Gambling laws in U.S. may be at odds
European group calls inconsistency unfair
By Eric Benderoff
March 11, 2008
In the U.S., it's OK to bet on the ponies, but making an online poker wager is against the law. You can buy a lottery ticket online in some states, but you can't legally bet on which team will win the NCAA men's basketball tournament. You can drive to Joliet to play blackjack, but a game of "21" online is only for fun.
That inconsistency of how and where bets are placed is at the heart of a complaint by European gambling sites that argue U.S. laws infringe on international trade rules.
On Monday, the Remote Gambling Association, which represents the European operators, asked the European Union to investigate U.S. laws forbidding online gambling, a move that could lead to a formal complaint with the World Trade Organization.
Key to the dispute is the question of whether online betting companies are unfairly being forced out of the U.S. market. In the U.S., wagering on horse racing is allowed across state lines. In Illinois, for example, there are 16 sanctioned off-track betting locations. Placing bets online is illegal in Illinois.
"You have to go to an OTB, casino or a race course to place a bet," said a spokeswoman for Illinois Atty. Gen. Lisa Madigan.
"I don't think these laws were particularly well thought out," said Anthony Cabot, a gambling expert in the Las Vegas office of Lewis and Roca LLP Lawyers.
As with most everything in gaming, money is at the center of this debate. The legal online gaming market is huge, estimated to be worth more than $15.5 billion a year. Illegal online gambling for casino games and poker in the U.S. is probably worth an additional $15 billion. That doesn't include sports wagering, which Cabot called "much higher," since sports betting occurs over phones and the Internet.
This time of year is prime time for sports betting, as the NCAA men's basketball tournament is a week away from opening.
The current dispute, which could lead to trade sanctions but not overturn U.S. gambling laws, is essentially a follow-up to a 2004 case with the Caribbean island of Antigua. In that dispute, "the U.S. lost on virtually every point except at the end with the 'morals exception,'" Cabot explained. That means, if "something is against the moral code of a country, they can prohibit it, even if that discriminates" against another country's trade concerns.
Now, the European gaming group is asking the EU how the U.S. defines gambling morals.
An EU investigation could last "five to seven months," according to a statement Monday from EU Trade Commissioner Peter Mandelson. It will then "present its findings in an investigation report, which could lead to the launch of WTO proceedings."
Cabot thinks if the EU decides to file a compliant with the WTO, it "would have a substantial chance of succeeding."
"The argument that we are morally opposed to Internet casinos" will be hard to defend when "it's pretty clear that we're not" morally opposed to gambling, Cabot said.