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WTO Turns Up Heat on US Online Gambling Ban

A World Trade Organization (WTO) panel ruled today that U.S. prohibitions on Internet gambling are unfair trade practices and that the country should open its borders to international casinos. The office of the United States Trade Representative (USTR) said it would "vigorously" appeal the "deeply flawed" decision.

In the ruling, the WTO affirmed a March preliminary decision favoring the Caribbean island nation of Antigua and Barbuda, home of numerous Internet gambling casinos. Antigua argued that the U.S. committed to honor cross-border gambling as part of its 1995 agreement to join the 148-member WTO.

When the U.S. became a member of the WTO, it submitted a "schedule of services" the country was willing to make mutual trade commitments on.

Included in the U.S. schedule was the term "other recreational services." Antigua and the WTO interpret that to mean Internet gambling.

"Their claim is that our obligations and our commitments under our General Agreement on Trade and Services (GATS) agreement included an obligation to Internet gaming services," a senior U.S. trade official said. "We fundamentally reject that. We vehemently disagree with the panel's finding that the term includes gambling services."

Richard Mills, a USTR spokesperson, said in a press statement, "Throughout our history, the United States has had restrictions on gambling, like many other countries. Given these restrictions, it defies common sense that the United States would make a commitment to let international gambling operate within our borders. Antigua is arguing for a result that was never imagined, much less bargained for."

The case now goes to a seven-member WTO appeal panel. The USTR said a decision is likely in the spring of 2005.

"This is not a situation where Antigua is claiming some discrimination against their service providers, per se," the USTR official said. "Federal and state laws against interstate gambling apply to everyone. It is not a case where U.S. companies can do one thing but Antigua and Barbuda companies can not."

The 1961 Wire Wager Act specifically prohibits the use of telephone lines for the purpose of placing a sporting bet. Since the Internet uses telephone lines, courts have consistently ruled the Wire Act also covers Web sports wagering, but a recent federal appeals court decision said it was beyond the scope of the original law to include placing a casino bet online.

The Department of Justice is appealing the decision, but even if a future court decision says the law does apply to online casinos, all of them are located offshore and beyond the jurisdiction of the U.S.

Congress is also considering strengthening U.S. anti-gambling laws. One proposal calls for banning the use of credit cards and other transfer instruments to offshore gambling sites.

"Contrary to what the [WTO] panel asserted, there is no obligation for WTO members to conduct international consultations before taking action to protect public morals and public order and enforce criminal laws," Mills said. "WTO members were already restricting gambling and other activities affecting public morals and public order long before they created the WTO."

The original WTO agreement was negotiated by the Clinton administration.

"I have no doubt they had no idea and expectation that they were making a commitment in our GATS schedule to open up gambling services," the senior trade official said. "If you think about it, it's ludicrous to think they would have thought that since nearly every state in the country bans these types of services and there are a number of federal laws that ban interstate gambling."

It is estimated that as much as 60 percent of all offshore gambling dollars come from Americans. Although the Wire Act poses enough of a threat to drive online gambling sites out of the country, offshore casinos and sports books have grown from about two dozen sites in 1995 to almost 2,000 last year.

The House Banking Committee was told last year Americans will gamble more than $2 billion through the sites in 2003.