WTO slates US offshore credit card only stance on gambling

Apr 14th 2005
>From The Economist print edition

Who was really the winner from the WTO's gambling decision?

GAMBLING is not prohibited by the Ten Commandments, nor is it one of the seven deadly sins. Still,
America bans almost all forms of wagering when it happens by phone or internet, on the grounds of
protecting "public morals". That ban violates free-trade rules for services, complained the islands
state of Antigua and Barbuda to the World Trade Organisation (WTO). On April 7th, a WTO appeals
panel reached a decision that both sides have claimed as a victory.

The WTO agreed with most of Antigua's claims that America's practices are inconsistent and
discriminate against foreign operators (because America allows online horse-race betting, but only
for operators authorised by American states). However, the WTO also concluded that America's "public
morals" exception is allowed, as long as America resolves the horse-racing inconsistency. As a
result, America intends to tweak the law, yet continue to ban online gaming generally.

The ruling will not change much for the online gambling industry, which has estimated revenues of
$10 billion annually, half from Americans. Although America outlaws both supply (websites) and,
occasionally, demand (users)-and even threw one website owner in prison-enforcement remains almost
impossible. Credit-card firms and PayPal, an online payment service, refuse to process transactions
between Americans and online betting operators-but other financial intermediaries are more obliging.

This is the first time that the WTO has considered the "public morals" defence and accepted it. It
may in future be used in other ways: for example, to justify a country banning on ethical grounds
goods made by child workers, says Andrew Guzman, a law professor at Berkeley.

The issue of online gambling may yet find its way back to the WTO. Several American states, which
have authority over gambling, are vying to legalise statewide online gaming. In the long run,
America's prohibition is unsustainable, reckons William Eadington of the University of Nevada,
because regulating, taxing and letting American firms compete against offshore rivals makes far more
sense. Australia allows online gambling, but regulates it and collects tax revenues. Britain plans
to do likewise, to encourage high-street betting shops that host internet sites offshore to return
home.

The Economist