updated 4/7/2005 7:45:13 PM ET 2005-04-07T23:45:13

The United States can keep some restrictions on Internet gambling, a World Trade Organization appeals panel said Thursday, but also concluded that some U.S. legislation discriminates against foreign operators.

Both sides — the twin-island nation of Antigua and Barbuda in the Caribbean and the United States — claimed victory in the dispute over whether Washington should drop prohibitions on Americans placing bets in online casinos.

In its 138-page report, the appeals panel said the United States had demonstrated that the 1961 Wire Communications Act — which was written to cover sports betting by telephone and has been used to prosecute some Web site operators — "was necessary to protect public morals or maintain public order."

But the panel found against Washington in another respect, saying it failed to show that the Interstate Horseracing Act was applied equally to foreign and domestic remote betting services. Unequal application of the law would contravene international trade rules.

Mark Mendel, legal counsel for Antigua in the case, said the WTO ruling means U.S. authorities will have to treat Antiguan online casinos in the same way as traditional gambling outlets.

"At the end of the day, Antigua continues to win," Mendel told The Associated Press. "It is clear cut. We won on all the major points."

But acting U.S. Trade Representative Peter Allgeier said the United States had won the case and was entitled to maintain its restrictions on Internet gambling.

"We are pleased that the appellate body has agreed with our position that the U.S. gambling laws at issue here protect public order and public morals," Allgeier said. "U.S. restrictions on Internet gambling can be maintained."

"This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine," Allgeier said.

There is no further appeal to the ruling. Mendel said that although the ruling relates only to Antigua, the precedent may have far-reaching implications.

Antigua filed the case before the WTO in 2003, contending that U.S. restrictions on Internet gambling violated trade commitments the United States made as a member of the 148-nation WTO.

U.S. trade officials disagreed, saying that negotiators involved in the Uruguay Round of global trade talks, which created the WTO in 1995, clearly intended to exclude gambling.

Antiguan authorities also argued that restrictions barring U.S. residents from betting at offshore casinos were harming their country's efforts to diversify its economy. Antigua, a former British colony in the Caribbean, has been promoting electronic commerce as a way to end the twin-island nation's reliance on tourism. The sector was hurt by a series of hurricanes in the late 1990s.

Antigua's Finance Minister Errol Cort said that while the government had not fully read Thursday's decision, "the U.S. was found to be discriminating against Antigua and Barbuda."

"This is a very important day for Antigua and Barbuda and we are all very pleased in respect of the ruling," Cort said. "It means that once we have worked out the modalities with the USA, we will be able to access the U.S. market."

Antigua's Internet gaming sector employs about 300 people, down from a peak of 3,000 jobs. In 1999, Internet gaming accounted for 10 percent of the country's gross domestic product.

Mendel said the WTO decision should bring an end to U.S. authorities threatening to subpoena or prosecute American companies that choose to do business with Antigua offshore gaming businesses.

The current legal status of Internet gambling in the United States is in dispute. In many states, gambling is banned or permitted with restrictions.

The U.S. General Accounting Office has estimated there are 1,800 Internet gambling operations. Virtually all of them are based outside of the United States, posing an enforcement problem for U.S. authorities.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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