WTO Offshore Gambling Ruling Leaves No Clear Winner

10 April 2005

On Thursday, a World Trade Organization appellate body released its ruling regarding the legitimacy of U.S. offshore online gambling policies. The verdict related to an appeal filed by the U.S., after the WTO ruled in favor of Antigua and Barbuda in November of last year. The original WTO decision stated that U.S. restrictions against offshore online gambling ventures violated international trade agreements. Instead of clarifying its position on the issue, however, the WTO ruling was ambiguous enough to allow both the U.S. and Antigua to claim victory.

While the current ruling maintained most of the previous findings, the WTO appellate body recognized the U.S.'s concerns for social problems associated with gambling. Specifically, the WTO referred to the 1961 Wire Act, which prohibits sports betting over the internet, citing it as necessary to uphold "public morality" and "public order". Although the U.S. sees this recognition as essentially legitimizing its online gambling policies, the WTO also found U.S. policies to be discriminatory. Accordingly, the WTO posits that U.S. citizens are given easier access to domestic gambling venues than offshore online gambling options.

According to the U.S., the WTO appellate court ruling will allow the maintenance of most existing restrictions against online gambling. The U.S. Trade Representative stated that in light of the WTO's ruling, it does not plan to request that congress relax current restrictions against online gambling.

Despite the U.S.'s claim of victory, Antigua and Barbuda see the WTO's decision as falling in their favor. After all, the Appellate Court's ruling upheld the original finding, which stated that the U.S. had signed free trade agreements, which obligate the country to permit offshore gambling. According to one of the attorneys serving Antigua in the WTO case, the ruling should free U.S. companies from fear of prosecution over maintaining dealings with Antigua-based gambling companies.

Within the next 30 days, a WTO dispute settlement committee is anticipated to adopt the reports released by the panel and appellate body regarding this case. Additionally, the U.S. is not expected to appeal the current ruling.

Reader Comment:

And the Winner is...

Jay Cohen

Any claims of a US victory in the matter are the result of the amazing spin the United States is putting on this opinion. Either the USTR doesn't understand the opinion, or doesn't want the general public to understand it.

Antigua won. In the last paragraph of the opinion, the US is ordered to gets its measures (The three federal anti-gambling statutes, we call the "Federal Trio") into compliance with the GATS.

What is causing all of the confusion is that the US raised an affirmative defense under Article XIV of the GATS. There are two prongs to this defense. The Appellate Body ruled that the US met the first prong, the need to have these measures in order to protect public morals. However, the US failed under the "chapeau" which looks at among other things how other laws in the US are treated under these measures.

The panel needed to look no further than the IHA (Horse Racing Act) to see that the US could hardly claim a moral aversion to remote betting when they had such widespread remote betting in its own country under the IHA. Therefore the Article XIV defense failed.

So the US needs to bring the "Federal Trio" laws into compliance. The US is trying to spin this is such a way that they have the right to have these anti-competitive laws on moral grounds, they failed to mention that defense was NOT accepted.

The US is publicly claiming if it tweaks some of its horse racing laws it can be in compliance. Not so, the opinion DOES NOT say adjust your laws so you may have another shot at the morals (Article XIV) defense. It says adjust your offending measures, the "Federal Trio."

They lost, there are no further appeals.

OCN Staff

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WTO Offshore Gambling Ruling Leaves No Clear Winner

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