Online Gambling Crisis Comes to a Head

Japan and India have jumped on the "Demand for Sanctions Against the US" bandwagon on Thursday, and it's all about online gambling. The European Union and tiny Caribbean nation of Antigua piled on the US this week with Antigua specifically seeking sanctions in the neighborhood of $3.44 billion.

The US can ill-afford to continue ignoring the ruling handed down by the World Trade Organization that found the Unlawful Internet Gambling Enforcement Act in violation of its own policy, citing "Protectionism" as it applies to the US allowance of horse betting.

The United States recently filed a complaint against China for trademark infringements. Their fear has focused on China's lucrative black market counterfeiting business. But not only does the US have to worry about being viewed as "hypocritical" in the international market, now there is the very likely potential that Antigua may begin a "bootlegging" business of its own.

Burke Hansen of The Register points out how the US Trade Representative appears to be working hand-in-hand with the DOJ.

"The United States Trade Representative’s (USTR) has taken a similar hard line position to that of the DOJ, and it’s clear from the American arguments in front of the WTO that the two have been working in concert on this case. Not surprising, since this dispute has revolved around American criminal law and how it impacts internet gambling.

(pictured below: China counterfeiting operation boom)

"What is surprising is the extent to which the USTR seems willing to abandon the decades of hard-fought negotiations covering the international trade in services that ultimately resulted in the General Agreement on Trade in Services (GATS) for a policy ultimately damaging to American trade interests. The USTR, after pretending the US didn’t really know what it was doing when it failed to exempt gambling services from its schedule of commitments (countries are allowed to exempt “immoral” services or products, but cannot discriminate in doing so), and repeatedly getting hammered by the Antiguans, has decided to redefine its GATS commitments to eliminate gambling services, thereby opening the door for other WTO members to do the same. It’s not hard to understand how such an approach may quickly render international agreements worth less than the paper they are printed on."

Amazingly, the issue of online gambling legality is taking on a life all its own and encompassing a much broader spectrum.

"And so, today, what is expected to become a parade of countries demanding sanctions against the United States as a result of its refusal to comply with WTO rulings on gambling services began to form, as Japan and India piled it on with more demands for compensation," Hansen points out. "Every other signatory affected will have a right to demand sanctions, and those sanctions may, depending on the circumstances, be applied against any American industry, from automobiles to semiconductors."

India provides an interesting case study. The World Trade Organization decided Wednesday to examine U.S. claims that Indian import duties unfairly discriminate against American wines and spirits.

The WTO launched its investigation after the United States made a second request for the Geneva-based trade referee to rule on the Indian fees applied to products such as Napa Valley wine and Jack Daniel's whisky, trade officials said.

Under WTO rules, the establishment of an investigative panel can only be delayed once. India blocked Washington's first request at the WTO's dispute body earlier this month.

Eventually, the US will have to concede defeat in Antigua's case against it or else deal with the consequences of having countries like India and China thumb their noses when it comes to United States WTO issued complaints.

(pictured right: World Sports Exchange Steve Schillinger)

The United States said it was still trying to resolve the dispute. It said the sanctions would come into effect "shortly," unless the United States requests a WTO arbitration panel on the level and scope of the sanctions.

"While we realize this is a significant step for Antigua and Barbuda to take, we feel we have no other choice in the matter," Antigua's Finance Minister L. Errol Cort said in a statement.

"Until such time as the United States is willing to work with us on achieving a reasonable solution to this trade dispute, we will continue to use every legitimate remedy available to protect the interests of our citizens," he said.

Gretchen Hamel, spokeswoman for the U.S. Trade Representative in Washington, said, "We will continue to work with Antigua and Barbuda to try to find a mutually satisfactory resolution to this dispute."

Antigua argues that before the ban was introduced, online gambling provided income for hundreds of its citizens and helped end its reliance on tourism, which was hurt by a series of hurricanes in the late 1990s.

Antigua was one of the first nations to license online gambling companies beginning in 1995. As a result, some of the most respected betting firms emerged, which included World Wide Tele Sports, Carib, Sports Off Shore, World Sports Exchange and BetonSports. Intercasino and Intertops as well as Boss Media were early pioneers in Antigua's lucrative online gambling industry.

Today, Bodog.com, World Sports Exchange and Intertops remain pillars on the Antiguan landscape. Bodog.com took over Antigua's largest Internet gambling employer, World Wide Tele Sports (a BetCorp company) late last year.

The US decision to effectively ban online gambling last October cut off a market worth US$15.5 billion (euro11.6 billion) last year. About half of the world's online gamblers are based in the United States.

The WTO ruled in December that the law unfairly targeted offshore casinos, telling the U.S. it could keep restrictions against sport betting in place if they were also applied to American business, such as operators of remote horse betting.

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Christopher Costigan, Gambling911.com

Originally published June 21, 2007 12:06 am ET