NeuLevel Inc, the operator of the .biz top-level internet domain, is to pay out over $1.2m to settle charges that the .biz launch period constituted an illegal lottery. The main winners in the proposed settlement are the class action plaintiffs' attorneys, which will receive $1.175m in fees.

NeuLevel was sued over claims that the method by which it allocated .biz names technically constituted a lottery, which are illegal without state approval in most of the US. Under the system, users "applied" for the chance to register a premium name like show.biz, and "winners" were randomly selected from the applicants.

"We stand by the original process we put in place as the most fair and equitable way to distribute names," NeuLevel spokesperson Barbara Blackwell said. "We are glad this matter is resolved."

The company said in a statement that it will refund affected customers either $0.15 or $2 per domain name, depending on how many applications they made and whether they were successful in their application or not.

Only 25,000 customers, holding 58,000 names, are believed to be affected, the vast majority of customers having already been refunded. Blackwell said NeuLevel already refunded thousands of customers to the tune of $1.7m, when the lottery allegations first emerged.

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