The World Trade Organization yesterday said the United States can regulate online gambling to maintain “public morals” and “public order.”
The ruling, which is final, is a partial reversal of a November decision that would have required the United States to allow offshore casinos to accept U.S. wagers via the Internet. The Justice Department considers such gambling illegal, although it is widely practiced.
“This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we’ll be fine,” said Peter Allgeier, acting U.S. trade representative.
Antigua and Barbuda, the tiny Caribbean nation that filed the case, interpreted the ruling differently, saying it would compel the United States to make some accommodation for Antiguan gaming operators.
The United States either has to outlaw all gambling or “they will have to provide Antiguan online gaming companies fair access to the U.S. market,” said Mark Mendel, Antigua’s lead legal counsel in the case.
The Justice Department and state governments have pressured banks not to allow their credit cards to be used for international gambling transactions and U.S. companies not to carry ads for the international sites.
Law-enforcement agencies are concerned that online gambling could allow minors to wager and there is potential for fraud, money laundering and infiltration by organized crime.
Antigua sued the United States, arguing that if bricks-and-mortar casinos can operate in the United States, it would be illegal to stop Internet casinos from providing essentially the same service.
The WTO yesterday asserted authority over regulation of gambling services, a setback for the United States, and said some federal laws barring wagers through offshore betting parlors are “inconsistent” with global trade rules. WTO judges added that the United States also violated trade rules by not applying its laws consistently to foreign and domestic companies.
But the ruling appears to uphold the legality of state prohibitions against gambling as well as the most important federal laws used to regulate online gaming.
Mr. Mendel said Antigua would seek a negotiated settlement with the United States that allows regulated access for the country’s online betting parlors.
The U.S. trade office said it would not ask Congress to weaken U.S. restrictions on Internet gambling.
Antigua, with no natural resources and a population of only about 68,000, built up its Internet gambling industry to supplement its tourism-driven economy. There are 37 licensed casinos employing 1,300 and generating nearly $68 million in income on the islands, said Ron Maginley, spokesman for the Antiguan Offshore Gaming Association.
Worldwide Internet wagers were estimated at $7.5 billion in 2004 and are projected to reach $18.4 billion in 2010, according to Christiansen Capital Advisors, a gambling and entertainment industry consulting group.
Despite questionable legality of online gaming, offshore gaming companies usually cite the United States as their biggest customer. Christiansen estimates that of almost 12 million Internet gamblers worldwide, about 4.5 million were from the United States.
“The growth in Internet gaming has been pretty phenomenal, especially considering some of the hurdles the government has put up,” said Keith Furlong, deputy director of the Interactive Gaming Council, a Vancouver-based association for online casinos.