• U.S. Gamble Doesn't Pay Off (So Far)
  • May 16, 2004
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • In the continuing international David v. Goliath fight over Internet gambling, the tiny two-island Caribbean nation Antigua and Barbuda achieved another victory over the United States before the World Trade Organization. As reported in the April 12, 2004 issue of [email protected], last year Antigua and Barbuda complained to the WTO that the U.S. ban on Internet gambling violates the rules of international trade. On March 24, 2004, the WTO issued a preliminary report upholding the complaint, and the U.S. appealed, promising to "argue vociferously" that the WTO panel was wrong and that when the U.S. joined the WTO in 1995, Internet gambling was not intended to be encompassed by the international trade rules. The U.S. representatives argued that WTO rules allow countries to regulate commerce in order to protect public morals and order.

    So far, the U.S. has not had any success changing the WTO's mind. According to diplomatic sources, last week the WTO panel issued its final report that is essentially unchanged from its preliminary ruling against the U.S. last month. Apparently, although the panel agreed that the U.S. intentions behind the ban were meritorious, the panel believed that the U.S. should have tried to negotiate an alternative to the ban with the tiny nation, whose economy relies upon revenue generated from Internet gambling and which has been negatively impacted by the U.S. ban.

    The U.S., however, does not intend to leave this issue alone. According to trade officials, the U.S. will continue to press its appeal and to "argue vociferously" for the reversal of the WTO ruling.

    Significance: U.S. trade officials' continuing pursuit of the Antiguan gambling business, coupled with the federal prosecutors' threats of legal action against companies which do business with offshore online gambling sites (see the March 22, 2004 issue of [email protected]), are all evidence that the U.S. is very serious about limiting, and perhaps one day putting an end to, Internet gambling in the U.S. In light of the WTO ruling, however, the U.S. may find that it cannot succeed acting unilaterally and may need to secure other nations' cooperation to achieve its goals.