New York Court: Server Location Doesn’t Determine Jurisdiction

The New York State Supreme Court ruled against World Interactive Gaming Corp.’s claim last month that its online gambling site was not subject to state law since its computer servers were legally based and licensed in the West Indian island nation of Antigua.

“It is irrelevant that Internet gambling is legal in Antigua,” said Justice Charles Edward Ramos in his contempt of court order. “The act of entering the bet and transmitting the information from New York via the Internet is adequate to constitute gambling activity within New York state.”

“The courts will assert power over any individual worldwide whose design and intent is to obtain money from people living in that court’s jurisdiction,” said John Steele, Internet attorney at Fenwick & West, Palo Alto, CA. “I call it the open-the-wallet test.”

“It doesn’t matter where the servers are,” concurred Scott Brown, spokesman for New York Attorney General Eliot Spitzer. “It matters where the players are.”

Attempts to reach the Bohemia, NY-based company were unsuccessful. The phone number is not listed, and the Web site was no longer in service.

Ramos said in his 20-page ruling that WIGC had broken state and federal laws, including the Federal Interstate Wire Act. The judge said the Web site created a virtual casino in the user’s computer terminal.

Spitzer’s office began investigating WIGC over a year ago when the company was discovered selling shares in its online gambling casino for $10,000 apiece. An estimated $1.8 million was collected from 114 investors, including 10 from New York.

Ramos also ruled that WIGC violated New York state securities laws by failing to register with the attorney general before selling shares and by not revealing that 46 percent of the investments garnered would be routed toward salaries, commissions and consulting fees to the company’s principals.

In March, Spitzer formed an Internet bureau in his office to deal with cases of similar nature. New York is the second state after Pennsylvania to have a stand-alone unit to handle Internet issues.

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