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Antigua Claims Its Share of WTO Decision

When the World Trade Organization (WTO) issued a ruling Thursday in a trade dispute involving Internet gambling services, Washington quickly claimed victory over the tiny island nation of Antigua.

The smallest nation in the WTO, however, refuses to fold its digital hand.

In a ruling specific to the U.S. and Antigua, the WTO's appellate panel said Washington has the right to keep online gambling services off its list of obligations under the General Agreement on Trade in Services (GATS).

The ruling, Washington declared, keeps online betting operations on offshore servers -- and American-based Internet bettors committing a crime when they want some skin in the game.

That's thanks to the panel's nod to a country's right to refuse to deal in good and services that its bans at home. But the WTO also noted the United States does permit betting on the ponies over the Internet. It said upholding public morals laws is one thing, but Washington can't have it both ways: either ban or legalize all online gambling.

In Antigua, government officials and Internet casino operators alike are baffled over Washington's reaction. In short, they say they won.

"Unless the U.S. wishes to repeal all of its laws that currently permit any form of domestic remote gambling and adopt laws to affirmatively prohibit it in all forms countrywide, then they will have to provide Antiguan online gaming companies fair access to the U.S. market," Mark Mendel, lead legal counsel for Antigua, said in a statement.

Not so fast, said the USTR.

"It [WTO] merely found that, for this exception to apply, the United States needs to clarify one narrow issue concerning Internet gambling on horseracing," a USTR statement claimed. "USTR will be exploring possible avenues for addressing this finding. USTR will not ask Congress to weaken U.S. restrictions on Internet gambling."

That clarification, though, may be hard to come by in Congress, according to Frank J. Fahrenkopf, Jr., president and CEO of the American Gaming Association.

Under pressure from the financially struggling horseracing industry, Congress in 2000 changed the language in the Interstate Horseracing Act to facilitate national betting on simulcasts from tracks throughout the country.

In the course of changing that language, Congress opened the door for Antigua's case. The definition of an interstate off-track wager was expanded to include pari-mutuel wagers transmitted between states by way of telephone or other electronic media, i.e., the Internet.

"There are 11 states where you can use the Internet and other means to place a horse racing bet," Fahrenkopf said. "California, Florida, Illinois, New York and Pennsylvania are among those states. Those are big states with strong delegations."

Fahrenkopf characterized the WTO ruling as "very confusing and very interesting," but ultimately not a threat to U.S. anti-gambling laws. "Nobody really cares about whether Antigua won or not," he said. "Sanctions [against the U.S.] would probably hurt Antigua much more than the U.S."

The challenge, he noted, will come from much larger countries such as Britain, which is currently considering an Internet gaming law. According to Fahrenkopf, if the U.S. does not change or tweak its own law, a large country that sanctions online gambling will use the Antigua decision to challenge the U.S. ban on online gambling.

If the U.S. were to lose against such a country, the sanctions could be considerable.

The next step in the U.S. Antigua matter is for the WTO's Dispute Settlement Body to formally adopt the appellate panel's report within 30 days. There is no further appeal.

But the ripple effect seems to be just beginning.