It was show-down time in Jackson County, Missouri on May 23, 1997 when visiting St. Francois County Circuit Judge Stan L. Murphy ordered that Interactive Gaming & Communications Corp. (IGC) pay more than $66,000 in fines and legal expenses in an internet gaming lawsuit.
Murphy imposed the following sanctions on Interactive Gaming Corp., a publicly-traded company 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 following sequence of events were reported by the Star:
- 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 May 20 another undercover investigator registered to gamble, mailed in $200 to start an account and gambled. Offering some culpability in that regard, IGC attorney, Larry Hirsch told IGN that it was "stupidity or negligence by employees" to say it was legal and presumably to take another account.
Hirsch also told IGN that the company's only gambling accounts in Missouri came from the two investigators.
Nixon's office point out that Missouri strictly controls gambling and checks backgrounds of all companies that apply for licenses. They further said that 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, said the AG's office.
Interactive Gaming headquarters in Blue Bell, Pa. was searched by the FBI (with a search warrant) in February, 1997. The company does not know the reason for the search and no charges have been filed, Hirsch said. For more information about the raid and its effects, check out this MSNBC story.
According to the Kansas City Star which covered the hearing, "the judge also found that Interactive Gaming's subsidiary, Global Casinos Ltd. in the Caribbean, is a mere "alter ego" of the Pennsylvania firm. (Must be a new legal term!) Interactive Gaming uses offshore gambling accounts to try to circumvent Missouri law, he ruled. His ruling applies to only Interactive Gaming and Global."
The fines include $22,000 in civil penalties to the state, $10,000 to the Missouri Merchandising Practices Revolving Fund and $34,050 to the state for the costs of investigation and prosecution.
Hirsch told IGN that they plan to take the company's fight to federal court. When asked why they weren't in attendance at the court proceeding, Hirsch noted, "This was a preliminary injunction hearing. We didn't anticipate being ambushed by the Attorney General and see this hearing be converted into a final action."
One distinction in this case seems to be whether internet gambling is illegal or legal in Missouri. While Hirsch acknowledged some "stupidity" on the part of employees who claimed it was legal to the "decoy" who set up an account from Missouri, he suggests that Jay Nixon is confusing legality and regulation. "His stance is that he can legislate what are acceptable entertainment options for Missouri residents," said Hirsch.
Jay Nixon, an avowed Senate candidate who is seeking to unseat Sen. Christopher "Kit" Bond in '98, has now successfully brought the first United States case to stop an Internet gambling operation. He said the company violated state gambling laws. In fact, AG office spokesman, Scott Holste told IGN, "The games of chance offered by Global Casino fall outside of the narrowly-defined definition of gambling in Missouri.
Will there be more cases? Who knows.... but Nixon said he would watch for any other companies operating in Missouri and act on any complaints against them.
The company will comply with the order to put a disclaimer on its Internet site that Missouri residents are forbidden to play, said Hirsch, "and we'll tell them why."
He was quoted in the Star as asking, "Do the people of Missouri think they need to get Jay's permission to get on the Internet and spend $25?"