The US is breaking the rules of the World Trade Organisation by banning online gambling activity that takes place abroad. The WTO has ruled in favour of Antigua, the tiny Caribbean island with a multi-million dollar online gambling industry.
Antigua had objected to recent US laws outlawing internet gambling. It claimed that the laws, which even ban gambling-related payments that take place outside the US's borders, broke the General Agreement on Trade in Services, a free trade multilateral agreement which underpins the WTO.
The WTO had previously ruled in favour of Antigua and Barbuda, a nation of only 80,000 people. It said in 2005 that the US had broken a 10-year-old pledge to open up the industry. The US did not change its policies and has now been censured both for its original violations and its failure to comply with the original order.
The WTO objected to the fact that the US allowed gambling on its own soil but not with foreign gaming companies via the internet. This broke free trade rules, it said; it also said that the US had ignored its first ruling.
The decision "vindicates all that we have been saying for years about the discriminatory trade practices of the United States,'' Antiguan finance minister Errol Cort told the news agency Bloomberg.
The news is a boost to online gambling companies, whose shares rose in value on the announcement. Online gambling has hit difficulties in the wake of a new US law passed last autumn specifically banning internet gambling.
The legal status of online gambling until last year was unclear. The US Department of Justice had always interpreted the Wire Act of 1961 as covering internet betting when it banned inter-state telephone betting. The US passed a more specific law last year, a move which was criticised in the report.
"Since the original proceeding the United States had an opportunity to remove the ambiguity and thereby comply with the recommendations and rulings of the DSB [dispute settlement body]," said the compliance panel report. "Instead, rather than take that opportunity, the United States enacted legislation that confirmed that the ambiguity at the heart of this dispute remains and, therefore, that the United States has not complied."
The US had previously told the WTO that it would comply, and asked for a "reasonable period of time" in which to do so. That period lapsed in April 2006 and no action was taken, by then or subsequently, to comply with the original order, though the US claimed that a civil investigation into possible illegal activity meant that it had complied.
The anti-online gambling law passed last year contains specific exceptions for domestic inter-state horseracing gambling. It is the permitting of domestic long distance betting while banning foreign distance betting that the WTO objects to.
Last year saw a crackdown on internet gambling, with two British businessmen connected with gambling companies put under arrest. The then-Sportingbet chairman Peter Dicks was arrested but released, while former BetOnSports chief executive David Carruthers is still under house arrest in the US awaiting trial for offences under the Wire Act.
Caribbean islands such as Antigua have become major bases for the $16 billion-a-year online gambling industry, with many companies operating services from there. It has become a major part of the Antiguan economy, which is said to have suffered in the wake of the US ban.