Posted on Wed, Apr. 05, 2006

Offshore casinos want law changed
U.S. ignores WTO ruling on Internet gambling

The Kansas City Star

The United States has apparently ignored an April 3 deadline imposed by the World Trade Organization to stop discriminating against Internet casinos based in foreign countries.

What happens next is unclear, but the WTO’s credibility and future U.S. policy on the legality of Internet gambling are on the table.

The WTO essentially agreed with the tiny twin-island Caribbean nation of Antigua and Barbuda that the United States, which ostensibly bans Internet gambling, had opened legal doors to offshore Internet casinos. Antigua argued that banning U.S. betting at its Internet casinos was inconsistent with exceptions in the U.S. Interstate Horseracing Act and some state laws that allow domestic remote wagering by telephone and the Internet.

It’s a tiny loophole, but the implications for the United States could be huge, especially if the United Kingdom and other developed nations that allow online gambling press similar claims for legal access to U.S. bettors. Despite the U.S. ban, some experts estimate that U.S. bettors may wager half of the $12 billion a year lost in cyber casinos.

After losing the WTO case last spring, the United States pleaded for a year’s delay to implement federal legislation to accommodate the ruling. But the year has passed without U.S. action to either close the loophole or make Internet gambling legal. One bill is moving forward in Congress, but it would only stiffen existing federal law while carving out exemptions for operators such as racetracks, Indian casinos and state-owned lotteries.

Mark E. Mendel, an El Paso, Texas, lawyer and counsel for Antigua, said Tuesday that the office of the U.S. trade representative formally advised him in a telephone conversation Monday that there would be no further negotiations.

“Yesterday our request to have meaningful negotiations was rejected,” Mendel said Tuesday. “They have come to the mind-boggling conclusion that they are in compliance and have been in compliance all along, and they need not do anything.”

Mendel declined to identify the official he spoke with.

A spokesman for the federal trade office did not return calls Tuesday. The agency for weeks has failed to respond to requests for comment.

Last month U.S. officials told the WTO: “The U.S. administration, in consultation with the U.S. Congress, has been working on appropriate steps to resolve this matter.” No details were offered.

The U.S. position is an awkward one. It holds that Internet gambling is unlawful — horseracing exceptions notwithstanding. Many in the Internet gambling industry had hoped the WTO decision would pave the way to U.S. legalization, regulation and taxation of the industry, in concert with scores of other nations.

At the same time, it is arguable whether Antiguan casinos are being effectively blocked from the U.S. market anyway.

For instance, the Antigua-based World Sports Exchange and its sister sites for poker and casino games were accepting U.S. player registrations Tuesday. The site merely warns: “Players are responsible for respecting local gaming laws and, if necessary, reporting winnings to their local government.”

If the United States won’t go back to the WTO bargaining table, Mendel said, measures initiated this week under WTO procedures would seek compensatory trade sanctions against the United States.

“With our small economy, it’s very difficult to slap a ban or tariffs on U.S. products. That would only harm our own people,” Mendel said. “But there are ways to get an offending nation to pay a little bit of attention.”

Mendel said one sanction Antigua was likely to seek from the WTO would be the lifting of U.S. patent and copyright protections in Antigua that could trigger a manufacturing wave of knockoff U.S. products such as music CDs.

“It’s being considered,” said Mendel, who noted that the WTO once granted similar patent waivers as compensation in a case involving Ecuador.

Mendel said the United States might be engaging in a strategic move, hoping that Antigua could have to reargue its case in a new round of appellate proceedings.

In a statement Monday, L. Errol Cort, Antigua and Barbuda’s minister of finance and the economy, called the “cavalier attitude” of the United States “greatly disappointing” for his nation’s 70,000 citizens.

Cort noted recent U.S. criticism of Chinese compliance in an unrelated WTO case.

He said, “I can find no better words in response to the United States than to paraphrase those of United States Trade Representative Rob Portman, made in relation to China last week: ‘As a mature trading partner, the United States should be held accountable for its actions and be required to live up to its responsibilities.’ ”

Mendel said the WTO’s credibility as a world court was at stake.

“The best weapon in our arsenal is the sanctity of the WTO process,” he said. “If a small nation like Antigua takes on the world’s greatest superpower and wins, and if they are going to ignore that reality, it makes you wonder about the long-term prospects for this system.

“It’s got to be fair for everybody.”

First glance

■ After hearing a case brought by the nation of Antigua and Barbuda, the World Trade Organization wants the U.S. to give offshore Internet casinos legal access to U.S. bettors.

To reach Rick Alm, call (816) 234-4785 or send e-mail to .

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