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People v. World Interactive Gaming Corp., et al.

In this case of first impression, Justice Charles Ramos held that respondents' activities violated New York State's prohibitions on gambling within the State of New York, as well as the Federal Wire Act, Travel Act and Interstate Transportation of Wagering Paraphernalia Act.

Respondent Golden Chips Casino Inc. ("GCC") is an Antiguan corporation licensed to operate a land-based casino in Antigua. GCC is also a wholly-owned subsidiary of respondent World Interactive Gaming Corporation ("WIGC"). GCC promotes a service which permits individuals, via their home computers, to access and use computers located in Antigua to gamble. Before a user can begin gambling, he must first wire funds to GCC in Antigua (which funds are credited to an account in his name) and download software from respondent GCC's website. He is then asked to supply GCC with his "permanent address." If the user provides an address from a state in which land-based gambling is legal, he is permitted to start gambling. If the user provides an address from a state, such as New York, where land-based gambling is illegal, he is not permitted to gamble. This restriction can easily be evaded by reapplying for permission to gamble using a fictitious address from a state in which land-based gambling is legal, as respondent takes no steps to verify the accuracy of the information supplied by the user. Once approved, the user can engage in gambling activities from his home via a computer hook-up with GCC's Antigua-based computers. The results of these gambling activities are reflected in the user's Antigua account.

GCC promoted the availability of this gaming service at its web site, on the Internet, and in a "national gambling magazine."

According to the court, WIGC is the "alter ego" of GCC, and significantly aided its gambling activities. WIGC is a Delaware corporation with its corporate headquarters in New York, from which location it "operated its entire business." From its New York location, WIGC had contacts with a third party for the purpose of obtaining graphics for, and edited versions of the gambling software at issue. It also purchased both the servers and software used to run respondent's activities. According to the court, "the evidence also indicates that the individuals who gave the [Antigua] computer commands operated from WIGC's New York Office." The court further held that:

Respondents engaged in an advertising campaign all over the country to induce people to visit their website and gamble. Knowing that these ads were reaching thousands of New Yorkers, respondents made no attempt to exclude identifiable New Yorkers from the propaganda.

To make matters worse, respondent WIGC engaged in the unlicensed solicitation, primarily via "cold call", of investors for its activities from its New York headquarters. The court found that in the course of these solicitations, respondent "misrepresent[ed] and failed to disclose facts regarding the use of proceeds raised in the offering."

Based on these activities, the court determined that "respondents ... are clearly doing business in New York for purposes of acquiring personal jurisdiction." Indeed, determined the court, "even without physical presence in New York, WIGC's activities are sufficient to meet the minimum contact requirements of International Shoe Co.".

Finding respondents subject to the court's jurisdiction, the court went on to hold that their activities ran afoul of various New York State statutes designed to prohibit gambling in New York. In so doing, the court rejected respondents' argument that the gambling at issue took place in Antigua, where it was legal.

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.

This determination was consistent with New York Penal Law 225.00(2) which provides that "if the person engaged in gambling is located in New York, then New York is the location where the gambling occurred."

The court held that respondents' acts violated New York Penal Law 225.05, which provides that "a person is guilty of promoting gambling ... when he knowingly advances or profits from unlawful gambling activity." Respondents also "engaged in conduct which materially aids ... gambling activity" in violation of New York Penal Law 225.00(4), which holds that such illegal conduct includes "conduct directed toward the creation or establishment of a particular game, contest, scheme, device ... or toward the solicitation, or inducement of persons to participate therein."

The court further held that "by hosting this casino and exchanging betting information with the user, an illegal communication in violation of the Wire Act [18 U.S.C. section 1084(a)] and the Travel Act [18 U.S.C. section 1952] has occurred. ... Gambling conducted via the Internet from New York to Antigua is indistinguishable from any other form of gambling since both the Wire Act and the Travel Act apply to the transmission of information into a foreign country." Thus, the court held that "the Wire Act bars citizens from engaging 'in the business of betting or wagering knowingly using a wire communication for the transmission of interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers.'"

The court determined that as a result of the violations of these and other laws, the State was entitled to injunctive relief, as well as restitution, penalties and costs in accordance with New York Executive Law section 63(12) and New York General Business Law section 353(3).

The full text of the court's decision can be found on a web site maintained by the Office of the New York State Attorney General.