Internet Gambling Could Be Legalized

Rhett Pardon
WASHINGTON – Legalized offshore Internet gambling became closer to reality after a preliminary decision by the World Trade Organization said that U.S. prohibitions on Americans placing bets on the Internet represented an unfair trade barrier.

The Bush administration said Wednesday it would fight a preliminary ruling by the WTO that could open the United States to one of the fastest growing sectors of the gaming industry.

Total revenue at Internet gambling companies worldwide last year was about $6 billion, up from $651 million in 1998, according to Christiansen Capital Advisors LLC. The online adult industry, in comparison, takes in an unofficial $12 billion in annual revenue.

Although each state in the United States sets its own gambling laws, the Justice Department maintains that gambling on the Internet is illegal.

Some of the website gambling operators – mostly offshore – have been prosecuted under the 1961 Wire Communications Act, which was written to cover sports betting by telephone. And virtually all of those 1,800 websites are based outside of the United States. Antigua, Costa Rica, Panama, Belize and Australia all host web addresses that target U.S. gamblers.

But the major credit card companies have been exceptionally leery of doing business with the websites, and all major casino companies have avoided basing sites offshore for fear of losing their U.S. licenses.

The WTO’s decision came in a trade dispute with Antigua and Barbuda, which contended that restrictions on Internet gambling violated trade commitments the United States has made as a member of the WTO.

Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, said the preliminary ruling by the WTO hearing panel had not taken into account the negotiating record in the Uruguay Round of global trade talks, which created the WTO in 1995.

Mills said the language on U.S. services commitments used by the Clinton administration “clearly intended to exclude gambling when the United States joined the WTO in 1995."

Full details of the WTO’s ruling may not be known for several weeks, but the WTO appears to have ruled that U.S. laws violate agreements allowing for free trade in services. That means that the United States may now have to either open its boarders to foreign web-based gambling companies or face sanctions.

The losing side in any WTO case has the right to appeal the decision to the seven-member appellate body of trade judges. But legal experts say it could be a couple of years before the United States would actually have to comply with the WTO judgment.