The New York Supreme Court ruled Monday that state gambling laws apply even to an offshore Internet casino.
The precedent-setting decision "clearly demonstrates that New York state gambling laws still apply, when state residents are involved, no matter where the technology resides," said Scott Brown, a spokesman for state attorney general's office.
Owners of the World Interactive Gaming Corporation, an online casino based in New York's Suffolk County, claimed they were not bound by New York gambling laws since their computer servers were located and licensed in Antigua.
But, in a 20-page decision issued late Friday, state Supreme Court Justice Charles Edward Ramos wrote that the "use of the Internet is more than the mere transmission of communications between an out-of-state defendant and a plaintiff within the jurisdiction."
In addition to convicting the casino of illegal gambling activity, the court found that the casino had violated state securities laws by failing to register with the attorney general's office before selling securities. A preliminary hearing to determine penalties and restitution to investors is scheduled for 9 September.
The attorney general's office began investigating World Interactive Gaming earlier this year, when it learned the company was selling shares in its casino gaming business for US$10,000 each.
Joel Michael Schwarz, the assistant attorney general, said the company was misrepresenting its stock values as being on a par with companies like Microsoft and Spyglass. The company was also cited for not disclosing that 46 percent of investors' funds would be used to pay salaries.
World Interactive Gaming managed to raise $1.8 million from 114 investors -- 10 of them from New York -- before it was shut down.
"This is obviously a very important precedent to set and will affect legal issues in things like e-commerce cases in the future," said Schwarz, who is with the AG office's Internet unit.
"What this case establishes is that although the gambling informationis transmitted over the Internet, in cyber-space, the illegal conductis still deemed to take place in real space, and is goverened by realworld laws," Schwarz said. "Since in this case the bets were placedfrom New York, New York law was deemed to apply."
Schwarz said that similar cases were being prosecuted in other states but that, as far as he knew, New York was the first to issue a decision.
