A bombshell court ruling that New York State gambling bans apply to overseas Web sites could choke online revenues at Australian casinos.
New York Supreme Court Judge Charles Ramos has ruled betting transactions conducted by New Yorkers via the Internet with a virtual casino in the Caribbean constituted gambling activity within New York State.
The fact the casino's Web server was based in Antigua outside US jurisdiction was irrelevant, he found.
The ruling is a threat to revenue streams of Internet gaming operators such as Lasseter's Hotel Casino in Alice Springs. US gamblers accounted for about 30 per cent of the $5 million in bets placed with the casino's Internet gaming arm, Lasseter's Online, since the service began in April.
"This is a big issue and our legal people are examining it now," said Lasseter's Online head David Ohlsen.
Lasseter's operates legally under Australian law and does not discriminate against US-based punters who wish to place bets, Ohlsen said.
Its online operation has been expanding rapidly. Revenues in the past month have equalled those of the previous four months combined, Ohlsen said.
Adrian McCullagh, national director of e-commerce for Gadens Lawyers, said the New York decision appeared to be the first against an Internet casino that was not located within US jurisdiction.
It was a significant step beyond a Minnesota decision last year which found against a virtual casino based in a neighbouring state, McCullagh said.
The next big step could occur if someone in the US commenced legal action against an overseas casino owned by non-US nationals.
McCullagh warned the US is pushing for adoption of an international convention that would facilitate enforcement of judgements obtained in such cases.
The convention, entitled "jurisdiction and recognition and enforcement of judgement in civil matters" is the subject of an issues paper now circulating in Australian government circles, he said.
Under the proposal "someone could bring an action in New York and get judgement, then register the judgement in Australia and enforce it against Australian citizens".
Even without such a protocol, the New York ruling could make it dangerous for Australian online casinos to own assets in New York, he suggested.
"You would have to think very carefully because the moment you placed assets within the jurisdiction of the US, they could be sequestered."
Ohlsen said Lasseter's had no employees or assets in the US, but "if we had we would be extremely concerned".
He noted international chains with casino connections such as Hilton Hotels "would love to get into Net gaming" but avoid it because of such considerations. In the light of the US ruling, one option for the online gaming service would be to "turn off New York State", he said.
US legal observers say Judge Ramos' decision may encourage other US states to file suit against the 300 or so Internet gaming sites.
It could also affect the plans to launch at least four other virtual casinos in Australia over the next few months.