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WTO Rules for, Against U.S. on Web Gambling

From Associated Press

April 8, 2005

The United States can keep some restrictions on Internet gambling, a World Trade Organization appeals panel said Thursday, but it also concluded that some U.S. legislation discriminated against foreign operators.

Both sides the Caribbean nation of Antigua and Barbuda versus the U.S. claimed victory in the dispute over whether Washington should drop prohibitions on Americans placing bets in online casinos.

In its 138-page report, the Geneva-based WTO appeals panel said the U.S. had demonstrated that the 1961 Wire Communications Act which was written to cover sports betting by phone and has been used to prosecute some website operators "was necessary to protect public morals or maintain public order."

But the panel found against Washington in another respect, saying it failed to show that the Interstate Horse Racing Act of 1978 was applied equally to foreign and domestic remote betting services, therefore contravening international trade rules.

Mark Mendel, legal counsel for Antigua, said the WTO ruling meant that U.S. authorities would have to treat Antiguan online casinos in the same way as traditional gambling outlets.

"At the end of the day, Antigua continues to win," Mendel said. "It is clear-cut. We won on all the major points."

But acting U.S. Trade Representative Peter Allgeier said the U.S. had won the case and was entitled to maintain its restrictions on Internet gambling.

"This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine," Allgeier said.

However, because the panel ruled that American laws discriminate against foreign commerce, Washington will have to provide Antiguan gaming firms with fair access to the U.S. market, Mendel said in response to U.S. claims of victory.

"Although a portion of the initial ruling was reversed by the appellate group, the overall result remains substantially the same in Antigua's favor," he said.

There is no further appeal of the ruling.

Antigua filed the case before the WTO in 2003, contending that U.S. restrictions on Internet gambling violated trade commitments that the U.S. made as a member of the 148-nation WTO.

U.S. trade officials disagreed, saying negotiators involved in the Uruguay Round of global trade talks, which created the WTO in 1995, clearly intended to exclude gambling.

Antigua, a former British colony, has been promoting electronic commerce as a way to end the twin-island nation's reliance on tourism.

The legal status of Internet gambling in the U.S. is in dispute. In many states, gambling is banned or permitted only with restrictions.

The General Accountability Office has estimated that there are 1,800 online gambling operations.