World Trade Organization rules against US online gambling policies

7 December 2004

The World Trade Organization (WTO) ruled on November 10th against U.S. online gambling policies. Accordingly, the WTO deemed the U.S.'s prohibition of online gambling as constituting a breach in fair trade standards established in a 1994 worldwide deal and ordered the U.S. to allow international casinos to operate within its borders. In response to the ruling, the United States Trade Representative's (USTR) office vowed to appeal the WTO's decision, calling the ruling "deeply flawed."

The ruling upheld a preliminary decision established in March of this year in favor of Antigua and Barbuda, a Caribbean state whose economy rests in part on the success of its internet gambling industry.

According to Antigua and Barbuda, as well as the WTO, the U.S. indirectly agreed to permit online gambling when it joined the WTO in 1995. The U.S. presented a list of services upon which it would submit to mutual trade commitments. This list included a category entitled "other recreational services," which Antigua and Barbuda and the WTO took to include internet gambling.

The U.S., in turn, rejected this interpretation, adding that "Throughout [U.S.] history, the United States has had restrictions on gambling, like many other countries. Given these restrictions, it defies common sense that the United States would make a commitment to let international gambling operate within our borders."

Following the U.S.'s appeal, the issue will await resolution by the WTO appeal Panel. According to the USTR, a decision is likely by early 2005.

The USTR representative added that the issue at hand is not one of discrimination. Accordingly, the U.S. prohibition against gambling applies to all gambling services, and not specifically toward online casinos managed by companies in Antigua and Barbuda.
The U.S. prohibition against internet gambling stems from the Wire Act of 1961, which disallowed the use of phone lines for the objective of offering a sporting bet. In light of the advent of the internet, courts unfailingly ruled that the prohibition could be carried over to betting on the Web. Recently, however, there have been judicial efforts to alter this approach, with a recent decision by a federal appeals court and an impending appeal by the Department of Justice leading the way. The Department of Justice also suggested that even if forthcoming court verdicts determine that the law does apply to internet gambling, it can only apply to online casinos in the U.S., as casinos abroad are outside of the U.S.'s jurisdiction.

In spite of its illegality, approximately 60 percent of all offshore gambling revenue comes out of the U.S. Accordingly, it was estimated that Americans gambled more than $2 billion online in 2003.

OCN Staff

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World Trade Organization rules against US online gambling policies

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