U.S. Said to Be Isolating Itself on Internet Gambling

Four issues pervade the gambling industry, Payne said: (1) Govt. taxation. (2) How to protect minors. (3) How to prevent Internet gambling from becoming addictive. (4) How to ensure there’s no fraud or money- laundering involved in online gaming. Payne said everyone agrees those are the key issues surrounding Internet gaming. The battles, he said, are over how to resolve them. Payne said most govts. recognize some citizens enjoy gambling, and therefore just set appropriate rules for it. But some U.S. politicians aligned with the Christian right “just don’t like gambling” and are determined to do whatever it takes to prevent the American public from accessing interactive leisure sites, Payne said.

U.K. online gaming companies can be “reasonably confident” children aren’t gambling because there are 3rd- party checking services and databases they can use to determine a would-be player’s age, Payne said. But “I haven’t a clue” how many American youngsters are betting, he said, because he can’t check with banks, voter rolls and other information sources. U.S. politicians who seek to ban the use of credit cards in Internet gaming are making the situation worse by denying reputable operators the ability to check how old a consumer is, he said.

The U.S. and the islands of Antigua and Barbuda have been sparring since 2003 over whether state and federal laws barring countries from providing gambling and betting services violate the General Agreement on Trade in Services. In Nov., a WTO panel upheld Antigua’s position in a decision the U.S. Trade Representative (USTR) branded “deeply flawed.”

The U.S. argues that gambling is excluded from its services commitments. “Throughout our history, the United States has had restrictions on gambling, like many other countries,” a USTR spokesman said in Nov. “Given these restrictions, it defies common sense that the United States would make a commitment to let international gambling operate within our borders.”

The appellate decision will be a “very important event,” Payne said. If the original ruling is upheld, he said, it will leave the “rest of the planet” once again wondering why the U.S. isn’t regulating Internet gambling. No one expects the U.S. to win, he said. The USTR didn’t return a call seeking comment.

A U.S. loss could have a negative effect in Europe by setting a precedent for other decisions in European national courts, said Pieter De Wael, a Belgian solicitor with expertise in gambling issues. If the WTO appeals panel backs the U.S., that could indirectly affect European law “to a very small extent,” De Wael said, because it would support the European view that gambling can be restricted on grounds of public order and morality -- the U.S.’s reason for not allowing offshore operators to service American gamblers.

If Antigua loses the WTO appeal, it could have a chilling effect on the ability of smaller jurisdictions to allow their operators to take U.S. bets, said Wes Himes, dir. of the U.K. Interactive Gaming, Gambling & Betting Assn. The U.S. may be less willing to take on major players like the U.K. in the WTO, he said, creating a split between large and small countries on the cross- border gaming stage. --

Under European law, a gaming company in one country can offer its services to residents in another, but the govt. of the 2nd country can bar such offerings, De Wael said. The European Commission (EC) is attempting to remove such barriers. Last April, it floated a directive which could, ultimately, include gaming offerings, but gambling is currently excluded from the directive pending an EC-ordered study on whether its inclusion in the legislation is feasible and legally defensible, several sources said.

The European Betting Assn. (EBA) is lobbying for the immediate liberalization of online gambling, said Secy.- Gen. Didier Dewyn. To push the decision-making process along, he said, EBA has filed “infringement” cases against France, Germany, several Scandinavian countries and Italy for blocking online gambling. The group is claiming the various prohibitions violate operators’ rights under the European Treaty.

But European national lotteries oppose including gambling in the services directive, De Wael said. He said EBA’s infringement cases must be investigated by the Internal Market Directorate-Gen. (DG). If that DG finds cause to proceed with the complaints, it must convince the other DGs to go forward, De Wael said. So far, DG Internal Market hasn’t succeeded because other commissioners want more information. European lotteries are trying to convince the EC that the infringement cases shouldn’t move forward until the study on Internet gambling is complete, he said.

“We are indeed supposed to look into this matter and come forward with solutions” this year, said a spokesman for Internal Market Comr. Charlie McCreevy. The EC hasn’t figured out which way to go with online gaming, he said, but the study may be finished in the 2nd half of 2005.

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The U.K. could have its own laws on remote gambling this spring, Himes said. On Tues., a Commons standing committee completed its review of all 337 provisions of the govt.’s proposed Gambling Bill, which will now be reported out to the House of Commons where amendments may be added, he said. The legislation then goes to Lords, which can also introduce amendments. Himes said he’s hoping the bill will be finalized before the election, expected in April or May.

So far, Himes said, the remote gaming clauses of the bill remain intact, particularly the key provision requiring remote operators to be licensed. It will be up to the newly created Gambling Commission to promulgate licensing regulations, he said. Several issues related to online gambling are still up in the air, Himes said, including what hardware and software must be physically located within the U.K., and what tax rate will be applied to gaming profits.

Meanwhile, Payne and other British gaming operators are meeting this week with congressional lawmakers. Given the breadth of disagreement between the U.S. and the world on Internet gambling, Payne said, it’s important for operators to figure out what the U.S.’s position is. Private gaming companies don’t care if they're regulated or not, he said. But public companies such as Sportingbet, William Hill and others -- who must stand for a “well-controlled, regulated industry” -- must try to understand the U.S.’s perspective, he said.