A foreign diplomat’s view of the Internet Gaming Act’s hypocrisy

by Lou on October 8, 2006

Publicly traded Internet gaming companies in Britain and their subsidiaries in the Caribbean have been eviscerated by Unlawful Internet Gaming Enforcement Act of 2006, the law that makes it illegal for banks, credit card companies, and other financial intermediaries to transfer funds to foreign online gambling sites. As a result of this law being tacked on to the Safe Ports act at the eleventh hour and passed with neither debate nor recorded vote, more than $7 billion was wiped off the market value of companies that that were worth $12 billion the day before UIGEA was enacted into law.

The bill’s passage outraged opponents of the bill, who see it an act of protectionism rather than a moral crusade because it did not outlaw horseracing, fantasy sports, or state-owned lotteries.

Sir Ronald Sanders, pictured to the right, a former Antiguan diplomat with responsibility for negotiations on financial and trade matters in the World Trade Organization and the International Monetary Fund, is a keen observer of the scene. He recently wrote that “revenues to the UK government – and more significantly to governments of Caribbean countries such as Antigua, Belize and Costa Rica – will be reduced immediately and employment will be adversely affected.”

Mr. Sanders went on to say that “If the United States was not the main centre of the world for gambling, the bill, ostensibly adopted on the basis of morality, may have been acceptable,” adding that “the US is the major centre in the world for gambling. Five years ago, spending in US land-based casinos alone reached almost $26 billion. It is much more today. And there is no effort in Congress to close down US casinos on any moral basis.”

And Mr. Sanders is right. The bill has cut-outs allowing other forms of Internet wagering, including horse racing, US Internet lotteries, and fantasy sports. It also permits states and Native American tribes to authorize Intrastate Internet-gaming of almost any kind.

“Even though the moral argument is being touted, and the religious right in the US has welcomed the Bill,” according to Mr. Sanders “it has little to do with morals and more to do with stopping Internet gaming companies from outside the US providing services to US customers.”

This is the underlying argument made by Antigua, in their case against the US that was brought before the World Trade Organization (WTO). Antigua complained that in its commitments under the General Agreement on Trade in Services (GATS), the US bound itself to provide market access and national treatment to the cross-border supply of foreign services including gambling and wagering.

A WTO Panel ruled earlier that the US must bring its laws into conformity with its international obligations. This UIGEA, which specifically permits a variety of domestic Internet betting opportunities, discriminates against gaming services offered to the US from other countries, and is even more discriminatory than US law was before Antigua brought its case to the WTO.

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