All Bets Are Off (Online Gambling 4 of 8)

Over the first three blogs, I have primarily written about regulation of online gambling here at home in the United States. However, the world has many different stances on online gambling. And since the Internet is worldwide, the difference in online gambling laws creates issues for players and online servers located in foreign countries. Recently, some of these countries have taken special exception to America’s Unlawful Internet Gambling Enforcement Act (UIGEA).

Some countries take a strict approach to online gambling. Rather than trying to distinguish between permissible types of electronic gambling versus illegal types, Russia has outlawed any and all forms of online gambling. The same is true for other Asian countries like Japan and China. [FN 1] Although with new democratic leadership, critics think Japan could be ripe for a change. [FN 2] On the contrary, Australia allows some forms of online gambling, but not other forms. For example sports betting is permissible in Australia with many operators being licensed by the government. However, in 2001 Australia passed the interactive Gambling Act, which made it illegal to operate a server where Australian residents could gamble online (except in relation to sports betting). The Act does not punish Australian residents who gamble online, but rather those who provide the service. Trying to stay ahead of the curve, the French government has changed their online gambling laws to adapt to the technology of today. Although they still restrict online betting, beginning in June of 2010, France allowed Internet gambling. The country does garner tax revenue (typically making around $6.3 million a year in gambling) from legalizing the service and also sells government backed licenses to providers. [FN 3] Other European countries like the United Kingdom, Spain and Ireland all enjoy legal forms of online gambling. [FN 4]

The conflicts in international laws regarding online gambling have come to a head in the World Trade Organization. The World Trade Organization (WTO) commits countries to a series of trade pacts, the gist being that you treat domestic and foreign goods and services the same way. [FN 5] Foreign countries, particularly Antigua and Barbuda have taken exception at the United States online gambling laws. Even before the UIGEA was passed, these two islands filed a complaint against the United States, stating that United States laws favored domestic online gambling businesses over foreign online gambling businesses. Antigua and Barbuda are islands where many online gambling businesses get their licenses [FN 6]. The United States argued that their prohibition laws on gambling were protecting the health and morals of their country, which was within their rights. In 2004, the WTO ruled against the United States claiming the Unites States was allowing a few online sports betting through the business (a state run online horse betting service), but had a general blanket against any foreign online gambling. The WTO stated this did not fall in line with the argument the United States asserted. This favoritism, the WTO stated, was a violation of the WTO’s General Agreement on Trade in Services (GATS). The United States disagreed with this ruling, filed an appeal, and took no corrective action. Over the next few years, the Unites States lost all of their WTO appeals with the WTO telling the United States their laws on online gambling did not comply with international law. [FN 7]

The stakes rose when the United States passed the UIGEA. After its passage, the European Union joined Antigua and Barbuda’s WTO claim against the United States. Other countries such as Chinese Taipei and even Canada have also since joined the claim. [FN 8] Since the United States refuses to alter its online gambling law, the claim has now asked the WTO to enact sanctions in the form of monetary penalties for this willful violation. The claim asked for an astounding $3.4 billion in compensation as well as permission to reject portions of U.S. patent and copyright laws. [FN 9] The United States’ stated in response to this that in their opinion Internet gambling is not encompassed in international trade law and thus the United States had no intention of complying with the WTO’s ruling on the matter. The WTO ruled that Antigua and Barbuda could respond by suspending $20 million a year in intellectual property rights. The United States had persistently requested the two islands not follow through with this ruling. [FN 10] With the shutdown of poker providers as discussed in my last blog, the WTO debate is heating up again. One of the suspended providers, Absolute Poker, is currently thinking about filing a new WTO claim against the United States claiming this is also a WTO violation. [FN 11]

What do you readers think? Is allowing gambling in an onsite, physical location the same as online gambling in regard to international law? If a casino in Las Vegas allows electronic gambling, is that the same as gambling electronically from your home computer? And if so, is it just to not allow international businesses in on this revenue stream? Is this a small enough issue that the United States should be able to ignore the WTO and request that Antigua and Barbuda still comply WTO laws that are in the United States’ best interest? Why would some countries allow online gambling and how can international law operate with such differing laws on this issue? Does an interest in the potential revenue outweigh the possible moral and health issues? Finally, with all the pressure to repeal the UIGEA both domestically and internationally, is it in the United States’ best interest to repeal the law?

Next blog, I will try and stop the policy buffet and instead look at Terms of Service Agreements and EULAS and discuss the history and issues with gambling within virtual worlds.

[FN 1] “Legality”.

[FN 2] Id.

[FN 3] “French Gambling plan seeks to stem illegal better.” New York Times.

[FN 4] See “Legality”.

[FN 5]  Michael Schmitt, Prohibition Reincarnated? The Uncertain Future of online Gambling Following the Unlawful Internet Gambling Enforcement Act of 2006, 17 S. Cal Interdisc.. L.J. 381, 395-396 (2007-2008).

[FN 6] Thomas Agar, “Rethinking the Offshore: Antigua’s Internet Gambling Challenge”.

[FN 7] Gary Rivlin, “Place Your Bet”, N.Y. Times, Aug 23, 2007, at C1.

[FN 8] WTO Ruling.

[FN 9] BBC “Antigua Demands Trade Sanctions”.

[FN 10] “World Trade Organization Could Sanction U.S. for online Poker Shutdown.”

[FN 11] Id.


~ by jramsey5213 on October 30, 2011.

One Response to “All Bets Are Off (Online Gambling 4 of 8)”

  1. The horse racing industry in the U.S. has a powerful lobby, which worked hard to ensure horse racing would not be covered under the U.S. prohibitions. It does seem hypocritical to ban other forms of gambling, particularly when horse racing can produce the same ills, e.g. addiction, that Congress claimed to be concerned with. Elected officials and legislators around the world do not really understand the internet, in my opinion. If ten countries ban online gambling and 110 permit it, how are the en really going to enforce the ban? Even if there are a few high profile cases, as in the U.S., eventually the gamblers and those providing the services will find a work around the ban. There needs to be an international level solution to this problem.

    And isn’t it amazing that now with the economy in tatters, legislators are taking another look at online gambling! It can produce taxable revenue. We will see how strong the U.S. opposition to online gambling really is as this recession continues to linger.

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