There's a great story about a kid with a slingshot and big mean bully taking a rock right between the eyes. You've heard it forever and it's become part of our popular culture to describe every great underdog story as a David & Goliath match. The internet gaming version of David is an island nation with a population smaller than the attendance of most NFL games, while Goliath is the superpower with a population that just surpassed the 300 million mark. The referee is the World Trade Organization, and the battlefield is the internet.
In 2004, the WTO ruled in favor of the tiny nation of Antigua, which cites online gaming as its second-largest employer (after tourism), against the US policies of banning internet sports betting from offshore companies. The ruling stated that allowing internet betting on horse racing by US-based firms while banning internet betting from non-US firms was a violation of WTO policies. A 2005 ruling stated that the US could, if it chose, ban all internet gambling within its borders, but that current US policy was inconsistent because only certain types of gambling was declared illegal.
The newly minted Unlawful Internet Gambling Enforcement Act (passed by attachment to a port security bill) has been seen by some as a further reinforcement of US unwillingness to go along with the WTO ruling. According to Jonathan M. Winer, a Washington attorney who has closely monitored the WTO action, the legislation could well increase the problems the US has already has with the WTO.
"To the extent that the legislation eliminates foreign competition for activities that remain lawful in the US, such as online betting on state-licensed horseracing, or state-licensed casino gambling that meets federal guidelines, there's no doubt it raises WTO issues," said Winer.
Texas attorney Mark Mendel, who represented Antigua in the 2004 WTO case, puts it more bluntly. "What Congress is really doing is putting the U.S. on a clear collision course with free trade and the WTO." Mendel said the ban Congress approved would allow Nevada and other states to conduct Internet gambling within their own borders. "That flies in the face of the WTO ruling," Mendel said.
Mendel was part of a delegation representing Antigua that was in Washington last month to meet with US government officials regarding the UIGEA and its ramifications on the WTO case. This delegation was led by Dr. Errol Cort, Minister of Finance and Economy, along with other senior officials from the countries of Antigua and Barbuda. Barbuda is a co-plaintiff in the WTO case.
Minister Cort expressed the concern that the passing of this bill will have a negative impact on the socio-economic development of Antigua. The internet gaming sector remains a vital source of employment for Antiguans and Barbudans, and the Government will take all necessary steps to protect and further enhance this sector, the Minister concluded.
Ken Dreifach, former head of New York's internet law division, said, "Part of the problem with the earlier case was that there wasn't sufficient evidence of a negative effect of the laws. This will provide a clear pool of evidence linked to ascertainable harm," as the US government singled out groups that breached the law.
In outlining his strategy for the meetings, Cort indicated that he hoped to convince US officials that Antigua and Barbuda and the United States are not at cross purposes as far as regulation of internet gambling is concerned. He also expressed the hope that at the conclusion of these meetings, United States officials would agree to refrain from further action against Antiguan and Barbudan based internet operators until the WTO makes its final ruling at the end of the year.
The WTO case began with the incarceration of Jay Cohen, sentenced in 2002 to 21 months in prison for his role as executive and co-founder of World Sports Exchange (parent company to poker site World Poker Exchange). Cohen received an anonymous letter tipping him off to the possible violation of international trade agreements involved in his arrest and imprisonment, he passed the letter on to his attorney, and two years later, the WTO ruled in agreement.
Antigua, a country with a population nearing 70,000, has very little to threaten the US with in the way of economic sanctions. Those sanctions would in fact damage the Antiguan economy much more, as the island nation is dependent on US trade for many goods.
So instead of levying sanctions, Antigua has threatened to refuse to enforce US copyrights and trademarks, thus opening the possibility of unlicensed copies of software, music and movies to be produced on the island. That threat has certainly gotten the attention of US corporations such as Microsoft and Time Warner, who have gone to great lengths to protect their intellectual property in the past.
The US was given until April 2006, to bring its policies into compliance with WTO rulings, and a panel is currently reviewing US law to determine if the US has done so. It remains to be seen how this ruling will affect US gamblers, if at all, but if nothing else, it puts another set of eyes on the issues of the US attempt to restrict the flow of the $12 Billion industry that is internet gambling.
*Caribbean Net News, Washington Post, The Financial Times, Las Vegas Review Journal were all sources for this article.*