April 7, 2005 3:55 PM PDT

WTO slams U.S. Net-gambling ban

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Federal efforts to curb offshore Internet gambling were dealt a modest setback Thursday after the World Trade Organization ruled some restrictions violated international trade agreements.

A WTO appeals board sided in part with the small island nation of Antigua and Barbuda, home to gambling Web sites that provide local jobs, by upholding portions of an earlier decision from a dispute resolution panel.

The WTO's decision now poses a perplexing political problem for the Bush administration, which must try to balance its support for international free trade rules with its desire to defend federal restrictions relating to Internet gambling.

Complicating that process are the intricacies of the WTO's complex ruling, which weighed in at 146 pages (PDF) and spurred both sides to claim victory. The WTO board agreed with the United States in key areas, saying that some disputed laws were "necessary to protect public morals" and that it would not consider whether state laws in Louisiana, Massachusetts, South Dakota and Utah violated trade agreements.

Even though the Justice Department believes that Internet gambling is illegal, it's become wildly popular in the last few years. The industry was expected to collect revenues of between $4.2 billion and $5 billion in 2003, according to a Government Accountability Office study.

The lack of an unambiguous defeat or victory at the WTO may embolden the Bush administration to suggest only modest changes to federal gambling laws, said David Gantz, the director of the international trade law program at the University of Arizona.

"They may well be able to come up with a package that either satisfies Antigua, or even if it doesn't satisfy Antigua, satisfies the appellate body" at the WTO, Gantz said. "It's very hard at this stage to predict."

The Bush administration indicated it would take the fewest steps possible. "U.S. restrictions on Internet gambling can be maintained," Acting U.S. Trade Representative Peter Allgeier said in a statement. "This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine."

Antigua's lead attorney, Mark Mendel, acknowledged the possibility of the United States merely tweaking federal laws and said his client was willing to start the "whole process" over if the changes were insufficient. "But we'd like to see a negotiated compromise that allows Antiguan operators to provide limited services in the U.S. that are subject to supervision," said Mendel, a partner at the Texas law firm of Mendel Blumenfeld.

In a 2003 complaint with the WTO, Antigua argued that federal and state laws restricting online gambling amounted to an illegal trade restriction that violated obligations that America had made in a free trade pact. A dispute resolution panel sided with Antigua, and the Bush administration appealed in January. No further appeals are possible.

Antigua and Barbuda are two flyspecks of land east of Puerto Rico that, combined, boast only two or three times the area of Washington, DC. Because the islands have scant arable land and a limited water supply, the government has come to view Internet gambling as an attractive source of revenue.

A sore point: Horse racing
One U.S. law that the WTO appeals board singled out for criticism was a federal law called the Interstate Horseracing Act. The wording appears to permit only out-of-state bets made domestically rather than internationally.

That amounts to a type of trade protectionism, Antigua argued, and the appeals board agreed. The U.S. failed to demonstrate "that the prohibitions embodied in those measures are applied to both foreign and domestic service suppliers of remote betting services for horse racing" and the law was illegal under WTO rules, the board concluded.

A spokesman for the U.S. trade representative said Congress may have to act but left open what might happen next. "We need to clarify one narrow issue, which is Internet gambling and horseracing," spokesman Richard Mills said. "It doesn't necessarily mean loosening restrictions. It could also mean tightening them."

The broader effects of Thursday's ruling remain unclear. They depend in part on what changes to U.S. law conservative Republicans can be persuaded to make--and whether America is willing to ignore portions of the WTO ruling, risking sanctions and a perception of the United States as hostile to an international trade regime it helped create.

One possible outcome, according to Antigua's interpretation of the ruling, is that virtual casinos could begin to advertise on U.S. search engines and Web sites. The Justice Department has tried to discourage that. In addition, credit card companies such as Visa and MasterCard could be permitted to process gambling-related transactions.

"If advising a client, I would urge caution," said Joseph Kelly, a law professor at SUNY College Buffalo and editor of the Gaming Law Review. "This is not going to be clear cut. There are going to be further proceedings on both sides."

Kelly said the United States may be able to ignore Antigua, but probably not other nations that are eagerly moving forward in legalizing and regulating online casinos. "How are you going to stop a British-licensed casino in the United Kingdom from taking wagers from American citizens?" Kelly asked. "You just can't."

26 comments

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The WTO can go sit on their thumbs
The more I read about the WTO the more I think the U.S should leave it.
Posted by unknown unknown (1951 comments )
Reply Link Flag
fancy that
What has the world come to, when the WTO says the US can't make laws regarding activity outside it's own borders.
Posted by (409 comments )
Link Flag
Feel Free
... it will just make the US dollar plummet further. The USA government needs to stop throwing it's (rapidly reducing) weight around leveling countries of no threat to anyone and become part of the world instead of trying to run it. First step - get rid of Bush.
Posted by Andrew J Glina (1673 comments )
Link Flag
Oh please....
If the governament was smart, they would legalize internet gambling because of the surplus tax dollars they could generate. They made it illegal because they weren't getting a cut. Secondly, they "hid" the banning of internet gambling on the coat tails of another bill they knew was going to pass. If they tried to have the restriction stand alone it would have never passed. Every state has gambling in one way or another (lottery, casino's, etc.). Our government acted as though they were they pouty little brat that wasn't getting to play so they took the ball and went home....secretly instead of up front. By the way, the government on a moral issue.....oh please, that's a laugh...
Posted by mhelke (2 comments )
Link Flag
The WTO can go sit on their thumbs
The more I read about the WTO the more I think the U.S should leave it.
Posted by unknown unknown (1951 comments )
Reply Link Flag
fancy that
What has the world come to, when the WTO says the US can't make laws regarding activity outside it's own borders.
Posted by (409 comments )
Link Flag
Feel Free
... it will just make the US dollar plummet further. The USA government needs to stop throwing it's (rapidly reducing) weight around leveling countries of no threat to anyone and become part of the world instead of trying to run it. First step - get rid of Bush.
Posted by Andrew J Glina (1673 comments )
Link Flag
Oh please....
If the governament was smart, they would legalize internet gambling because of the surplus tax dollars they could generate. They made it illegal because they weren't getting a cut. Secondly, they "hid" the banning of internet gambling on the coat tails of another bill they knew was going to pass. If they tried to have the restriction stand alone it would have never passed. Every state has gambling in one way or another (lottery, casino's, etc.). Our government acted as though they were they pouty little brat that wasn't getting to play so they took the ball and went home....secretly instead of up front. By the way, the government on a moral issue.....oh please, that's a laugh...
Posted by mhelke (2 comments )
Link Flag
Time for Republican Congress to show they can act
Here's a perfect chance for this Republican-dominated Congress to show that they have the capability to make things happen. It would be the simplest thing in the world to make the few technical changes required, quickly, to take back control of this situation and stem the tide of uncontrolled internet gambling. Do they have the will to act? Do they really believe in all the family values stuff or will they fall prey to the big business dark side of their psyche? Stay tuned...
Posted by Razzl (1318 comments )
Reply Link Flag
Internet Gambling
In regards to Razzi's statement.The Internet gambling law had nothing to do with family values..It all came down to If Uncle Sam can't make it where he gets a piece of the pie there is no pie. If it had to do with family morals why is'nt alcohol banned? or Tobacco? Do you have any idea how many families they ruin? A lot more than gambling has. But Uncle Sam has a hold on those does'nt he? Big tax money there! So dont think for one minute this has anything to do with helping The average American..Oh no this is all about the goverment being scared that U.S. dollars or going out or coming in with out the goverment being able to help themselves ...again!
Posted by dianeb213 (2 comments )
Link Flag
Time for Republican Congress to show they can act
Here's a perfect chance for this Republican-dominated Congress to show that they have the capability to make things happen. It would be the simplest thing in the world to make the few technical changes required, quickly, to take back control of this situation and stem the tide of uncontrolled internet gambling. Do they have the will to act? Do they really believe in all the family values stuff or will they fall prey to the big business dark side of their psyche? Stay tuned...
Posted by Razzl (1318 comments )
Reply Link Flag
Internet Gambling
In regards to Razzi's statement.The Internet gambling law had nothing to do with family values..It all came down to If Uncle Sam can't make it where he gets a piece of the pie there is no pie. If it had to do with family morals why is'nt alcohol banned? or Tobacco? Do you have any idea how many families they ruin? A lot more than gambling has. But Uncle Sam has a hold on those does'nt he? Big tax money there! So dont think for one minute this has anything to do with helping The average American..Oh no this is all about the goverment being scared that U.S. dollars or going out or coming in with out the goverment being able to help themselves ...again!
Posted by dianeb213 (2 comments )
Link Flag
Vote these Do-Nothing Politicians out of office
With so many important issues going on around us, we can no longer tolerate having these morons waste time on relatively insignificant issues. Especially when their unsolocitated actions actually take our individual rights away. The stereotypical Republican politician works for LESS government in our lives. Times have changed. No we see that the Republican politician is being MORE intrusive on our freedoms. People that are outraged over the Internet Gambling ban need to vote, organize political action committees against politicians that take our rights away, and support those politicians that will work to defend our individual right to participate in Internet Gambling (poker). We also need to elect politicians that will make Internet Gambling safer for U.S. Citizens by monitoring the industry and the processes used to transfer money.

PEOPLE, get up off your butts, make phone calls to your state Representatives, or send letter or emails stating your support for new Internet Gaming Laws.

You may want to look into joining the Poker Players Alliance. Look for their website online and read about it. Then decide for yourself.
Posted by Ammo1231 (2 comments )
Reply Link Flag
Vote these Do-Nothing Politicians out of office
With so many important issues going on around us, we can no longer tolerate having these morons waste time on relatively insignificant issues. Especially when their unsolocitated actions actually take our individual rights away. The stereotypical Republican politician works for LESS government in our lives. Times have changed. No we see that the Republican politician is being MORE intrusive on our freedoms. People that are outraged over the Internet Gambling ban need to vote, organize political action committees against politicians that take our rights away, and support those politicians that will work to defend our individual right to participate in Internet Gambling (poker). We also need to elect politicians that will make Internet Gambling safer for U.S. Citizens by monitoring the industry and the processes used to transfer money.

PEOPLE, get up off your butts, make phone calls to your state Representatives, or send letter or emails stating your support for new Internet Gaming Laws.

You may want to look into joining the Poker Players Alliance. Look for their website online and read about it. Then decide for yourself.
Posted by Ammo1231 (2 comments )
Reply Link Flag
Time for a change
Our government needs to recognize that if they legalized internet gambling here it would create jobs, a huge stream of income, and in turn taxes to the U.S. government. Not to mention the fact that it could be watched and regulated.

Awhile back I got serious about starting an internet gambling business. The concept is completely different than poker or traditional casino games. When I found out how things work, I was surprised to say the least. In Costa Rica, one can get an internet gambling license for about $100 USD. There are no regulations, and no taxes. What this means? Any of these offshore gambling sites could be rigging their games, and no one has any recourse. Even the giants such as pokerstars could easily have software that plays poker with the real people. In fact, there was a recent article that absolute poker got caught cheating by using the resources of an inside man who could see all of the players hole cards.

Summary - legalize, tax, regulate. Do it now before the U.S. loses out on billions of dollars of revenue, and millions in taxes.
Posted by MikeT1136 (4 comments )
Reply Link Flag
Time for a change
Our government needs to recognize that if they legalized internet gambling here it would create jobs, a huge stream of income, and in turn taxes to the U.S. government. Not to mention the fact that it could be watched and regulated.

Awhile back I got serious about starting an internet gambling business. The concept is completely different than poker or traditional casino games. When I found out how things work, I was surprised to say the least. In Costa Rica, one can get an internet gambling license for about $100 USD. There are no regulations, and no taxes. What this means? Any of these offshore gambling sites could be rigging their games, and no one has any recourse. Even the giants such as pokerstars could easily have software that plays poker with the real people. In fact, there was a recent article that absolute poker got caught cheating by using the resources of an inside man who could see all of the players hole cards.

Summary - legalize, tax, regulate. Do it now before the U.S. loses out on billions of dollars of revenue, and millions in taxes.
Posted by MikeT1136 (4 comments )
Reply Link Flag
Hello
My name is Giovanna Barrantes. I'm a gaming attorney in San Jose Costa Rica. The online gaming industry despite all the laws passed and rulings is still alive in Costa Rica.
Posted by costaricalawyer (2 comments )
Reply Link Flag
The UN declaired internet gambling free trade. If you signed WTO then you have to comply. USA appealed. This is BS.
Posted by ordosincorporated (2 comments )
Reply Link Flag
 

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