WTO Revises Guidelines on Internet Gambling - Tuesday 12th of April 2005

The United States and Antigua both claimed to be winners Thursday after the World Trade Organization partly reversed an earlier ruling on US restrictions on cross-border gaming on the Internet.

A WTO appeals body accepted that prohibitions in some US states on cross-border gaming were valid and agreed with Washington's argument that some federal laws could "protect public morals or maintain public order."

The appeal had followed an earlier ruling by the WTO's disputes settlement body entirely favoring a complaint brought by the tiny Caribbean island of Antigua and Barbuda.

The decision on Thursday effectively allowed state laws in Louisiana, Massachusetts, South Dakota and Utah, reversing the previous negative ruling.

Acting US Trade Representative Peter Allgeier welcomed the decision, claiming a "win."

"US restrictions on Internet gambling can be maintained. This report essentially says that if we clarify US Internet gambling restrictions in certain ways we'll be fine," he told AFP.

But the Caribbean island also claimed in a statement that the decision was "a landmark victory for Antigua as the smallest WTO member to defeat the United States, the largest member."

The WTO appeals panel ruled that the United States had not been able to show that US laws on horse-racing bets were applied equitably to foreign and domestic online betting suppliers, a key condition of global trade rules.

It also maintained that some restrictions imposed under US federal laws were inconsistent with the trade body's GATS services agreement.

Antigua said it expected the ruling to unlock opportunities to advertise online gaming products on US Internet sites or media without the threat of legal action by authorities.


"We expect that major Internet search engines, including GoogleLatest News about Google andYahooLatest News about Yahoo, financial institutions and credit card service providers will be required to accept advertising from Antiguan Internet gaming sites as they do currently with US gaming interests," said Mark Mendel, a lawyer for Antigua.

"I can't comprehend how the US can call this a victory," Mendel added.

"Following this ruling, the US has two options. One is to grant Antigua market access, the other would be to prohibit all forms of remote gambling within the United States."

Mendel said "remote" gambling allowed in the United States now includes off-track race track betting in some states, Internet betting involving Indian casinos and telephone purchases of lottery tickets.

Allowing these forms of betting while denying Antigua casinos the right to operate is discriminatory, the lawyer said.

It was not clear what impact the WTO ruling might have on any prosecution or litigation involving Antigua casinos, but Mendel said this might have to be taken into account by US courts.

Antigua had argued in the complaint it launched in March 2003 that US prohibitions were harming its online gaming business, which is aimed at reducing the island's economic dependence on tourism.

The Caribbean island, with a population of about 68,000, is a center for offshore Internet gaming operations, attracting large numbers of US residents to its casino-style games and betting services.

Similar restrictions on cross-border gambling are enforced by other countries.

US officials contend Internet gambling is illegal if it involves activity on US soil, and have vowed to prosecute those involved in the practice.

Antigua, with a population of about 68,000, is one of the centers for Internet gaming operations, but industry officials say US residents are major players in casino-style games and betting from offshore centers.

The UC Group, a British-based Internet payments services firm, said the ruling could force Washington to regulate online gambling.

"This WTO ruling means the US will need to regulate, rather than prohibit Internet gaming," said company chief executive Kobus Paulsen. "It's clear that this will require Internet gaming companies seeking to do business with US consumers to have adequate protections for consumers in place, to deal with such problems as the risk of underage gaming, fraud, and money laundering."

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