Fresh off the press

Today: March 24, 2004 at 11:23:57 PST

U.S. loses WTO ruling covering online gambling
By Warren Giles
BLOOMBERG NEWS

Antigua and Barbuda, the Caribbean island nation, has won a World Trade Organization ruling in a finding that U.S. legislation criminalizing online betting violates WTO commercial services accords.

Antigua, which has a population of 68,000, filed a complaint with the WTO about a year ago concerning the United States’ position effectively banning Internet gambling.

The U.S. position has slashed revenue in Antigua, which developed online gambling to boost an economy whose main income, tourism, suffered after a series of hurricanes.

Some gaming observers say the ruling may have limited affect on the longstanding position of the U.S. government that Internet gambling is illegal.

In an interview with the Las Vegas Sun earlier this week, American Gaming Association Chief Executive Frank Fahrenkopf said such a ruling probably wouldn’t have much power to affect change in the United States.

The U.S. Justice Department has long interpreted a telephone betting law from the early 1960s as making it a crime for offshore casinos to accept bets from U.S. residents, he said.

“I doubt the ruling will have any impact at all on land-based casinos in the United States,” he said.

Fahrenkopf also said the ruling wouldn’t likely put more pressure on Congress — which has wavered on the issue of how to effectively ban Internet gambling — to further crack down on online operators and bettors.

The ruling — which only applies to Antigua and not to other Internet gambling jurisdictions worldwide — was disclosed today and comes as federal prosecutors have threatened legal action against such media companies as Clear Channel and the Discovery cable network for doing business with online gambling sites.

Experts also are unsure how the WTO, which has the authority to impose sanctions against the United States, could enforce the ruling.

“It’s a trade organization. It’s not a world court. Their power is limited by the terms of the agreement that members of the WTO agreed to,” Las Vegas attorney and Internet gambling expert Tony Cabot said. “This isn’t the same thing has having the U.S. Supreme Court declare something as unconstitutional or illegal.”

Internet gambling sites aren’t goods like lumber or other products that have been subject to tariffs and other trade sanctions, Cabot said.

State Gaming Control Board Chairman Dennis Neilander this morning said the agency provided information to the International Trade Administration, the arm of the U.S. Department of Commerce charged with representing the nation in international trade disputes. Nevada and other states were asked to provide the ITA with information about their Internet gambling laws and rules and Nevada regulators have complied, Neilander said.

He declined to speculate on the impact of the WTO ruling.

Attorneys for the Antiguan government declined to comment on the ruling.

Antigua-based Internet companies handle a quarter of online bets in a global industry worth $6.1 billion. The country has lost more than $90 million in income from the U.S. ban. About a sixth of the government’s $200 million annual revenue comes from the Internet gambling industry, Sir Ronald Sanders, Antigua’s ambassador to the WTO, said in a telephone interview from London.

“We lost many jobs as a result of the U.S. laws. This is justice done and a victory for the WTO dispute system,” Sanders said. “This proves that a small country like ours can take on a big nation and win.”

Up until 1999, Antigua and Barbuda was among the largest Internet gambling jurisdictions in the world, he said. Sanders has argued that the loss of jobs, reduction in government revenue and money lost to the rest of the economy are “very significant” relative to the size of the nation’s economy and population.

Citigroup Inc., the world’s biggest issuer of credit cards, agreed in 2002 to stop processing online gambling transactions using its cards. In most U.S. states, unauthorized betting and gambling is illegal, regardless of whether it takes place online.

The United States says its laws are designed to protect children and other citizens from online gambling.

“These services present psychological dangers to some segments of society, as well as creating serious social problems and law enforcement difficulties,” the United States said in statements at the WTO when Antigua filed the case last July.

Before the U.S. prohibitions, Antigua’s Internet gambling industry employed 5,000 people in the country in 119 companies. That dropped over three years to 1,000 people in 30 companies as a result of the ban, Sanders said.

“The U.S. is under an obligation to repeal their laws, but they will probably appeal and delay for as long as possible,” he said.

The complaint marks the first time a Caribbean country and any country with a population of less than 100,000 has taken a dispute to the WTO, he said. It’s also one of few disputes to test the relatively new General Agreement on Trade in Services, one of three multilateral agreements that underpin the WTO, he said. Under the agreement, member countries have to make certain commitments to free trade.

Though they didn’t endorse Internet gambling, the European Union, Canada, Japan, Mexico and Taiwan also filed briefs supporting some of the legal arguments made by Antigua in the dispute.

The ruling is expected to be made public next month and the U.S. may appeal the decision.