U.S. makes drastic move to keep online casinos out

May 8, 2007 |
By: Julian Dickinson
U.S. makes drastic move to keep online casinos out

The latest move by the United States in its ongoing dispute with Antigua and Barbuda over online gambling laws has caused an uproar in international trade circles.

After losing out in a recent decision by the World Trade Organization, which ruled in favor of the Caribbean nation that is home to a lucrative Internet gaming industry, the U.S. opted not to appeal and chose instead to rewrite the details of a 13-year-old treaty it had made with Antigua and dozens of other nations.

Antigua originally brought the case to the WTO four years ago because of what they saw as inconsistencies in American gambling laws which pressed financial institutions to sever ties with Internet casinos and sportsbooks. The U.S. countered with a “morality defense,” claiming that its domestic laws had outlawed interstate (and by extension, international) gambling for decades.

However, Antigua pointed to exceptions made for horse racing and lotteries, two forms of gambling for which American laws permit gambling across state borders. The WTO agreed with Antigua's argument.

There was a simple solution available. The U.S. could have brought its domestic laws in line with its international policy by eliminating the exceptions on horse racing and lotto. Instead, the U.S. opted to withdraw from its commitments under the WTO’s General Agreement on Trade and Services, essentially claiming a “Mulligan” on the pact.

"Unfortunately, in the early 1990s, when the United States was drafting its international commitments to open its market to recreational services, we did not make it clear that these commitments did not extend to gambling,” stated Deputy U.S. Trade Secretary John K. Veroneau.

“Moreover, back in 1993 no WTO member could have reasonably thought that the United States was agreeing to commitments in direct conflict with its own laws."

However, according to Antigua’s lead counsel in the case, a number of member nations “were able to expressly exclude gambling from their commitments” when the agreement was originally signed.

Many observers viewed the tactic as shocking and dangerous because it threatens to destroy the very fabric that holds the WTO together. The nation of Antigua and Barbuda is obviously upset as it hoped it might be able to rebuild an industry that is bleeding millions of dollars a year because of American restrictions.

"While we had of course been aware of the possibility of the United States taking such an action, we frankly considered it extremely unlikely," said Dr. Errol Cort, Antigua's Minister for Finance and the Economy. "It is almost incomprehensible that the United States would take such an action in the face of an adverse dispute resolution ruling.

“This is going to have very severe consequences for the global free trade movement."

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