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WTO rules US ban on offshore Internet gambling to be illegal 02/04/2007
Nick Mathiason

In a judgment published late on Friday the World Trade Organisation (WTO) ruled that the unilateral prohibition imposed by the US on offshore Internet gambling is illegal. .

However the decision is unlikely to have much effect in the short term at least – as the Bush administration has simply ignored a 2005 WTO finding that concluded the US was in breach of WTO rules by banning payments by individual US citizens to gambling Web sites whilst simultaneously allowing gambling within the country itself.

It was back in 1995 when the US government first promised the international organisation that it would open-up its gambling industry to competition. However, under extreme lobbying pressure from powerful interests in places such as Las Vegas and Atlantic City, for the next ten years nothing was done to fulfill the pledge.

The original complaint against the US was made by the tiny Caribbean nation of Antigua and Barbuda and years later, in a second David v Goliath re-run, representatives of the 70,000 citizens of the islands appealed against the US government’s decision reached in October 2006, that made it illegal for US residents to make credit card payments to overseas betting organisations.

This time around the WTO has found that the US action is discriminatory and in breach of the organisation’s rules and has said that if the ban is not lifted sanctions may be applied.

Before the ban the offshore Internet gambling sector was estimated to be worth US$12 billion a year, with US punters accounting for $6 billion of that turnover.

In its response to the WTO, the Bush administration did not contest the finding that the government had failed to comply with the earlier 2005 ruling requiring American gambling to be opened to competition but instead took refuge behind a claim that it had been forced to prohibit Internet gambling to “protect public order and public morals”.

However, despite the cynical whipping-up of a spitball of synthetic moral froth by certain parties and religious interest groups in Washington DC and elsewhere, the reality is that the US ban has always been more about protectionism than any spiritually higher purpose.

Thus the US government has been forced to cast about in an effort to find some justification for its actions and finally settled on the bizarre argument that the prohibitions that were in place before the enactment of the October 2006 law apply to both foreign and US betting services alike while the WTO's decision applies only to gambling on horse racing.

Upon reading a little further into matters, one finds, altogether unsurprisingly, that it is legal for the US to discriminate against overseas companies in relation to gambling on horse racing.

Further in its response, the Bush administration says the October 2006 law is not covered by the WTO ruling and that the government’s 1995 commitment to open gambling to foreign companies was "an oversight on the part of the Clinton administration.” This is as classic an example of retrospective buck-passing as has been seen in many a year.

'The WTO judgment say the US government "had an opportunity to remove the ambiguity between legal betting on horse racing across state borders and strictures and prohibitions on other types of gambling but instead, rather than take that opportunity, the US enacted legislation that confirmed that the ambiguity at the heart of this dispute remains.”

Meanwhile the Antiguan finance minister, Errol Cort, said the WTO ruling "vindicates all that we have been saying for years about the discriminatory trade practices of the United States."

Antigua and Barbuda are now theoretically able to ask that sanctions be imposed on the US. The most likely and most damaging would be the WTO-sponsored withdrawal of overseas protection for US trademarks and copyrights. Such action, known as “cross-retaliation” (and the Caribbean islands in question are definitely cross and do want to retaliate) are entirely permissible under WTO rules in cases (such as Antigua and Barbuda) where countries cannot afford to impose higher import taxes in incoming goods.

Meanwhile, elsewhere in the Caribbean, Gary Kaplan, the founder of the UK Web-based sports bookmaker BetonSports, was arrested in the Dominican Republic and “rendered” to US authorities. Last year, Mr. Kaplan, his company and 10 other individuals were indicted by a US grand jury on illegal Internet gambling charges .