Is the tide turning for Internet gambling within the U.S.?

[The Judge]

Is the tide turning for Internet gambling within the U.S.?
By: The Judge
CappersMall.com
April 19, 2007

By 2003, the island nation of Antigua and Barbuda had realized a tremendous reduction in the income that had been generated by licensed online gambling operators within their borders in previous years. This decline was deemed to be a direct result of the United State’s blatant efforts to block American citizens from gambling over the Internet which was source of over $1 billion dollars in revenue to the tiny country as recent as 2000. As a result of the serious decline in income from this industry, the Antiguan government began to take a hard look at the myriad of U.S. laws governing gambling and determined that they were in direct violation with the United States' free trade obligations, as administered by the World Trade Organization. This determination led the Antiguan government to ask the WTO in to rule that U.S. gambling restrictions violated an international treaty governing trade in services.

At issue was whether those laws constitute "arbitrary and unjustifiable discrimination" against foreign firms. Antigua's complaint was based on the theory that since the United States does allow gambling within their borders, by imposing barriers to foreign companies seeking access to the growing U.S. gambling market, they were not living up to their WTO obligations for free trade. Predictably, the United States’ opposition to this complaint was based on a “morals” defense which allows a country to restrict foreign providers of a product if due to moral objections, that product (in this case, Internet gambling) is not permitted within their own country.

The United States was somewhat successful with this approach to the issue in that the WTO agreed that there was indeed a distinction between land-based casinos in the United States and online gambling outlets. However, the fact that U.S. does allow some forms of Internet gambling contradicted their own defense to the complaint and the resulting WTO ruling gave the United States a year to comply by either changing its laws to fully ban online gambling or to allow foreign access to their online gambling market.

That year ended in April of 2005, but rather than do anything to comply, the United States simply issued a statement to the effect that it had spent the year reviewing the matter and decided that it has been in compliance all along. Not surprisingly, Antigua challenged this half-hearted response and a final ruling from a WTO tribunal was released last month finding that the U.S. remained out of compliance.

What is hard to believe is that the U.S. Congress seems to have been largely oblivious to this entire issue as demonstrated by its recently enacted legislation. The Unlawful Internet Gambling Enforcement Act 0f 2006 only strengthened Antigua’s arguments, as it clearly acknowledges beyond any doubt, that the United States does not prohibit all forms of Internet gambling. In fact, contained within the new legislation is a concise list of the exceptions under which Internet gambling is permitted, including state lotteries, horse racing and online gambling within state borders.

The latest WTO ruling was surprisingly received by the general gambling community within the U.S. with little fanfare as the U.S. latest policies have clearly shown that Department of Justice’s desire to crack down on the offshore gambling industry. Many gamblers have become disillusioned and complacent about the possibility of anything making a difference when the American government has so convincingly flexed its muscles. However, it is becoming more and more obvious that this is a groundbreaking event as many who actually understand the potential ramifications of the WTO ruling have been expressing their concerns.

As early as May of 2005, the Attorney Generals of twenty nine states joined together in co-authoring a letter to the United States Trade Representative in which they expressed their obvious concern over the initial WTO ruling. An excerpt from that letter follows:

“The recent WTO Appellate Body ruling on Antigua’s WTO challenge to the U.S. Internet gambling ban is quite troubling. Putting aside disagreement about whether the WTP Appellate Body’s ruling ought to be considered a “win” or a “loss” for the United States, it cannot be disputed that the panel’s ruling on several underlying issues raised in this dispute will have significance far beyond the trajectory of this individual case.

“First, the Appellate Body determined that regardless of U.S. intentions. U.S. “gambling and betting services” are subject to GATS coverage. The panel came to this conclusion by reading in a gambling commitment as being subsumed under a commitment the U.S. explicitly made subject to “other recreational services” to GATS coverage. The U.S. commitment for other recreational services was taken without limits, meaning that the Appellate Body’s logic requires the United States to abide by market access and national treatment obligations with regard to the gambling service sector. Among there obligations is the right of foreign services providers to establish a commercial presence within the United States to provide a covered service. Thus, while this case concerned cross-border trade in gambling services via the Internet, the panel’s determination that the gambling sector is subject to all GATS requirements means that an array of common U.S. gambling regulations, including limitations on the number of casinos or slot machines, state monopoly lotteries or exclusive Indian gaming rights, are now subject to challenge before future WTO tribunals as violating U.S. GATS obligations.

"After the lower panel’s ruling, USTR assured state officials that if the Appellate Body upheld the lower panel’s ruling on this point, the United States could act to withdraw the gambling sector from the United States’ specific GATS commitments. We urge you to do so, as the cost of withdrawing the sector will only increase as foreign suppliers of gambling services invest in the U.S. market in the wake of this case. Our states have a diversity of regulations vis-à-vis gambling. We believe that under our constitutional system of federalism, states should continue to have the flexibility and sovereign authority to determine whether and under what conditions gambling occurs within their borders, without such decisions being subject to second-guessing by WTO tribunals."

What is conspicuously absent in the letter to the USTR is even a suggestion that the U.S. could possibly ignore the findings of the WTO Appellate body as many casual observers have assumed they would. Indeed, what the Attorney Generals are proposing here is the U.S. exercise the right that each of the WTO member nations of the General Agreement on Trade in Services (GATS) have to withdraw from specific sectors of the agreement if they so choose.

That approach does not seem to be as valid of an option as the Attorney Generals suggest according to Mark Mendell, the attorney representing Antigua before the WTO, who recently posted on an internet discussion forum in an attempt to bring the matter into perspective. “Simply put, the General Agreement on Trade in Services is intended to be subject to further liberalization, and not restriction (Art XIX). In keeping with that, for a member to restrict its existing commitments has been made quite punitive in the GATS, basically opening up the changing member to claims for damages from all member countries (Art XXI). Accordingly, it is just not done--in fact, I am not sure the process has ever been used.

“Currently, a new round of services negotiations is in process,” says Mendell, “and we have observed that the proposed new United States schedule under the GATS does not effect a change in the portion of its schedule that we were able to convince the WTO contained an unrestricted US commitment to the cross-border provision of gambling and betting services. This recognizes the virtual impossibility of regressive change to commitments.”

To date, the USTR has taken no steps to address the key request of the attorneys general; that the gambling sector be completely withdrawn from the list of services the United States signed up to the GATS in 1994.

The fact of the matter is that one of two things must happen for the U.S. to avoid trade sanctions from the WTO: Either the U.S. Congress must acknowledge that betting on poker or horses over the Internet is no greater threat to the nation's moral fiber than it is at a casino or off track betting parlor, or make it illegal to play the lottery or horses over the Internet anywhere within the country. Ant attempt to ignore this issue will do nothing less than to force the WTO to authorize trade sanctions against the U.S.

It is clear that most people do not understand the potential repercussions of these types of sanctions. Antigua is not likely to impose tariffs on American imports as that strategy would surely backfire in their face. However, now that the ruling has been upheld, if the U.S. does not come into compliance, it is not at all unlikely that the WTO will grant this tiny country the right to cease respecting the US copyright and patent laws. Don’t scoff at that idea as the world body has actually authorized intellectual property based reprisals in the past.

Consider if you will how easy it would be to start reproducing copies of Microsoft’s products and distributing them worldwide at a fraction of what Bill Gates is selling them for. The same opportunity would be available in the film and music markets and it is not likely that companies like Disney and Sony will be standing by allowing this to happen for very long. In fact, just last week the U.S. renewed its own complaint to the WTO regarding China’s blatant disregard for the music and software piracy that is wide spread in that country. While these types of products can easily and rapidly be duplicated, the same patent scenario would exist for Antigua for everything from machinery to pharmaceuticals.

“And it’s not just ‘an eye for an eye’ when it comes to WTO trade sanctions,” Lori Wallach, director of Public Citizen’s Global Trade Watch said. “Antigua could set up its own version of iTunes without paying the U.S. artists, suspend U.S. pharmaceutical company patent rights or follow the advice of its lawyers and ignore intellectual property rules to start selling Windows Office, given Microsoft is a U.S. company.”

Because the US our economy is so heavily reliant on intellectual property, this ruling could indeed have a profound effect on how the U.S. lawmakers eventually respond to this issue. Last year’s passage of the Unlawful Internet Gambling Act would suggest that the U.S. Congress has not even considered the ramifications of their actions.

Clearly this is not a matter that the U.S. government can ignore. However, the U.S. has sent mixed messages whether it will comply with the WTO ruling in this case. As a general matter, President George W. Bush has made it a priority of his administration for the US to comply with rulings of the WTO. In response to the issuance of WTO trade sanctions against the US in another matter, President Bush said, "We've worked hard to comply with the WTO. I think it's important that all nations comply with WTO rulings. I'll work with Congress to get into compliance." Yet in its initial response to the Antigua WTO ruling, the US Trade Representative stated that the US Trade Office “would not ask Congress to weaken U.S. restrictions on Internet gambling" as ordered by the WTO Appellate Body in its report.

The WTO ruling could potentially have a huge impact on current U.S. online gambling laws in that, among other things, it legitimizes the offshore sports and casino industry as providing a tradable service recognized by the WTO, it provides a continuing forum for U.S. Antigua negotiations on the provision of remote wagering by Antiguan operators in the US gambling market and it places international pressure on the U.S. to comply with the WTO ruling.

The WTO is a well respected international trade court and the fact that its smallest member, Antigua has been the first country to defeat the U.S. which is the largest member, is a very significant event. "The impartial dispute resolution machinery of the WTO has functioned as we had expected," says Mark Mendel, lead legal counsel for Antigua's case. The WTO ruling is anticipated to pave the way for new financial and media opportunities for Antiguan gaming operators. Previously U.S. companies such as Citibank, Chase Manhattan, Bank of America, Clear Channel Communication, Discovery TV, Yahoo and MSN were previously convinced that conducting financial transactions or broadcasting advertisements involving online gaming products was illegal. The WTO determination provides a clear defense for those that have been weary of associating with the offshore gambling industry and may very well end the string of subpoenas and threats of prosecution from the federal government to U.S. companies who choose to do so.

The time has come when the U.S. government will have to take a serious look at these compliance issues in its approach to online gaming rather than simply prohibiting it altogether. "At the end of the day," said Mendel, "we expect that major internet search engines, including Google and Yahoo, financial institutions and credit card service providers will be required to accept transactions and advertising from Antiguan internet gaming sites as they do currently with US gaming interests, including hundreds of American casinos and state lotteries."

[BoBo]

good read, thanx

[verdict]

yes enjoyed it

[The Judge]

This guy is a freaking moron.


Delusional thoroughbred chief wants US out of GATS
Horseracing head keeps head in sand

By: Burke Hansen
April 18, 2007
theregister.co.uk

House of Cards In a bizarrely rambling and ill-informed interview with Interactive Gaming News last week, National Thoroughbred Racing Association (NTRA) head Alex Waldrop advocated that the United States try to remove gambling services from the General Agreement on Trade in Services (GATS), thereby circumventing a string of negative rulings against the US at the WTO covering the provision of cross-border gambling services.

Never mind that the WTO resolved the status of gaming services and the GATS in the initial panel; even the hard-up Department of Justice (DOJ) has given up on that tack, choosing instead to do nothing and hope that the dispute somehow resolves itself. With trade partners such as China, Europe, and Japan breathing down the neck of the DOJ...well, good luck with that.

The dispute originated years ago in the aftermath of the arrest of Jay Cohen, the one-time head of the World Sports Exchange (WSE), who landed in federal prison after returning voluntarily to the US to fight charges that he had violated the Wire Act by operating an online casino out of Antigua. Although the company operated completely out of Antigua, where online wagering is legal, the Federal Court for the Southern District of New York felt that the WSE had marketed itself sufficiently in the US to fall under American jurisdiction.

Sensing a threat to one of the pillars of its economy, the tiny Caribbean nation of Antigua and Barbuda challenged the US over its gambling policies at the WTO.

The WTO panel ruled decisively against the US, and the WTO appellate body has systematically upheld that ruling with some modification. Although the US could have specifically excluded gambling when it negotiated the GATS, it did not; the ruling provided the important precedent that gambling businesses are indeed providing "services" within the meaning of the GATS. Those services are covered by the GATS, and not just for the United States as Mr Waldrop seems to believe.

It's a preliminary [ruling]...the proceeding is ongoing. It seems to be interminable. The unfortunate fact is that gambling should have never been included under the General Agreement on Trade in Services (GATS) in the first place. And the only logical solution, perhaps not a practical solution, is to withdraw gaming from GATS. We're the only country in the world, apparently, that included gambling. All other countries had the foresight to check the box and remove gambling from consideration. We neglected or failed or decided for whatever reason not to exclude, and not we're left with this very difficult decision. Not only difficult for the racing industry, but actually it doesn't bode well for other interests across the country because this ruling is based upon federal law, but it could just as easily have been based on state-law claims. It's not just the racing industry that's put in an awkward position by this.

Of course, another solution would be for the US to bring its policies into compliance with the WTO it worked so hard to create. Apparently, bringing American law into compliance with the WTO is not a logical solution for Mr Waldrop. Could that be why he's confusing an appellate report with a preliminary ruling?

The WTO chose to focus on the most clear-cut American violations of its WTO commitments, which involved large scale internet gambling on horseracing in the US, both by states and publicly traded companies. The horse racing industry is notoriously protectionist, and not only in the US.

In spite of the provincial character of the industry, however, it might be reasonable to assume that the public face of the American horse racing industry would be avidly following a landmark case covering his industry.

Right?

Maybe not.

"I haven't looked at it with any close detail. I mean I haven't analyzed it because, again, it's preliminary and it will be appealed," he said. "Keep in mind we're not a party to it, so we're just monitoring it. We're not monitoring it. We're not being consulted. We're not in any way directly engaged. But given the fact that it's preliminary, it's safe to say that we didn't scour it like we would the final, not appealable ruling."

Uh, I'll take Appellate Body Reports for $800, Alex. Never mind that the recent compliance report slammed the US for failing to comply with the appellate body report of two years ago – Mr Waldrop prefers to live in la la land, it seems.

Long shots may be the only way to make real money at the track, but as far as lawsuits go, they're money losers. Mr Waldrop would serve his industry better if pulled his head out of the sand and took a hard look at what the future has in store.

[Dr. Jack]

My guess is he would feel differently if horse racing didn't have the exemption. What is he playing every man for himself. He's a Jerkoff

[Seanie Mac]

since when does judge write for cm?

[uva3021]

good job The Judge, lots of big words

[The Judge]

Gambling and the Law®: Keeping Out Legal Gambling
By: Professor I Nelson Rose

The biggest news over the last few years for Internet gambling has been the attempt by many governments to keep out foreign legal operators. Legal complaints have been filed in the World Trade Organization (“WTO”) and the European Court of Justice (“ECJ”) against countries like the U.S. and Italy, which have passed laws that have the real-world effect of making it a crime for a licensed online gaming site to take bets from those countries.

While the issue of whether to legalize is being debated, law enforcement officials face a more fundamental question: Can a state or nation keep out foreign legal gaming?

We now may be able to answer that question, or at least make educated guesses, due to recent decisions from not only the ECJ and WTO, but also the United States Supreme Court.

The first step is to find a statute or regulation that might apply. Most fights against remote betting stop here, because lawmakers simply have not enacted the necessary laws.

The anti-gambling laws that are on the books were designed for specific problems from other eras. The Wire Act, for example, the major federal barrier to overseas-based gaming, was passed in 1961 as part of Attorney General Robert Kennedy’s “war on organized crime.” It was designed to help states fight illegal Bookmakers who took sports bets by telephone. No one at the time thought about the possibility of playing poker on home computers.

The federal Department of Justice, which is charged with enforcing federal laws, asserts the Wire Act covers all forms of interstate and international gambling. But the few courts that have looked at the issue have ruled the Wire Act is limited to bets on sports events and horse and dog races. So, if these courts are correct, the question of whether the U.S. Congress had the power to bar foreign, licensed Internet poker under the Wire Act, need not be answered, because that statute simply does not apply.

Of course there are other federal and state statutes. Though almost all of those have severe weaknesses, such as not clearly stating that they apply to activities taking place partially in other countries.

The recently enacted Unlawful Internet Gambling Enforcement Act does nothing to correct this problem. An underhanded political move by the failed politician Bill Frist, ex-majority leader of the U.S. Senate, this Act applies only to Internet gambling that is unlawful under some other federal or state law.

Assuming there is a law in place that makes it illegal to accept bets on a particular form of gambling, there is no doubt that a state or nation can keep out illegal gambling.

The situation gets much more complicated if the operator is acting legally under its local laws.

Still, states start with the right to bar the importation of all goods and services, even if these come from places where it is legal to sell and ship these products. The problem arises when a government has agreed, sometimes unintentionally, to eliminate its trade barriers.

Usually when a state joins a federation, like the states of the United States or Australia, or signs a treaty organization, like the European Union, it finds it has opened its borders to goods and services from its sister states or trade partners. The United States discovered that it had consented to allow in legal gambling from other member states of the WTO when it signed the WTO treaties. Its major mistake was failing to do what some other member states did: specifically list “gambling” as an activity it wanted kept out.

But decision-makers have unanimously agreed that gambling is different from other legal businesses. A government can bar foreign gaming, if it can come up with good reasons for doing so.

This is easy if the state has a complete prohibition. Utah does not have to allow in California State Lottery tickets if it does not permit anyone to sell lottery tickets to its residents.

States that want to exclude legal foreign gambling always raise the same arguments: fear of fraud, money laundering, organized crime, underage and problem gambling, and because it offends local morality. Governments cannot rely solely on the real reason – to keep out competition.

It is almost impossible to successfully argue that a state has the right to exclude a legal activity from its sister states or trade partners when that state allows only local operators to do the exact same thing.

This is what happened to the U.S. in its fight with Antigua in the WTO. The WTO ruled that the U.S. had agreed to let in legal gambling from other members of the WTO. But it then bought the argument that federal laws against remote gambling were necessary to protect Americans. So, the U.S. would have won. But Antigua raised the Interstate Horseracing Act, which allows Americans to bet on races from their homes, but only with operators in U.S. states. Since there is no reason for this discrimination against Antiguan horsebooks, the U.S. was held to be in violation of the WTO treaties.

The same type of analysis can be done with any two countries and any form of gambling, for anyone willing to spend large amounts of time and money.


#112 © Copyright 2007, all rights reserved worldwide. GAMBLING AND THE LAW® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

[cptkirk321]

This is always the argument that makes me piss myself laughing when I hear it


States that want to exclude legal foreign gambling always raise the same arguments: fear of fraud, money laundering, organized crime, underage and problem gambling, and because it offends local morality. Governments cannot rely solely on the real reason – to keep out competition



That never happens with locals does it, LOL!!! Who exactly booked bets before the computer and online sites became so widely popular? Oh thats right the criminal element of our society, I am sure the local morality really enjoyed walking past a guy with two broken knees for an outstanding gambling debt Lets see a computer site where people can be somewhat protected from themselves or pushing it completely underground once again where the ones who are benefitting the most by this law are the criminals of our society who are now booking bets and making the profits from it, once again wonderful thinking from this governemnt. IDIOTS!!