WTO Turns Up Heat on US Online Gambling Ban

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Robert J. Berger" <rberger () ibd com>
Date: November 10, 2004 9:55:47 PM EST
To: Dewayne Hendricks <dewayne () warpspeed com>, Dave Farber 
<dave () farber net>
Subject: WTO Turns Up Heat on US Online Gambling Ban

WTO Turns Up Heat on US Online Gambling Ban
By  Roy Mark  November 10, 2004
http://www.internetnews.com/ec-news/article.php/3434111

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.


--
Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
http://www.ibd.com


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