WTO Online Casino Deadline Has Passed

Published: Monday, April 03, 2006 Online-Casinos.com

WTO ONLINE CASINO GAMBLING DEADLINE OF NO CONSEQUENCE?

3rd April has come and gone, and still no apparent U.S. action

Antiguan WTO delegates and pro online casino gambling observers alike watched the April 3 deadline for a U.S. response to a World Trade Organisation ruling come and go this week....but it seems that nothing was happening.

The deadline the United States faced was to bring into compliance U.S. laws relating to the ban on online casinos and Internet gambling that a World Trade Organisation (WTO) tribunal ruled against last year. The U.S. government has taken no action to change the U.S. law that the WTO panel identified as violating U.S. WTO obligations. Theoretically at least, the United States could now be the subject to trade sanctions.

Shortly after last year's ruling, a bipartisan group of 29 state attorneys general sent a letter asking United States Trade Representative (USTR) Rob Portman to remove gambling from the list of U.S. service sectors bound to meet WTO rules, writing, "USTR assured state officials that if the Appellate Body upheld the lower panel's ruling on this point, the United States could act to withdraw the gambling sector from the United States' specific GATS [General Agreement on Trade in Services] commitments. We urge you to do so … We believe that under our constitutional system of federalism, states should continue to have the flexibility and sovereign authority to determine whether and under what conditions gambling occurs within their borders."

However, this demand has apparently been ignored by the Administration, thus exposing many more U.S. gambling laws, including state laws, to challenges by other countries at the WTO.

Following a complaint by Antigua, the WTO's disputes panel first ruled in November 2004 that United States laws banning Internet gambling violated GATS commitments. In April 2005, the WTO's Appellate Body struck down certain aspects of the lower panel ruling and upheld others, mainly related to horse racing bets.

The United States was ordered to change the federal Interstate Horseracing Act (IHA). The Appellate Body ruled that the U.S. ban on remote gambling was not applied in a non-discriminatory manner because the IHA allowed U.S. gamblers to place bets across state lines while forbidding similar activity via foreign Internet gambling services.

The WTO tribunal ordered the United States to address the situation or face trade sanctions. The USTR had two options: to unilaterally withdraw the gambling sector from GATS coverage, which it could do without congressional approval, or work with Congress to make its federal laws consistently prohibit remote Internet gambling.

Because no action has been taken, the United States may face trade sanctions from Antigua. Antigua is not a major trading partner, yet the long-term implications of this ruling outweigh the short-term ones, as U.S. gambling commitments under GATS expose state and local government gambling regulations to further WTO challenge.

The USA was given until April 3 2006 to comply.

Over the strenuous objections of the U.S. government, the WTO declared that the United States had committed the entire gambling sector to the GATS, because the United States had made commitments under a category called "other recreational services." Under a United Nations (U.N.) service sector classification system used by some WTO nations, gambling is a sub-sector of "other recreational services." The United States argued unsuccessfully that it was not using this U.N. system when it signed up recreational services in 1995.

This aspect of the 2005 WTO ruling means that all U.S. federal, state and local laws governing gambling are now subject to future WTO challenge if they don't comply with GATS rules. GATS rules forbid limits on the number of service suppliers (i.e. on the number of casinos), prohibit monopolies (i.e. monopolistic state lotteries) and prohibit exclusive service provider arrangements (i.e. Indian gaming compacts).

The WTO Appellate Body also ruled that a regulatory ban - in this case the U.S. ban on Internet gambling - in a covered service sector constituted a GATS-forbidden limit.