INTERNATIONAL ECONOMY: US defeated on online gambling
By Frances Williams in Geneva and Matthew Garrahan in New York
Financial Times; Mar 25, 2004
The tiny state of Antigua and Barbuda has won a landmark case at the World Trade Organisation against US restrictions on online gambling, in a controversial ruling that threatens to put the WTO on a collision course with the US administration and Congress.
In a confidential interim report issued to the parties yesterday, a WTO dispute panel said the US restrictions were inconsistent with its obligations under the body's general agreement on trade in services (Gats). The US is expected to appeal once the final report is issued at the end of May, but the appeals decision is binding. Though Washington will not be worried by the threat of sanctions by Antigua, failure to comply would reinforce the perception of the US as a WTO "scofflaw".
Sir Ronald Sanders, Antigua's London-based chief foreign affairs representative, welcomed the ruling and said it showed the WTO disputes procedure was effective in giving redress to even the smallest nations.
Three years ago Antigua, with a population of about 67,000, had 119 licensed online gaming operators employing 5,000 people, but this had shrunk to 30 operators with a workforce of fewer than 1,000 since a US crackdown on internet gambling, Sir Ronald said.
The Caribbean island has captured a sizeable chunk of the rapidly growing global online gambling market, worth over $6bn (€4.9bn, £3.3bn) last year.
Antigua argued before the panel that US commitments under Gats required it to allow foreign gambling operators to compete with the domestic industry. The US claimed gambling was not covered by its Gats commitments and that restrictions on online gambling were justified to protect citizens, especially children, from social, psychological and financial harm.
Most US states bar unauthorised betting and gambling, regardless of whether it takes place online, but at the federal level the law is less clear. The US Justice Department says all forms of online gambling are illegal under the 1961 Wire Act, which prohibits placing or taking bets across state boundaries using telephone lines or wires.
However, it makes no mention of the internet and in 2002 a US appeals court ruled that only sports bets placed on the internet were illegal. Despite this, US federal prosecutors have recently stepped up enforcement measures against online gambling and tougher legislation is pending in the US Congress.
Any reversal of US policy would be welcomed by an industry prevented from setting up operations in the world's largest gambling market.
Nigel Payne, chief executive of Sportingbet, an offshore operator, said: "Potentially this is a very exciting development for Sportingbet and the online gambling industry. But we need to see the actual report before we can start celebrating."