U.S. Ignores WTO Order To "Lighten Up" On I-Net Gamers

Ignoring a World Trade Organization (WTO) order to cease attempts to block Americans' access to offshore online casinos, the Bush Administration has sent a clear message that it still considers online gambling illegal despite numerous U.S. court decisions unfavorable to its position.

In the aftermath of the adverse decision, which came in late 2004, and the rejection of its appeal to a WTO appellate court, the Administration admitted there were inconsistencies between its positions on online gambling within the U.S. and the rest of the world and asked the WTO for a delay in order to "bring itself into compliance." This "grace period" expired in early April, by which time the Administration, apparently reversing itself, contended that since interstate gambling is completely illegal in the United States, the U.S. has no obligation to recognize it as legal elsewhere.

Officials of Antigua and Barbuda (normally referred to as just Antigua), the twined Caribbean nations which brought the WTO action, were quick to condemn the Administration's position and to assert that the Amendment to the Interstate Horseracing Act of 1978 specifically legalized at least one form of interstate gambling* in the U.S.. Echoing rhetoric used by the U.S. in its WTO actions against China, Antigua Finance Minister Errol Cort said that the U.S. "as a mature trading partner should be held accountable for its actions and be required to live up to its responsibilities."

What happens next is anybody's guess. Typically, WTO sanctions involve the aggrieved nation setting restrictive tariffs or surcharges on products imported from the offending country. But, experts in international trade say, this solution would not work for Antigua because its 70,000 residents form such a small market that the loss of sales there would hardly be felt by any American multinational company. That said, it seems clear that the tiny nation, which claims a loss of more than $90 million and 4,000 jobs due to America's attempts to suppress offshore online betting, are going to attempt to gain some recompense for what the WTO called a U.S. "violation" of free-trade agreements by not allowing companies in Antigua unfettered access to U.S. markets.

"The U.S. says it wants open competition, but it only wants free trade when it suits the U.S.," said Ronald Sanders, Antigua's ambassador to the WTO. "It's unbelievable, they've done nothing, but they say they're in compliance," added Antigua's Texas-based Attorney Mark Mendel. "We're talking a big figure, a very big figure, and we intend to back it up … there are ways to get an offending nation to pay a little bit of attention."

Mendel indicated that one of those "ways" could include a request that the WTO allow Antigua to suspend enforcement of U.S. patent and copyright protections. If granted, this would allow Antigua to become a legal "host nation" for companies engaged in DVD, CD, and software piracy. Online gaming opponents, such as Rep. Bob Goodlatte (R-VA) were, in Goodlatte's word, "appalled" by the WTO decision. "It cannot be allowed to stand that another nation can impose its values on the U.S.," Goodlatte said, echoing the sentiments of many of the original opponents of the bipartisan agreements - the General Agreement on Trade and Services (GAT) Treaty and the Congressional action supporting the establishment of the WTO - which, in theory, allow just such an imposition.

Indeed, some analysts believe, the WTO decision may turn out to be a major determinant in the success or failure of Goodlatte's crusade against online gaming. Now moving through Congress, the Representative's Internet Gambling Prohibition Act would make every American betting in an online casino guilty of a federal offense punishable by fine or imprisonment. Specifically, H. R. 3125 would make it illegal for anyone "to place, receive, or otherwise make a bet or wager or to send, receive, or invite information assisting in the placing of a bet or wager" using the "Internet or any other interactive computer service."

While the prohibition against sending and receiving information, strangely similar to Communist China's internet censorship, seems unlikely to withstand a First Amendment challenge, a law making online betting illegal seems eminently constitutional in light of 200 years worth of Supreme Court decisions supporting the federal government's right to ban or regulate interstate gambling.

The WTO's decision in the Antigua case, however, sets a precedent for other, more politically powerful nations such as Great Britain, a much bigger player in the online gaming industry than Antigua, to challenge legislation such as that proposed by Rep. Goodlatte. "It's one thing for the Bush Administration to ignore the ruling favoring Antigua," one gaming operator said. "Turning its back on a decision favoring its only real ally in Iraq would be another matter. "Unless the U.S. can find a way to finesse the WTO issue, I think a total federal prohibition is very unlikely to happen anytime soon."

* The 2000 Amendment says, in part, "there is a need for Federal action to ensure States will continue to cooperate with one another in the acceptance of legal interstate wagers … it is the policy of the Congress in this chapter to regulate interstate commerce with respect to wagering on horseracing, in order to further the horseracing and legal off-track betting industries in the United States …Interstate off-track wager" means a legal wager placed or accepted in one State with respect to the outcome of a horserace taking place in another State and includes pari-mutuel wagers, where lawful in each State involved, placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State, as well as the combination of any pari-mutuel wagering pools.