Last month, the state of Kentucky issued a seizure order for 141 domain names that it claimed were being used in connection with illegal gambling. (Full text of the order here.)

It’s a remarkable order. It asserts that probable cause exists to believe that the domain names are being used in connection with illegal gambling (despite the fact that some are parked domains, which would clearly indicate otherwise), and that as such, Kentucky is entitled to require the registrars to immediately transfer the registration for those domains to Kentucky or some other entity that it designates.

WebProNews has published statements from Governor Steve Beshear and his deputy communications director Jill Midkiff. The governor essentially claimed that illegal online gambling harms Kentucky’s legal gambling businesses, particularly the lottery and horse racing. But regardless of why it was done, it’s still a chilling potential precedent.

Yesterday, the judge in the case denied a dismissal, setting a forfeiture hearing for next month. He also stated that the sites would have 30 days to voluntarily block access by Kentucky users to avoid further legal problems. MarkMonitor (a provider of managed domain name and brand protection solutions) has posted the full text of the opinion, along with the key relevant questions raised by this case.

This case gets right to the heart of the question, “Who controls the Internet?” If Kentucky succeeds, it will fundamentally change our understanding of jurisdiction with regarding to domain names, with broad ramifications both within the United States and internationally.