and she questioned the state’s jurisdiction to sue the websites’ registrants.

“Indeed, of the 141 domain names, your honor, that are at issue here, none have registrars that are here in the commonwealth,” Grimes argued before Franklin Circuit Judge Thomas Wingate, according to a video recording of court proceedings. “And I can’t speak on behalf of all 141, but I can better well bet that the registrants aren’t located here, otherwise they would already have a complaint against them personally.

“So your honor, we would point to the fact that if indeed a domain name is property, which we don’t concede, the commonwealth is not the appropriate jurisdiction for a domain-name dispute.”

Attorneys representing the Beshear administration would have to travel far in order to take action against her overseas clients. Grimes said in an August 2008 court hearing the registrar for resides in the Netherlands.

A domain-name search by Pure Politics found the registrar for, which could be accessed, is actually based in Scotland. The registrar for, which could not be accessed because Pure Politics’ IP address “shows you might be located in one of the countries that are restricted on our platform,” is based in Amsterdam.

McConnell’s campaign latched onto the revelation that Grimes defended online gambling sites against Kentucky’s lawsuit.

“Alison Lundergan Grimes chose not to attend college or law school in Kentucky and as a lawyer actively worked against the Commonwealth, against the horse industry and against the taxpayers to defend an online gambling website based in the Netherlands that Governor Beshear called ‘a threat to national security,’” McConnell campaign spokeswoman Allison Moore said in a statement, referencing Beshear’s remarks in a September 2008 piece by The Courier-Journal. “Apparently the only way she could get more anti-Kentucky than that was become Barack Obama’s candidate for Senate.”

Grimes’ campaign defended her role in representing online gambling domains.

“Alison is an attorney,” her campaign spokeswoman Charly Norton said in an email to Pure Politics. “She represented the interests of her firm’s clients, which was her professional and ethical responsibility.”

Beshear, whose administration pursued court action against the 141 Internet domains, downplayed the impact of Grimes’ role as a private attorney in the case during an interview with Pure Politics Wednesday.

“Alison’s a good lawyer, so when you’re in the law practice you get clients and you do the best you can for them and you hope you win,” Beshear said after an event in Louisville. “Sometimes you do and sometimes you don’t, but she’s now the secretary of state and she’s running for the U.S. Senate, a great candidate, and I don’t think it affects her at all.

“It says she’s a good lawyer.”

Online gambling in Congress

Whichever candidate is elected to the U.S. Senate, the issue of online gambling will likely be a topic of debate in Congress.

In March, U.S. Sen. Lindsey Graham, R- South Carolina, and U.S. Rep. Jason Chaffetz, R-Utah, introduced legislation called the Restoration of America’s Wire Act, which would ban online wagering. A Democrat and two Republicans signed on as co-sponsors of the Senate version while three Democrats and six Republicans are co-sponsors of the House version.

The bills have thus far failed to gain traction in Congress. Since their introductions, they’ve been forwarded to committee without action, according to congressional records.

The legislation is backed by billionaire casino mogul Sheldon Adelson and would roll back a 2011 Department of Justice interpretation of the Wire Act that allowed states to regulate online gambling, The New York Times reported in March. Three states — Nevada, New Jersey and Delaware — have moved to expand Internet wagering since the 2011 decision, according to the newspaper.

But the proposed federal ban has met political differences. Graham’s and Chaffetz’s bills exempt online gambling on horse racing, seen as a key factor in gaining support from McConnell since horse racing is a staple industry in Kentucky, The Las Vegas Sun reported in March. Churchill Downs also operates, which allows bettors to gamble on races via the Internet.

Senate Majority Leader Harry Reid, however, has led the effort to carve out Web-based poker from any online gambling legislation since poker is a game of skill rather than a game of chance, according to the Sun report.

“Senator McConnell continues to discuss the online gambling issue with constituents and is reviewing the legislation to consider the impact it will have on Kentucky families and our economy,” McConnell’s Senate spokesman Robert Steurer said in an email to Pure Politics.

Major racetracks place Senate bets

As Congress considers the online gambling issue and Grimes’ defense of Web domains seized by the state surfaces, a review of federal campaign finance records shows current and former officials at Kentucky’s major Thoroughbred racetracks have contributed heavily to McConnell’s re-election effort against Grimes.

Grimes picked up some support from track officials during her 2011 run for secretary of state, according to state campaign finance records. Corey Johnsen, president of Kentucky Downs, gave her campaign $250; D. Brett Hale, former senior vice president for corporate and government relations for Churchill Downs, contributed $500; and Robert Elliston, president of Turfway Park, chipped in $250.

But the tracks’ officials appear to have sided with McConnell in his battle with Grimes, particularly Churchill Downs. Current and former officials at the iconic track have given $27,420 to McConnell’s 2014 re-election campaign in recent years, including $2,400 from Churchill Down’s political action committee in October 2010. Officials at Churchill also gave $16,000 to the McConnell Victory Kentucky fundraiser, a joint effort between McConnell and the Republican Party of Kentucky.

Officials at Keeneland have given the five-term incumbent $5,432; Turfway Park officials have contributed $4,600; and those at Kentucky Downs have given $4,800, according to campaign finance records.

None of Grimes’ contributors list any of the major Thoroughbred racetracks as employers, campaign finance records show.

Beshear said Wednesday Grimes’ involvement in the 2008 case should not deter the Kentucky horse industry from supporting her candidacy.

“The horse industry understands that attorneys and law firms are hired by people to represent them,” he said. “They hire lawyers all the time, and sometimes they get into it with each other in the horse business and there are lawyers on both sides of that.

“So it’s not a personal situation. It’s just a business situation.”

Norton, in an email to Pure Politics, spoke generally about the enthusiasm in Grimes’ campaign in response to a question about support from Kentucky’s horse industry.

“We are excited about the growing energy and momentum surrounding this campaign,” Norton said. “This election is a stark choice between two very different visions — one with a comprehensive plan to create good-paying jobs, grow the middle class and finally put the people of Kentucky first, and another that sides with millionaires and billionaires and doesn’t think it’s his responsibility to bring jobs to the Commonwealth. Kentucky deserves better.”


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