Wednesday, January 31, 2007

The United States government has shown a chink in their armor during their
war against online gambling. On Friday they admitted that the WTO had ruled
against them in the most recent stage of their long standing dispute with
Antigua. Gretchen Hamel, a spokeswoman for the US Trade Representative at
the WTO, said the interim report "did not agree with the United States that
we had taken the necessary steps to comply". Antigua's representative Mark
Mendel said "America's prohibition in the provision of gambling services
from other countries violates the US commitments to the WTO". The US
government considers online gambling to be illegal, however they have
created loop holes that exclude horse racing and various state lotteries.
Antigua accused the United States of protectionism against international
online gambling companies. Antigua is a small Caribbean island that is home
to several online gambling companies. Antigua successfully argued their
case, in front of the WTO, that the United States government allows online
gambling on horse racing, but unfairly forbids international companies from
competing in their market. The final ruling on the case is expected in
March 2007. Once the final ruling is disclosed, Antigua will be able to
introduce sanctions although the US still has the right to appeal. Legal &
Trade Experts do not believe that Antiguan sanctions will help to drive
change in US policies regarding online gambling, however the European Union
could take up the cause. If the EU gets involved, Washington will begin to
listen more intently out of fear of being sanctioned by larger trading
partners. One lucky benefactor of the ruling could be David Carruthers.
Carruthers, the former CEO of BetonSports PLC, is currently on house arrest
awaiting trial in a Missouri Federal Court on money laundering and tax
evasion chargers stemming from his duties with BetonSports. BetonSports was
licensed by Antigua as an online gambling operator. Carruthers, a British
Citizen, was arrested in the Dallas/Fort Worth airport while on a layover
between Costa Rica and the UK back in July 2006. The Carruthers arrest was
one incident that clearly showed the US had no intention of complying with
the WTO ruling. Since then, the online gambling industry has been under
constant siege by the US government. In the middle of the night, the
Republican led congress tacked legislation banning online gambling financial
transactions to a "MUST PASS" Port Security Bill. In November, the
President signed UIGEA (Unlawful Internet Gambling Enforcement Act of 2006)
into law. UIGEA bars financial institutions from knowingly allowing online
gambling financial transactions.

The most recent blow in the US goverment's war on online gambling came this
month when the Canadian founders of NETeller were arrested on tax evasion
and money laundering charges. NETeller's e-wallet money transfer solution
was widely used by operators to take in deposits and process withdraw
requests. The arrests triggered a ripple effect with other companies such
as Citadel Commerce leaving the US market out of fear of indictment.

Many within the online gambling industry are hoping that the WTO ruling will
help pave the way for regulation in the $15 Billion dollar US market. The
big question is: When will the United States realize that prohibition does
not work?