US Could Save Billions by Electing Not to Fight iMEGA Online Gambling ChallengeThe U.S. would not have to offer trading partners greater access to the American market if it were to abide by a World Trade Organization ruling that found in favor of tiny Antigua in its long standing feud with the United States over online gambling.
As reported in the Wall Street Journal yesterday, The Bush administration, pressured by an unfavorable ruling by the World Trade Organization, plans to push for legal changes that could make it easier for European service companies, from engineering firms to law firms and shipping companies, to do business in the U.S., officials say.
After the U.S. banned foreign gambling Web sites, EU trade officials sought compensation for billions of euros in lost income. The U.S. has been in a trade dispute over online gambling since 2003, mainly with Antigua and Barbuda.
What's Next: EU and U.S. negotiators are working out details of a compensation offer to open some sectors of the U.S. services market to greater foreign competition.Europe's online gambling firms were hit particularly hard and complained to the European Union's executive arm in Brussels. EU trade officials took up the matter with the WTO, seeking compensation for billions of euros in lost income. The EU invoked a rarely used WTO rule that requires a country that closes one market to foreign companies to open others to compensate trading partners.
A host of countries, including India, Japan and Canada, have filed similar claims for compensation, but the talks with the EU and its $8 trillion service sector promise to have the biggest financial impact. As a result, while any affected sectors would be opened to all 150 WTO members, European companies stand to gain the most.
The U.S. Internet gambling market is valued at more than $15 billion, so the outcome of the U.S.-EU negotiations will likely be worth billions of euros to European companies. "We have to offer something substantive," says a senior U.S. official.
But here is the kicker:
The USTR could be bailed out by Congress were it to change the law to again allow foreign firms to offer online gambling. Several such bills are on the table.
"The U.S. could make this all go away by passing legislation," says Nao Matsukata, a former senior U.S trade official and a policy adviser at Alston & Bird, which represents clients on online-gaming issues.
But, as pointed out by the WSJ, none of these proposals are likely to pass and certainly not any time soon.
The U.S. could also make this go away by electing not to fight a challenge being waged by independent trade association iMEGA which has brought a suit against the US Justice Department and the Federal Reserve. There claim is that the Unlawful Internet Gambling Enforcement Act passed last October is unconstitutional.
iMEGA's case will be heard in a court of law next month. The US government has requested a two week extension from the original September 4 date in which to respond. iMEGA is being represented by one of the top First Amendment attorneys.
The UIGEA requires banks to enforce the new Internet gambling prohibition by monitoring fund transactions deemed to be for online poker and casino purposes. But the banking sector, which had until July 15 to act, insists it does not have the ability to police the billion dollar industry, at least not now. And the smaller banking sector claims they may never have that capability.
"This (The UIGEA policy) was essentially an unfunded mandate," one industry source told Gambling911.com.
The UIGEA was attached to an unrelated port security bill that overwhelmingly passed during the final hours of Congress before November elections recess. Arizona Republican Senator Jon Kyl was instrumental in getting the new law passed and continues to pressure Attorney General Alberto Gonzales into making sure the UIGEA is enforced.
Now with the EU threatening to enter the US market, nearly all US corporations are likely to be in support of repealing this online gambling prohibition and the efforts of both iMEGA and the Poker Players Alliance, a nonprofit organization consisting of several hundred thousand poker players (see our interview with PPA Chairperson Alfonse D'Amato from this past week:
Online Gambling's Closest Ally: Alfonse D'Amato
(Interview),
Online Poker Ally Alfonse D'Amato: Part II of Our Interview)
The Wall Street Journal article came out the same day that the Poker Players Alliance announced its move to Washington, D.C. in order to ensure stronger lobbying power. Both iMEGA and the PPA are actively soliciting donations in their fight to keep online poker and other forms of online gambling legal.
The U.S. is required to submit a formal offer of market access to the EU by Sept. 22. If the sides disagree, a WTO panel will arbitrate. That has never happened in a case on services, so the outcome would set a precedent. In the end, the U.S. could hope to mollify the EU by offering trade concessions in other protected areas where the EU and U.S. disagree, including agriculture, military contracts or subsidies to aircraft makers.
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Christopher Costigan, Gambling911.com
Originally published August 24, 2007 8:35 pm ET
