Court deals Net gambling blow

Perhaps it comes with the trade, but Net gambling entrepreneur Kerry Rogers can't stand losing.

Rogers says he has shelled out more than $1 million in legal fees to fight for the right to run a Net gambling business. But last week, Rogers experienced another setback in his quest.

Since 1995, he has been in a standoff with the state of Minnesota, which aims to restrict his Nevada-based Web site from promoting to its citizens a yet-to-be-released sports betting site in which the actual wagers will be taken via computers in Belize.

After a split 3-3 ruling last week, the Minnesota Supreme Court reverted to an appeals court decision declaring the state has jurisdiction to sue Rogers for falsely advertising on his Web site that Net gambling is legal anywhere in the United States.

Rogers said he is undeterred. His attorneys now will ask the nation's high court to hear the case and decide unequivocally whether states can regulate Web sites based outside their borders.

"We're going to the Supreme Court," Rogers said. "I still don't think Minnesota has jurisdiction over a Las Vegas Web site. If we let this happen, where does it end? There are all kinds of ramifications for letting states oversee other states' electronic commerce."

The WagerNet case was sparked in 1995 by Minnesota's eagerness to deter Net gambling. But the battle really centers on the obstacles states face when attempting to regulate online activity that originates elsewhere.

Now Minnesota's case against Rogers will finally go to trial. In making its case that Rogers allegedly made false claims to Minnesota consumers, the state will argue that Net gambling is illegal when it travels into a state where the practice is prohibited. There are some legal forms of gambling in the state such as its official lottery, bingo, and casinos based on Indian reservations.

"In order to prove our consumer-protection case, we have to show that Internet gambling is illegal," said Carolyn Ham, Minnesota's assistant attorney general. "We need a decision that says [Net casino operators'] interpretation of the law is wrong and that they are engaging in criminal activity."

A pending bill would update the federal Wire Act to outlaw accepting and placing cash bets on the Net with a few exceptions. Still, some states such as Minnesota and Missouri have filed charges against the owners of online casinos, which creep into their states via the Net.

The Minnesota appeals court decision equates Web sites to direct mail advertisements or door-to-door salesmen. So if a pitch reaches Minnesota, the state then can exercise its consumer protection laws. If the ruling is upheld, states could have a new precedent to regulate Net gambling and other online activities.

Minnesota Attorney General Hubert Humphrey III initially sued Rogers for false advertising for posting the promotion on his WagerNet site--which has yet to take a bet. Rogers filed a motion to dismiss the case on grounds that Minnesota can't govern his business in Nevada. But the state appeals court ruled in favor of the state.

Minnesota authorities aren't the only ones after Rogers, however. During an online gambling sweep, the U.S. Attorney's Office in Manhattan indicted Rogers in March for his connection with the Winner's Way gambling site.

Rogers claims he just designed the site and registered its Net domain name, but the authorities alleged he is operating the site in violation of a federal statute that prohibits taking wagers over telephone lines.