Measures Affecting the Cross-Border Supply of Gambling and Betting Services.

1. Measures Affecting the Cross-Border Supply of Gambling and Betting Services. Noor Saymeh Dulani Seneviratne Christopher Sheng

2. Background • More than 1800 different online casinos are on the internet: • Some examples of online games: Roulette, Craps, Blackjack, Sports bedding • Trustworthy and honest sites that are strongly recommended: Examples: Cryptologic, Microgaming, Boss Media, Playtech and Odds • Some factors that encourage various people are: A) 24 hours open B) Free software, nothing too complex C) Higher payout percentage and bonuses for newcomers • Three types of online gambling: A) Web-based casinos: can play casino games w/o downloading software to the local computer, B) Download-based: Requires download of the software, in order to play and wager on the casino games offered and C) live-based: See, hear and interact with live dealers at the tables in casino studios worldwide

3. A Quick Look… • Exploded in the 1990’s • By the end of 1998 had produced an annual revenue of $835 million • Worldwide revenues in 2004 were between 7 to $10 billion, $4 billion being U.S. betters • 2009 projected to be around $20 billion ***Sports betting= 35% of the revenues • National and provincial lotteries have received $1.5 billion in 2005 • Internet continues to grow 20% despite federal government hostilities • States that have some form of law that prohibits online gambling are: California, S. Dakota, Texas, Kansas, Louisiana, Michigan, Missouri, Nevada, Florida, Wisconsin and Indiana

4. Antigua & Barbuda, What’s all that commotion? ***The Caribbean country of Antigua and Barbuda claim that offshore online casinos are a lucrative source of revenue and provide an income for hundreds of islanders. Basically…U.S. prohibitions were hurting the island’s efforts to diversify its economy away from tourism. • The three main Prohibitions: 1) The Interstate Wire Act of 1961: is a United States federal law prohibiting the operation of certain types of betting businesses in the United States. 2) Travel Act: makes it a federal crime to travel among the states or internationally or to use the U.S. mail or other means of interstate commerce to “promote, manage, establish, carry on, or facilitate …unlawful activity…” 3) The Illegal Gambling Business Act: statute was aimed at syndicated gambling. ***Controversial Argument: Antigua Argues: U.S. a WTO member, has put restrictions on Internet gambling in which violated trade commitments BUT U.S. argues: In Uruguay Rd. the U.S. clearly intended to exclude gambling. • The two countries have argued that the U.S. has not taken any measures to comply with recommendations nor rulings

5. Worldwide Growth: -From 1999-2004, the U.S. has been market leader in the Global internet gambling industry -Lacking behind is Latin America ***Sports bedding

6. U.K. Endorse Gambling… -Brings in Tax Revenues - Encourages citizens to bring businesses to their own country

7. Gambling Revenues • U.S. Gambling Revenues taken from: http://www.americangaming.org/Industry/factsheets/statistics_detail.cfv?id=7 • Estimated E-Gambling total taken from “Busted Flush” The Economist October 5, 2006

8. Timeline Article 21.3 (c) Arbitration Report Request for Consultation Panel Report Appellate Body Report March 13, 2003 November 10, 2004 April 7, 2005 August 19, 2005 2003 2005 2006 2004 • Information taken from http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm

9. World Trade Organization - GATS • General Agreement on Trade in Services (GATS) • Recognizes the growing importance of trade in services for the growth and development of the world economy • Establish a multilateral framework of principles and rules for trade in service with a view to expansion • Achieving progressively higher levels of liberalization of trade • Recognize the rights of Members to regulate on the supply of services within their territories in order to meet national policy objectives • Facilitate the participation of developing countries in trade in services and the expansion of their service exports by strengthening domestic capabilities • Take into account the serious difficulty of least-developed country economic situations

10. Main Argument of Antigua • United States Violates Article IV: Section 1 and 3 of the GATS • Section 1 • In sectors where specific commitments are undertaken, each Member shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner • Section 3 • Where authorization is required for the supply of a service on which a specific commitment has been made, the competent authorities of a Member shall, within a reasonable period of time after the submission of an application considered complete under domestic laws and regulations, inform the applicant of the decision concerning the application. At the request of the applicant, the competent authorities of the Member shall provide, without undue delay, information concerning the status of the application.

11. United States Laws In Question • Antigua states that the United States violates Article IV: Section 1 of the GATS via: • Louisiana: § 14:90.3 of the La. Rev. Stat. Ann. • Massachusetts: § 17A of chapter 271 of Mass. Ann. Laws • Minnesota: §§ 609.75, Subdivisions 2 – 3 and 609.755(1) of Minn. Stat. Ann • New Jersey: paragraph 2 of N.J. Const. Art. 4, Sec. VII and § 2A:40-1 of the N.J. Code • New York: § 9 of Art. I of N.Y. Const. and § 5-401 of the N.Y. Gen. Oblig. L. • South Dakota: §§ 22-25A-1 - 22-25A-15 of the S.D. Codified Laws • Utah: § 76-10-1102 of the Utah Code Ann

12. United States Laws In Question (Continued) • Federal Laws • Wire Act • Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

13. United States Laws In Question (Continued) • Federal Laws (Continued) • Travel Act • As part of United States Attorney General Robert F. Kennedy's program to combat organized crime and racketeering, Congress enacted the Travel Act in 1961 as part of the same series of legislation as the Wire Act. The Travel Act, which is aimed at prohibiting interstate travel or use of an interstate facility in aid of a racketeering or an unlawful business enterprise, provides as follows: • (b) As used in this section (i) "unlawful activity" means (1) any business enterprise involving gambling, liquor on which the Federal excise tax has not been paid, narcotics or controlled substances (as defined in section 102(6) of the Controlled Substances Act), or prostitution offenses in violation of the laws of the State in which they are committed or the United States,

14. United States Laws In Question (Continued) • Federal Laws (Continued) • Illegal Gambling Business Act (Part of the Organized Crime Control Act) • Section a • Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both. • Illegal Gambling • Title 18, U.S.C., Sec. 1955 (Illegal Gambling Business Act) (1) Is a violation of the law of the state in which it is conducted; and (2) Involves five or more persons who conduct, finance, manage, supervise, direct or own all or part of such business; and (3) Has been or remains in substantially continuous operation for a period in excess of thirty days, or has a gross revenue of $2,000 in any single day. • Section b • (1) Defines what an illegal gambling business means (shown on Definition Slide) • (2)“gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein. * Definition taken from www.lectlaw.com

15. United States Defense • United States wants to ban e-gambling on the basis of “public morals” • Ban on Antigua-based gambling company is consistent with federal laws • Protection against minors utilizing such services

16. Panel Decisions …Presented on November 10, 04 • Panel Decision • The GATS Schedule of the United States has been interpreted to include specific commitments for gambling and betting services • The United States failed to accord services specified in the US Schedule • U.S. federal and State laws at issue violate the market access commitment • Antigua failed to demonstrate that the measures at issue are inconsistent with Articles VI:1 and VI:3 of the GATS

17. Panel Recommendations • The Panel decided to exercise judicial economy with respect to Antigua’s claims under Articles XI (i.e. concerning payments and transfers) and XVII (i.e. concerning national treatment) of the GATS.

18. Appellate Body Decisions …Presented on April 07, 05 • The United States’ measures are justified under Article XIV (a) of the GATS as measures “necessary to protect public morals or to maintain public order” • The United States’ Schedule includes a commitment to grant full market access in gambling and betting services (Article XVI:1 and 2). • United States acts inconsistently with Article XVI:1 and sub-paragraphs (a) and (c) of Article XVI:2 by maintaining certain limitations on market access not specified in its Schedule • “Total prohibition” on the cross-border supply of gambling and betting services cannot constitute a “measure” subject to dispute settlement under the GATS. • AB revised panel’s decision: US’s eight state-laws at issue violate the market access commitment, as Antigua had failed to make such a claim with specificity.

19. Implementation Stage • U.S. stated its intention to implement the recommendations. • Both parties failed to agree on a reasonable time of period for implementation. • The reasonable period of time for implementation was established as 11 months and 2 weeks from 20 April 2005, expiring on 3 April 2006, by the arbitrator. • The United States failed to comply with the recommendations and rulings of the DSB.

20. Implementation Stage • On 8 June 2006, Antigua requested consultations under Article 21.5 of the DSU • On 16 August 2006, the Panel was composed. • On September 30th 2006, the U.S. Congress introduced a bill to stop banks and credit-card companies from processing payments to online gambling companies. • The interim report of the panel did not agree with the United States, that it had taken the necessary steps to comply with a WTO ruling: that the US was not granting full market access in gambling and betting services.

21. Implementation Stage • The Panel expects to circulate its report to Members by the end of March 2007. • Antigua will be able to introduce sanctions such as tariffs on imports. • Unlikely to sway the US due to the small size of the Antiguan economy (It’s economy substantially depends on the US for trade). • Success at the WTO for Antigua could pave the way for the EU to pursue a fair trade case against the US over online gambling

22. National and International Interests • Third Party nations • Canada, Chinese Taipei, European Communities, Japan, Mexico, and China • For the protection of “public morals” • Non-Profit Organizations including religious orgs. • state-protected gambling monopolies (horse-racing and state lotteries). • For the “full-market access” • offshore gambling firms • offshore financial intermediaries

23. Recommendations • For the United States: • Amend the International Horseracing Act (IHA); or • Clarify that the IHA does not discriminate between domestic and foreign gambling suppliers by: • Shutting down or significantly curtailing the activities of interstate online gambling and horseracing companies such as youbet.com • Prohibiting interstate online state lotteries such as the system in Maine, New Hampshire, and Vermont. • For Antigua and other member States: • Prove that other less-restrictive market friendly mechanisms are feasible and sufficient to protect the public moral • “Because many forms of gambling in the U.S., including some forms of internet gambling, a complete ban on cross-border internet gambling is unnecessary to protect the U.S. • A new complaint against the U.S. based on well-pleaded state law discriminations.

24. E-Gambling More about E-Gambling

25. Sources • One page summary of the case. Available at: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm • http://www.internationaltraderelations.com/Case.E-Gambling%20Case%20(Panel%2011.10.04).htm • http://www.wto.org/english/docs_e/legal_e/final_e.htm • http://www.global-trade-law.com/Article.Internet%20Gambling%20Case%20(NYT%2011.11.04).htm • Thayer, James. “The Trade of Cross-Border Internet Gambling: The Dispute Continues” Journal of internet law. July 2006. • Country Briefing: Antigua EIU accessed via GMU database online. Feb. 07, 2007. • Pimlott, Daniel. “Caribbean/USA Regulations: US Suffers Setback at WTO Over Online Gambling.” Financial Times. Jan. 29, 2007. • “Who was Really the Winner from the WTO's Gambling Decision?” The Economist. Apr 14th 2005