Online Gambling Ban Could Cost US Billions of Dollars

Online Gambling Ban Could Cost US Billions of Dollars

The Guardian reports that an online gambling ban in the US could be overturned as negotiations between Washington and Brussels over compensation have stalled.

"Lawyers for the EU are seeking compensation for the severe losses suffered by the British and European companies banned from operating in their biggest market last year, after the Bush administration cracked down on what it sees as an immoral activity.

"The companies, which saw billions wiped off their share prices after the ban, would not receive any cash and instead Brussels wants Washington to open up other areas of its services industry to European firms, such as insurance or reinsurance. But such a deal could cost the US billions of dollars and it might opt to allow overseas operators back into its market under licence."

This news comes on the heels of what many believe to be a positive outcome in a New Jersey courtroom Wednesday where the Honorable Judge Mary L. Cooper (3rd District/Trenton division) heard arguments for a temporary restraining order to halt the enforcement of the Unlawful Internet Gambling Enforcement Act.

Judge Cooper determined that "this was a case against a complicated backdrop" and would require her to review further over the coming weeks. No decision was made from the bench. However, iMEGA's legal team felt very confident after today's hearing. Independent trade organization iMEGA brought the legal action against the US, arguing that the UIGEA is "unconstitutional".

The government was less than commanding in its performance and the attorney representing the US, Jacqueline Coleman Snead, at times seemed "intimidated". She sat alone in the court room while the iMEGA team arrived with two powerful attorneys and its organization representatives.

The Honorable Judge Cooper aggressively challenged the US government and its Motion to Dismiss.

Edward J. Leyden, President of iMEGA.org, released the following statement on Wednesday.

"Based on the decision of the U.S. District Court earlier today, iMEGA eagerly awaits the action of the Honorable Mary L. Cooper and the Court.

"We agree that children and problem gamblers need protection. We know that technology is available that will accomplish this. This law -- in addition to being defective and unconstitutional -- will not provide greater protections. In fact, it will only make these groups more vulnerable.

"UIGEA passed in the waning minutes of the 109th Congress with very little input from members of Congress and is a misguided attempt to regulate content developed for the Internet. Although UIGEA is purportedly designed to limit illegal Internet gambling, it falls woefully short of having the ability to accomplish that purpose and fails the American people on a number of fronts. These regulations, if promulgated, would stifle online innovation and commerce; inadequately protect children by failing to ensure adequate safeguards; have a chilling effect on the privacy rights of individuals; and potentially lead to the loss of thousands of U.S. white collar jobs. iMEGA strongly suggests an immediate congressional review of the numerous pieces of legislation that address the issue of online gaming and recommends passage of new laws that ensure safe Internet use, protect U.S. Internet leadership and promote the Internet as a bastion of innovation."

Meanwhile, European and US lawyers warned Wednesday that the WTO trade dispute between the US and Antigua (which brought the action to the WTO as a means of protecting its own burgeoning online gambling industry) posed a "systemic risk" to the credibility of the World Trade Organisation after it ruled earlier this year that America acted illegally by excluding online gaming operators from the tiny Caribbean island of Antigua.

At the same time, the White House allowed domestic operators to offer gambling over the internet and withdrew its entire $100bn gambling industry from its free trade commitments.

Raul Herrera, a Washington-based trade attorney, said the compensation merited by the EU would be a multiple of 20 or 30 times the $3.4bn of sanctions prepared by Antigua, a country with a GDP of only $1bn but home to dozens of online gaming operators that once controlled half the American market.

That would imply compensation of up to $90bn, according to the Guardian.

But the EU official said this was exaggerated. "If there's compensation it will not be cash but in the form of the US opening up its services industry or part of it, say insurance or re-insurance, to others and not just the Europeans under WTO rules. "

Jonathan Cohen, a New York-based public affairs consultant acting for EU operators, said the US legal regime was "wildly inconsistent" as it allowed online fantasy sports leagues and racecourse betting but specifically banned other services provided by European firms.

Clive Hawkswood, chief executive of the Remote Gambling Association, said the European industry suffered from outrightly protectionist measures from the US. "It is using unjustified trade barriers to stop EU operators and a proper licensing system would attract many EU operators."

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