FINDLAW ARGUES THE CASE FOR REGULATION

(660) (10-October-2006)

Carve-outs criticised

Law professor Anita Ramasastry at the University of Washington School of Law in Seattle presented an impressive argument for online gambling regulation rather than prohibition in the US publication Findlaw this week.

Ramasastry wrote that regulating online gambling would be a far better solution than selectively banning it through attacks on financial channels.  She challenged the claims of supporters of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGE) that internet gambling presents moral dangers by pointing out that the act exempts state-run lotteries, online fantasy sports games, intrastate gambling, gambling on Native American territories, and interstate horse race betting via the internet.

Consequently, problem gamblers will still find numerous online outlets eager to indulge their addictions - and with respect to these outlets, they will have no problem wagering via their credit cards, bank accounts, and the like.

Meanwhile, those gamblers who do insist on sticking with their previously favored forms of gambling may suffer an even worse fate. Barred from using upfront financial channels to deal with more legitimate sites, they may simply be conned into dealing with disreputable and illegal offshore entities, using unlicensed prepaid payment services, or routing their funds through questionable entities.

Ramasastry also addresses the question "Does the Law Violate U.S. Free Trade Obligations?" Her conclusion is that the UIGE is unlikely to be effective and may additionally violate the U.S. free trade obligations - in particular, the General Agreement on Trade in Services (GATS), which covers, among other services, "recreational services."

"Back in 2003, the small Caribbean islands of Antigua and Barbuda, which host offshore online casinos, complained to the World Trade Organisation (WTO) that the U.S. was violating GATS in that it both allowed its own gambling operations to offer Internet gambling services in the U.S., and prohibited other companies to offer the same services from abroad," Ramasastry argues.

"In 2004, a WTO panel ruled that the U.S. had to bring its laws into conformity with GATS. But the UIGE seems to do just the opposite - making it all the harder to gamble with companies abroad, and easier to gamble domestically. (Meanwhile, U.S. authorities have arrested officials of UK-based online gaming companies, in another illustration of the double standard.)

"Even if the U.S. continues to ignore the Caribbean nations and the WTO on this matter, it may not be able to ignore the European Union - which is liberalising its own markets for Internet gambling, and may seek to hold the U.S. to the GATS agreement.

The professor concludes by noting that here's no question that Internet gambling raises serious issues. But they are far better addressed through regulation, than though an unfair and ineffective partial ban such as that suggested by the UIGE.