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