Internet Gambling and the World Trade Organization:
Criminal Behavior or a Commodity?
California, Irvine, USA
Gregory C. Brown
State University, Fullerton, USA
gambling possesses an array of attractive attributes. For one thing, there is
no necessity to leave home, with the associated outlay for lodging and meals,
and the expenditure for transportation costs. For another, gambling at home
avoids the noise and confusion of crowded confines, the distractions of
seductive servers, the windowless gaming rooms, with no wall clocks to make
customers aware of the time. Internet gambling is an industry that is growing
exponentially and its perception as criminal is a matter of intense debate. On
the transnational scene it has emerged as a public policy issue of significant
ideological interest and of massive financial importance. This paper traces
the development of the WTO case and attempts at its resolution and also offers
a view of what is regarded as the most sensible, and probably the inevitable
path that the trajectory of Internet gambling should and will take.
Internet gambling; Disputes; WTO; International;
Now one of the
fastest growing industries, legal gambling already attracts more customers
than baseball games or the movies. Most people see internet gambling as a
recreational and leisure activity. However, for other people internet gambling
can become a trap. It can gradually, or sometimes quickly, become the only
thing important. All of an individual’s resources and interests become focused
on the next chance to gamble on the Internet. While the vast majority of those
who participate in gambling do not experience problems, a small percentage of
individuals do experience some problems with gambling. Studies have indicated
that approximately 5% of the population experience current problems with
gambling (Kossman, 2006). There are both positive and negative sides of
internet gambling. For some persons at-home gambling also avoids discomfort
about the wagering procedures at places such as blackjack tables with many
eyes, most especially those of the dealer, focused on your movements. These
advantages of gambling by means of a computer also can be regarded as
negatives. Gambling in your own home can be a lonesome enterprise, the travel
and the glitz of the casino world can be exhilarating, and the multitude of
other customers at the betting venues can provide an assurance that one is
participating in an exciting and respectable enterprise. These assets and
debits of Internet gambling vis-à-vis brick-and-mortar gambling sites cannot
readily be assayed in order to claim which of the two arrangements is
gambling contains many ingredients that characterize the outsourcing of
manufacturing from a rich country, where wages and other costs tend to be
high, to a poorer nation where the skill of workers is equivalent to that of
the domestic labor force but where such workers command lower wages - in part
because their cost of living is less than that of the country exporting the
services. Outsourcing makes sense in a capitalist economy. In regard to
Internet gambling it introduces moral and criminal elements that provide
leverage for the exporting country to seek an interdict for the activity and
to retain domestically whatever sums might otherwise move overseas.
The status of
Internet gambling on the world scene has been notably addressed in the David
and Goliath dispute between the United States and the small Caribbean islands
of Antigua and Barbuda, which constitute a single nation. The dispute
represented the first attempt by the World Trade Organization (WTO) to examine
cross-border electronic services, with the added ingredient that the behavior
itself under review has at certain times and in certain places been regarded
as criminal. In this paper, we trace the development of the WTO case and
attempts at its resolution. We also offer a view of what we regard as the
most sensible, and probably the inevitable path that the trajectory of
Internet gambling should and will take.
Antigua, which gained its independence from
in 1981 (Sanders, 1982), is the largest of the English-speaking Caribbean
countries. It is an island of 108 square miles, 14 miles long, and 11 miles
wide. It was sighted by Columbus on his second voyage to the
in 1493, and legend has it that he named it for a Spanish church in Seville,
Saint Maria Antigua.
Christopher Codrington migrated to
from Barbados where his father was governor-general. Codrington established
Antigua’s largest sugar plantation at Betty’s Hope, a 700-acre property which
today is in the process of restoration. For Antigua it was the “major turning
point in the island’s development” (Dyde, 2000, p. 20). The planting and
harvesting of the cane relied on slaves imported from Africa who, if they
worked in the fields, existed under excruciatingly harsh conditions, both
before and after they were freed in 1834 (Gaspar, 1985; 1993).
economy relied on sugar cane exports, but a devastating decline in the price
of the product on the world market in the 1990s led it to turn to tourism for
revenue. That venture suffered a severe blow on September 5, 1995 when
hurricane Lulu sent winds of 145 miles an hour through the island, knocking
four hotels into the sea. Some other revenue-generating program was
chose telecommunications and Internet gambling. It edged out competitors with
the development of an undersea fiber-optic link with the
that guarantees Americans continuous telecommunications contact, even in the
event of a hurricane (D. Schwartz 2005, p. 9). Antigua also created a free
trade zone in which gambling operations were excused from paying import duties
and local taxes. Antigua’s economy benefited from the $100,000 annual fee for
a casino license and $75,000 for a sports betting license.
Cohen Case (2001)
international dispute between
has its roots in the criminal prosecution of Jay Cohen, one of the founders of
the World Sports Enterprise (WSE) that was licensed in
in 1997 and became the second largest employer on the island. Customers were
required to transmit $300 before they were permitted to gamble, and the WSE
exacted ten percent off the top of each wager. In its first fifteen months of
operation the company took in $3.5 million. To establish a criminal case, FBI
agents in America placed bets at WSE by means of telephone calls from
jurisdictions where Internet betting was illegal. Thereafter, Cohen was
charged in a New York court with violation of the Wire Act (U.S. Code, Title
18 §1604), a statute that was enacted in 1961, well before the dawn of
Internet gambling, in an effort to keep organized crime syndicates from using
communication networks to facilitate gambling, most particularly on horse
Cohen was the victim of a federal policy that, as one writer observes, has
been marked by “fierceness” and has been “unpredictably inhospitable to online
gambling,” despite an earlier bow to the prerogative of state governments to
make what arrangements they desire about gambling, and the endorsement of
Native-American tribal gambling (Hurt, 2006, p. 375). Similarly, another
writer emphasizes what she believes is the U.S. Congress’ “obsession with
sinful activities” which have moved it “to take aggressive (and aberrational)
approaches to Internet gambling” (Crawford 2005, p. 697). In the Cohen
case, the judge’s instructions to the jury after a ten-day trial left it no
room to exonerate the defendant, had it been so inclined. The judge declared
that if Cohen’s company had accepted bets over the telephone the jury was
obligated to find him guilty. Cohen was sentenced to a 21-month prison term
and incarcerated in a minimum-security institution located outside of
States v. Cohen, 2001).
explained why he had returned home to defend himself while many of his
colleagues remained in their Antigua haven:
‘I came back
United States because I wanted to clear my name….Here I sit in the shadow of
the [Las Vegas] Strip while billion-dollar corporations engage in the same
activity every day for which I am serving a sentence. And for what? For
running a legal business in another country (Massoud, 2004, p. 996).’
maintained that his Internet gambling business was no different than the stock
market transactions he had conducted in an earlier job that he held in
“I came from the stock market,” he asserted, “and if that isn’t gambling, I
don’t know what is, except that the folks I work with now are less sleazy” (Lubben,
2003, pp. 321-322).
The World Trade Organization
The idea of an organization to deal with matters of international trade was
fostered at the Breton Woods,
meeting of the Allied leaders during World War II. It ultimately led to the
General Agreement on Tariffs and Trade (GATT), which from 1947 until 1974 was
the primary agency addressing cross-border trade issue. It subsequently
became evident that an updated treaty was required to cure the birth defects
of GATT (Jackson, 2000). The result was the World Trade Organization which
became operational in 1995. The WTO then put in place a General
Agreement of Trade in Services (GATS) that was based upon an agenda agreed
upon by WTO delegates at a meeting in September 1984 at the resort site of
Punta del Este in Uruguay. In a series of conferences over the next seven and
a half years delegates hammered out a treaty that sought to lower custom
tariffs and other barriers to trade and to keep service markets open.
Agreement also reached that special concessions were to be accorded to
developing countries. The treaty covers 26,000 pages which even the WTO itself
grants makes for “daunting” reading. It was ratified at Marrakesh, Morocco,
on 15 April l994. Today, the WTO has a membership of 148 countries which,
taken together, are responsible for 95 percent of the world’s trade.
Among the four
modes of supply specified by Article I.2(a) in the Treaty was “the supply of a
series of products from the territory of one member into the territory of any
other member.” An exception was provided in Article XIV(a) which indicated
that trade could be restricted if the product constituted a danger to public
morals or public order. Public order was defined as “the preservation of the
fundamental interests of a society, as reflected in public policy and law.”
Such fundamental interests related, inter alia, to standards of law, society,
and morality. The rule specified that “the public order exception may be
invoked only where a genuine and sufficiently serious threat is posed to one
of the fundamental interests of society” (WTO, 2004, p. 238). Other
exceptions besides public morals and public order include the protection of
human, animal, and plant life and health, and the protection of exhaustible
natural resources. An instance of the legitimacy of a public morals claim
would be the banning of the importation of alcoholic beverages into Muslim
countries. But for that point to prevail, the Muslim countries must not
permit the production of intoxicating beverages domestically, a situation far
from the reality of gambling in the United States. The ambiguous wording would
produce a good deal of semantic jousting in the dispute between Antigua and
the United States, although the terms “sufficiently serious threat” and
“fundamental interests” would appear to erect a high barrier against readily
Challenges the United States
Antigua’s Internet gambling business – “remote access gambling” as it was
called—fell off dramatically in the wake of the Cohen decision, with a
reported decline in sites from a high of 119 licensed operators, employing
approximately 3,000 persons and accounting for ten percent of the country’s
gross national product in 1999, to 29 sites employing fewer than a total of
500 persons in 2003. Prodded by Cohen (Blustein, 2006), Antigua filed a
charge on March 13, 2003 with the World Trade Organization claiming that it
was being denied access to a legitimate outlet in violation of the GATS
provision that mandated open transnational markets for “recreational, cultural
and sporting services.” The Antigua filing, the first charge made before the
WTO by a country with a population under 100,000 persons, asked that the WTO
“find that the United States’ prohibition on the cross-border supply of
gambling and betting services and its measures restricting international money
transfers and payments relating to gambling and betting services are
inconsistent with its specific commitments to GATS” (WTO, 2004, p. 2). The
States pointed out that when it had signed the treaty in 1994 it had exempted
itself from its open market obligation regarding “sporting services,” but this
was interpreted to represent a desire to control overseas athletic teams from
entering the American market, not wagering. As I. Nelson Rose, a leading
expert on gambling law, notes: “The funny thing is that if the US did want to
keep out gambling all it had to do was to say so” (Rose, 2005, p. 437).
Senegal, for instance, had specifically ruled out its agreement to
cross-border betting (WTO, 2005, p. 63). But the United States did not do so,
and now it had been hauled before an international adjudicatory body to try to
defend its position.
sought to override objections raised by the United States about possible
irregularities in its arrangements for Internet betting. Typically, such
criticisms focus on the prospect of underage gamblers participating in
Internet gambling, fraud, money laundering, and the creation of compulsive
pathological gamblers. The most prominent covert issue in this case obviously
was the loss of revenue faced by the United States if its gamblers placed
their bets offshore, but this matter was not addressed since it was contrary
to the essence of the trade agreement.
Antigua pointed out that each of its Internet gambling operations maintained
an “’anti-fraud’ department with the objective of preventing…collusion among
players, financial fraud and credit card abuse, underage playing, and other
[undesirable] occurrences” (WTO, 2004, p. 4). It said that underage gambling
was explicitly prohibited by Antiguan law and was monitored by a sophisticated
age identification program and inhibited by the need to fund an account before
wagering, which would require
instruments such as checks or bank accounts and involve a wire transfer.
“This is a significant barrier which most minors are unable to overcome,
particularly given the practice in the industry to either send winnings and
deposits directly back to the account from which deposits were received or
crediting winnings directly back to the applicable credit card” (WTO, 2004, p.
4). Ties to web sites such as “Cybersitter” and “Net Nanny” also were
employed to screen minors. Antigua also noted that the United States was
hardly in a position to assume a superior air in regard to underage persons,
citing the report of the National Gambling Impact Study Commission which found
that although selling lottery tickets to persons below the age of 18 was
illegal throughout the United States, such sales occurred with “disturbing
frequency.” A study in
found that 27 percent of 15- to 18-year olds had purchased lottery tickets,
while in several states the tickets were sold by vending machines which were
readily accessible to youths. In Massachusetts, an experiment by the Attorney
General’s office had determined that 80 percent of underage persons, some as
young as nine, had been allowed to purchase lottery tickets (United States,
1999, pp. 3-4).
was further noted in the
filing that by law operators there are required to display warnings on their
sites of the addiction possibilities of gambling and information about
contacting organizations such as Gamblers Anonymous. It was claimed that
“most operators appear to be able to detect patterns of problem gamblers
either at the sign-up stage…or later during the course of the relationship
with the player, in which event the player’s account often will be closed and
the balance returned to the player” (WTO, 2004, p..4).
laundering and other organized crime involvement was said not to be a serious
consideration in the Antiguan Internet gambling realm in large part because
operators were not allowed to accept cash and were required to authenticate
the bettor’s identity. The Antiguan brief did not resist a jab here at its
competing litigant. “This is in stark contrast,” it observed, “to land-based
casinos and other gaming outlets in the United States, where not only can
players wager with complete anonymity, but gamble almost exclusively with
cash” (WTO, 2004, p. 5).
The Dispute Settlement Body Panel
and the United States had reached an impasse, Antigua requested the formation
of a Dispute Settlement Body Panel. The
representative to the WTO, Linnet Deily, a former investment banker, sought to
block the move, declaring that “the United States has grave concerns over the
financial and social risks posed by such activities to its citizens,
particularly but not exclusively children.” He added, ”We are surprised that
another WTO member has chosen to challenge measures to address these
concerns—particularly in an area in which the United States made no market
access commitment” (Bissett, 2004, p. 371). Before long the United States
would learn that it could not high-handedly employ these rather weak defenses
against what it likely initially saw as a gnat that required a quick, decisive
swat. It would be determined that the United States had indeed made an access
commitment and that its expressed concern for children had constitutional free
speech problems and other difficulties.
the United States’ filing, the WTO Director-General, Supachai Panitchpakdi
from Thailand, constituted a three-person group, presided over by B. K. Zushi,
vice chairman of the Telecom Regulatory Agency of India (TRAI) and the former
Indian ambassador to the WTO, who had co-authored a well-regarded article on
negotiations (Self & Zushi, 2003). The other two members of the panel were
Virachai Plaasai, director-general of the Department of Internal Affairs in
Thailand, and Richard Plender, a Queen’s Council from the United Kingdom.
Besides the contesting nations, Canada, the European Union, Japan, Mexico, and
Taiwan joined the litigation as third parties, indicating the considerable
international significance of the issue. In theory, third parties have a
“significant interest” in the proceedings; in practice, they are any country
that desires to contribute its views on the subject under consideration (Guohua,
Mercurio &Yongje, 2005, pp. 99-108).
States claimed before the Panel that gambling was illegal in various American
jurisdictions. It further argued that Internet gambling offended the “public
morals” of the country and therefore could legitimately be excluded from the
embrace of the trade treaty (see generally Chanovitz, 1998). The United
States’ response contained both condescension and a sizeable portion of
obfuscation. At one point it scolded Antigua for inaccuracies in its summary
of American gambling law and its tardiness in submitting corrections. It
scored occasional debating points, arguing, for instance that “children have
ready access to payment instruments, and no technology has yet been developed
to enable constraints on Internet gambling approaching those that are possible
in other settings where gambling can be confined and access to it strictly
limited” (WTO, 2004, pp.14-15). Some of the dispute over legal matters
focused on the entertainment and recreational services heading in the United
Nations’ classification of products that included a subsection specifically
listing “gambling and betting” (United Nations, 1991, Code 904). The United
States argued that the roster was not binding and that its federal ban on
interstate gambling in the Wire Act automatically exempted it from adherence
to the UN schedule.
its part, adopted a somewhat feisty and combative tone in debating the
American claims. “The US should not be allowed to in essence ‘hide behind’
the complexity and opacity of its own legal structure to deflect attention
from the fundamental simplicity of this complaint” (WTO, 2004, p, 31). The
Antiguan pleaders also put on record a biting criticism of the American
presentation to the WTO of a television documentary presented by the Canadian
Broadcasting System in October 2001:
submits that the video is offensive and totally irrelevant to the legal
questions that arise in this proceeding: the fact that the United States seeks
to adduce it as evidence at all…makes the ruse all the more obvious. The
program portrays Antigua as a backwater, the Antiguan Solicitor General who is
African and whose mother tongue is not English, finds himself depicted as
incompetent…If the United States is struggling so much in this case that it
needs to resort to a media hatchet job of a small developing country that does
not have the clout to get a retraction, then the United States is really
clutching at straws. The most offensive fact of all, however, is that by
submitting this video as evidence, the United States implicitly adopts the
view expressed in its own formal view vis-à-vis Antigua. If put in the
context of the rest of the US argument, the United States is essentially
saying that Antigua is backward, irredeemably incapable of operating a
respectable gaming, or any other industry. This is an astonishing statement
[and] outright prejudice.’ (WTO, 2004, pp. 86-87).
This protest may not have been altogether impelled by bruised national
feelings, but could have been an attempt to call attention to the mandate of
the WTO to pay special attention to the needs of
countries. It might also have been an effort to counteract what writers have
interpreted as a bias in WTO decisions. Kok Pen Khor and Martin Khor (2005,
p. 42), have claimed, “The global economy is not managed impartially [by the
WTO], but favors rich countries and multinational corporations.”
report, issued on November 10, 2004, contained three major findings:
(1) The GATS was applicable to betting and gambling;
was in violation of the Treaty when it relied on the Wire Act and other laws
to interdict Internet gambling with Antigua. Its actions violated the intent
of fair trade and access to markets in Antigua by persons living in America;
(3) The United States had failed to demonstrate that its action was necessary
to protect “public morals,” defined as “standards of right and wrong conduct
maintained on behalf of a country or a community” (WTO, 2004, passim).
the third point, the Panel called into play an earlier Dispute Resolution
Panel report that had set forth the procedure to be employed in determining
the propriety of public morals and public order claims. In that case, it had
been said that what was required was “a process of weighing and balancing
factors which prominently include the contribution made by the compliance
means for the enforcement of the law or regulation at issue.” To be taken into
account as well was “the importance of the common interests or values
protected by the law or regulation, and the accompanying importance of the law
or regulation on import or export” (WTO, 2000, para. 161). The Panel granted
that the Wire Act and its two complementary statutes clearly were designed to
protect public morals and public order in the
States. But it was well aware that some form of gambling is legal in all
American states except Hawaii and Utah, and that Antigua had undertaken
programs to deal with the risks enunciated by the United States. It thought
that the United States had failed to diligently explore alternative approaches
that might permit it to meet its trade treaty obligations to its own
satisfaction, and it labeled the United States’ position as “a disguised
restraint on trade” that “amounts to arbitrary and unjustifiable
discrimination between countries” (Weiler, 2006, p. 816) and insisted that
countries cannot unilaterally define what constitutes “public morals”
The Appellate Body Ruling
United States and Antigua appealed aspects of the Panel findings. The
Appellate Body is required to be broadly representative of the WTO. Its
members cannot be affiliated with any government, and serve four-year terms.
The Antigua-United States Panel adjudicators were highly distinguished men,
headed by Giorgio Sacerdoti, with Georges Al-Saab and John Lockhart the other
two participants. The president of the panel had been a professor of
International Law and European law at the University of Baconi; Abi-Saab is an
Egyptian with two law degrees from Harvard and a Ph.D. jointly awarded by
Cambridge University and the University of Geneva, and teaches at New York
University. Lockhart, who died early in 2006, had been a federal court judge
Fundamentally, the Appellate Body’s decision upheld the
original finding (though in some instances for different reasons) that the
United States had acted in a manner inconsistent with its treaty obligations,
but it disagreed with the earlier conclusion that federal anti-gambling laws
in America were not fashioned to protect public morals and maintain public
order. The Appellate Body also disagreed with the Panel’s consideration of
many of the American state laws as relevant to its ruling. It focused
considerable attention on the legislative tools that the
was relying upon to try to end cross-border Internet gambling: the Wire Act,
the Travel Act, and the Illegal Gambling Business Act.
the Wire Act, as noted earlier, had been successfully invoked to convict Jay
Cohen of illegal gambling practices on the Internet. The Travel Act (U.S. Code
Title 18 §1952) was, like the Wire Act, a 1961 enactment directed against
organized crime, outlawing interstate or foreign commerce with the intent to
distribute the proceeds of an unlawful activity, such as gambling. The Illegal
Gambling Business Act (U.S. Code Title 18 §1952), passed in 1970, also was put
in place as a weapon against organized crime, making it a federal offense to
operate a gambling business that violates state law, providing other
conditions are met, such as the involvement of at least five persons and an
operation that has existed for more than thirty days and that took in $2,000
or more on any given day.
The core conclusion of the Appellate Body was that the three acts, the Wire
Act, the Travel Act, and the Illegal Gambling Business Act, were measures
necessary to protect public morals or maintain public order, though as one
writer would note the Body employed “a very lax test” to reach this conclusion
(Broude, 2005, p. 684). Nonetheless, the Body ruled that the
had not shown, in particular in regard to the Interstate Horseracing Act, that
its enforcement actions were carried out against both foreign and domestic
service suppliers of remote betting services. Therefore, as Antigua had
alleged, the United States was in violation of GATS as alleged by
The Interstate Horseracing Act (IHRA) (Title 15, U.S. Code §3001) had been
passed in 1978 with a crucial amendment in 2000 that was put in place over the
strong objections of the federal Department of Justice. It permits
inter-state wagering on race track events that are transmitted by means of
telephone or other electronic means, presumably including the Internet, so
long as the wagering is legal in both states. The
had tried to finesse the inconsistency between the permissive IHRA and its
claims of a legitimate exemption from the trade requirements by maintaining,
rather awkwardly, that the horse racing stipulation did not replace the
interdictions of measures such as the Wire Act. That claim was, of course,
accurate, but beside the point, because the Wire Act could not be used against
interstate wagering on hose races in a state that had legalized such betting.
Simply put, the conclusion of the WTO Appellate Body was that the United
States was using its laws relating to gambling selectively to punish Internet
offshore gambling and gamblers while exempting some domestic operations from
equal enforcement of the law interdicting Internet betting. At the same time,
it needs noting that, as one commentator has said, the vast and dense verbiage
of the Panel and the Advisory Body reports and the language and diction
employed at times render its precise views “less than clear” (Hurt, 2006, pp.
the report stated:
Body recommends that the Dispute Settlement Body request the United
States to bring its measures, found in this Report and in the Panel Report as
modified by this Report to be inconsistent with the General Agreement on
Trade in Services, into conformity with its obligations under this
Agreement (WTO, 2005, p. 126; italics in original).
States Trade Representative deemed this judgment to be “deeply flawed,”
insisting that it was in contradiction of the evidence and that the amendment
to the horse racing law did not contravene existing American criminal
statutes. He said he hoped that Antigua and the WTO would disabuse themselves
of this “misperception.” Negotiations again were inaugurated between the two
countries that lasted four months but proved fruitless. An arbitrator turned
down a request by the United States that it be granted an additional fifteen
months to respond to the Appellate Body recommendations. Thereafter, Antigua
announced that it would request the formation of another review body to decide
what action the United States was required to take and, if it failed to adopt
such remedies, what penalties should be imposed on it. Possibilities included
an extra tariff on export products from America. For its part, Antigua was
asking permission to copy and export American-made CDs and DVDs and similar
comprehensive examination of WTO law and practice, however, points to a
significant shortcoming in its adjudication process. “A problem with the
implementation of WTO dispute settlement recommendations and rulings are a
lack of guidance over what exactly a losing party must do to comply,” Matsuo
Matsushita and his colleagues write, and then add wryly: “The tendency has
been for the losing party to take minimal steps and declare itself in full
compliance. The winning party often disagrees (Matsushita, Schoenbaum &
Mavroidis, 2003, p. 30).
The European Union’s Third Party Submission
Among the submissions of the various third parties to the dispute between
and the United States regarding offshore Internet gambling is that of the
European Community which cut to the heart of what was at stake. The submission
was by Carlo Trojan, Italian born but a Dutch citizen, who had been an EU
secretary-general and now was the European Union ambassador to the WTO.
third-party stance reflected a case involving
and Italy. In that case, Pierglorgio Gambelli and 137 other persons had
appealed a charge of illegally taking bets in
for an English bookmaker in violation of the monopoly on betting enjoyed by
the Italian government. The EU court noted that “if a Member state incites and
encourages customers to participate in lotteries and betting to the financial
benefit of the state, the state may not use the pretext of protecting public
order in order to justify restrictions” (Gambelli v. Italy, 2004; Del
Nemo, 2004). The European Community’s submission on the Antigua-United States
dispute was the only one to discuss what truly was at stake, echoing the
earlier Gambelli situation:
conditions being equal, such prohibition [as sought by the United States]
provides an incentive to consumers to turn to service providers within the US
territory over like services supplied from the territory of other Members
thereby modifying the conditions of competition. The incentive obviously is a
particularly powerful one, since consumers who continue to gamble through
websites operated e.g. from
are doing so in breach of law
(WTO, 2004, p.
Antigua and the United States had sparred at great length, often in niggling
terms, about whether or not an organized crime would infiltrate the Antiguan
gambling endeavor or whether such gambling would allow underage participants
and create additional compulsive, pathological gamblers. These in the nature
of debating tactics, would hopefully persuade those judging the case to favor
one or the other party. There was also a back-and-forth duel concerning the
precise nature of the United States’ obligations under treaty provisions.
Fundamentally, the United States was seeking to criminalize enterprises that
outsourced gambling services. Outsourcing is a new and legitimate aspect of
international trade, as market considerations move businesses from Bangor in
Maine to Bangalore in Karnataka. The practice initially aroused strong public
and political indignation in the United States in regard to the export of
jobs. But later research indicated that the concern was greatly overrated. A
2006 study, for instance, found that more domestic jobs are created in a few
months than are lost to external sites in a year. The McKinsey Global
Institute in the
found that 4.7 million Americans started new jobs in May 2005 alone;
predictions for the years 2004 to 2008 are that about 1.4 million jobs would
be outsourced overseas. Many factors work against outsourcing, most notably
in the retail and health care sectors, where face-to-face interactions are
required (Gross 2006:BU5). An influential essay by an economist in the
highly-prestigious journal Foreign Affairs claimed that “outsourcing
actually brings more benefits; both now and in the long run” (Drezner, 2004,
For some, the
continued truculence in regard to offshore Internet gambling by the United
States was seen as ‘an ineffective and futile stance on a crucial social
issues’ (J. Schwartz 2005, p. 138) in the nature of a Luddite resistance to an
emergent and vitalizing trend toward freer international commercial
interaction. Most particularly it was regarded as a self-serving camouflage
staged to divert attention from its real purpose which was ‘a marked attempt
to channel American dollars away from offshore gambling into American casinos’
(Bissett, 2004, p. 403). Another move on the part of the United States in that
direction took place in the closing moments of 2006 Congressional session when
the leader of the Senate attached a rider to a port security measure that
mandates that banks and credit card companies halt the use of credit cards for
the transmission of Internet gambling stakes to overseas sites (Title 31, U.S.
Code §§ 5361-5367). The bill was passed without being presented for committee
consideration or floor debate. Commentators saw it primarily as a symbolic
political gesture to appeal to conservative voters and predicted that it would
merely force bettors to locate other routes for transferring funds. The law
often was labeled by its critics as a “new prohibition.” comparable to the
ill-fated ban against alcoholic beverages that had been put in place earlier
in American history.
In a prescient
appraisal of the likely developments that would ensue from, or perhaps
despite, the Antigua-United States conflict in the realm of Internet gambling,
I. Nelson Rose offers a prediction, a view with which we are in accord:
those states that wish to license operators and allow citizens to wager online
will be allowed to do so. As more developing countries turn to legalization,
taxation, and regulation, and as more states pass enabling statutes, the
federal government will be forced to shift away from a complete prohibitionist
position to one of reluctant tolerance. Federal permission will, at first, be
limited to state licensed operations, if for no other reason than foreign and
non-licensed operations have no lobbying power in Washington (Rose 2000, p.
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Professor, Department of Criminology, Law and Society, School of Social
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Professor Emeritus, Department of Criminology, Law and Society, School of
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