Governor Steve Beshear of Kentucky is seeking to seize more than one hundred gambling-related domain names. A judge initially rejected the governor's bid and has scheduled a hearing for October 7. See coverage in the Louisville Courier-Journal, DomainNews, and The Iconoclast.
John Levine's take on the issue sounds right to me. I doubt very much that Kentucky has adequate grounds for jurisdiction over the domain names, the registrants, the registrars, or the registries. Any registrar that voluntarily forfeits a domain name on behalf of a registrant is likely asking to be sued.