April 4th came and went, not with a bang, but with a whimper. This was the due date given by the World Trade Organization to the United States for compliance with their ruling regarding America's stance with internet gambling. As I predicted, the ruling was ignored and nothing has happened. Last year the United States was ordered by the WTO to end their prejudices against foreign online betting companies.

The US claims that internet casinos are illegal due to the 1961 Wire Act, which forbids any sort of luck wager along intrastate phone lined (interstate phone lines are acceptable depending on the state). The Justice Department considers the internet to be in the essence of the law, and as such is illegal (the internet didn't exist in 1961 when the act was passed). Antigua and Barbuda disagree, in their opinion the anti-internet gambling act is simply economic protectionism and they have a point as some sort of gambling is legal in almost every state in the US.

Here's the funny bit – Antigua and Barbuda are now seeking sanctions against the US since the US missed the deadline. I'm sure the US is scared - not. Realistically these sanctions will hurt Antigua and Barbuda more than they will hurt the US. Of course, the US knows this, which is why they weren't in any sort of hurry to comply. Antigua and Barbuda are kind of like a fly bugging an elephant, while it may be a pesky annoyance it isn't something to get fussed about.

The US claims its attitude towards internet gambling is in the interest of "`public morals". Right, are these the same morals that allow 20 million porn stations on cable, Indian gaming casinos, and the state lottery? Many are of the opinion that the US is banning online gambling as they haven't figured out how to tax the industry yet. I think they just don't want to deal with it and figure the situation now suits them just fine.

Currently US citizens can deposit and play legally in internet casinos most states. Of the states which ban all gambling the police have admitted that they will not be enforcing the law against internet gambling as it is a non-victim crime. People are depositing their own money of their own free will. No one is putting a gun to their head and as long as the person doesn't become addicted to gambling, no one is getting hurt. Which makes one wonder why would Antigua and Barbuda care so much on making internet gambling legal if people can deposit and play? They want the freedom to advertise.

Internet gambling is estimated to be ten percent of the total gambling spending in the US. This number could be raised significantly if internet casinos were able to advertise freely. Many online casinos and poker rooms advertise their play for fun sites in lieu of their play for real sites in a way around the advertising ban. However, the Department of Justice has been known to lean on companies which allow any sort of internet gambling industry advertising. Furthermore, US citizens would be more likely to choose internet gambling if they knew the sites could be trusted. This would mean making the industry legal and allowing businesses to be licensed to allow US players. Britain has already made internet gambling legal and is financially reaping the benefits from this.

The US has agreed to clarify its position on horseracing. Horseracing is the one form of gambling which allows interstate phone betting. However, they have never agreed to open their borders to foreign competitors. Even some land-based casinos have tried to create internet casino sites with some betting, paid for in the casino but used online, and the sites have been shut down.

The US is a big deal in the internet gambling world, as its citizen's count for approximately 55 percent of online bets. WTO sanctions are typically calculated as a percentage of damages. Mark Mendel, chief legal counsel to Antigua, stated "We're talking a big figure, a very significant figure, and we intend to back it up and get some benefit out of this. I don't know what else to do, but it's unbelievable, they say they've done nothing but are in compliance [with the WTO ruling.]"

Errol Cort, Antigua's finance minister, had this much to say: "As a mature trading partner, the U.S. should be held accountable for its actions and be required to live up to its responsibilities." So the US should be held accountable, we all knew that. The trouble is the US knows that no one can make them comply if they don't want to.

Let's look at the facts here. Antigua has approximately 70,000 people and is the smallest government ever to lodge a WTO dispute. This is the first problem. They scored a "victory" against US online gambling restrictions in November 2004, when the WTO said that the US had committed itself to open the industry in 1995. If they were to try and impose sanctions they could suffer the same fate as Ecuador when they tried to impose sanctions against the EU. Ecuador decided not to impose sanctions against the EU in a dispute over access to the European Union's banana market, because it would have damaged its economy. I don't think a country with less people than Los Angeles, hell less people than most suburban cities, is going to have a significant economic impact on the US.

The idea is to retaliate by including a full range of commercial services and industrial goods imports from the US. However, if they do decide to impose sanctions it will be the first time any of the WTO's 149 governments retaliated by targeting commercial services and property rights rather than increasing tariffs on goods.

I suppose the moral of the story here is you just don't bite the hand that feeds you, even if that hand tends to slap you around a bit. Sorry Antigua and Barbuda, but we told you so.

Posted on: April 7, 2006

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