USA loses WTO Appeal in Online Poker & Online Gambling Case

The World Trade Organization (WTO) ruled again March 30 against an appeal by the United States in a long-running David versus Goliath case brought by the tiny Caribbean nation of Antigua and Barbuda against the United States initially in 2003 alleging that the U.S. discriminates against online gambling (including online poker) companies that are not located within the United States.

Antiguan Finance Minister Dr. Errol Cort said that the ruling offers hope to the global online gambling industry currently under siege by the U.S. Department of Justice. "It [the WTO ruling] vindicates all that we have been saying for years about the discriminatory trade practices of the United States,'' Dr. Cort said in an e- mailed statement to Bloomberg News.

Antigua originally challenged US laws blocking non-US internet gaming companies from operating inside US borders in 2004. It argued that US trade officials had signed the 1995 GATS treaty, committing it to allowing foreign entrants to its lucrative online gaming market.

In April 2005, the WTO ruled in favor of Antiguan online gambling companies offering services to consumers in America, and against US protectionism. It ordered the United States to comply either by lifting its ban on foreign operators or by withdrawing a "discriminatory" exemption for US online horse-racing betting sites, within 18 months.

Antigua and Barbuda complained when the US failed to meet the 18 month WTO deadline to comply with international trade laws, so the WTO agreed in July 2006 to investigate their complaint, which resulted in a ruling late January 2007 against the United States.

The United States appealed the ruling, asking that the judgment made by the highest trade body in the world be thrown out.

The WTO announced on March 30 that it rejected the U.S. appeal, and again upheld Antigua's claims that the US violates WTO rules by their efforts to prohibit US residents from gambling at online sites located outside of the United States, especially because the US allows online betting on horse races, to take place within US borders.

Furthermore, the WTO report noted that the Unlawful Internet Gambling Enforcement Act (UIGEA), which became law October 2006 after the 2005 WTO ruling, maintained the same loopholes that first caused Antigua to file their case.

A spokesperson for the U.S. Trade Representatives Office, Gretchen Hamel, conceded that the WTO ruling had gone against her country. But she insisted that the U.S. would maintain a ban on Internet gambling financial transactions to "....protect public order and public morals as long as it doesn't discriminate against foreign companies."

"We are currently reviewing our options,'' Hamel said.

The U.S. added that its latest [UIGEA] law isn't overed by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was "an oversight" by the Clinton administration.

According to WTO rules, Antigua may now place sanctions against the United States in the form of withdrawing intellectual property protection for U.S. trademarks or copyright. Such sanctions, which are known as "cross-retaliation'' are legal according to the WTO when the economy of a small country cannot afford to impose sanctions in the form of higher customs duties on goods.

More important, is that the precedent of the WTO ruling against the United States for online gambling discrimination and protectionism may be taken up by any larger country that supports online gambling and wants access to US customers.

The gambling industry is especially watching the United Kingdom, whose Gambling Act of 2005 comes into full force September 2007. The Gambling Act will allow online companies to be located and licensed in the UK or alternately to remain offshore but apply for a UK operating license.

When the UIGEA was passed, many large UK-registered gaming companies lost their US customers and consequently took a huge loss in book value. So UK officials may be pressed by the many UK-based gaming companies to work with the WTO to assure 'free trade' to win back the business of US customers.

However, recent developments in the UK suggest that prospects of aggressive action to win back US players may not be taken by the coming change of government.

First, the announcement of steep new taxes on casinos and a 15% tax on online gambling firms was made by Britain's Chancellor of the Exchequer, Gordon Brown in March. Many fear that these new taxes could discourage fulfillment of the Blair-economic recovery gambling scheme, including the building of the super casino and 16 smaller casinos (click here to read related PokerPages article).

A second harbinger came last week when the House of Lords revoled and rejected the choice of Manchester for the supercasino location over economically- depressed Blackpool or London's Dome called the economic 'albatross' by many (click here to read related PokerPages article).

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