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The rapid growth of online gambling will raise the prospect of trade battles among the United States, Britain and Continental countries.
By Eric Pfanner / International Herald Tribune
The stakes are high, the ante is low, and a lot of bluffs may soon get called.
It's not Vegas, baby, but the freewheeling world of Internet gambling is a $7.5 billion business that is expected to more than double over the next five years.
Rapid growth and a low cost of entry are drawing in investors, but they also raise the prospect of trade battles among the United States, Britain and Continental countries that don't see eye to eye on gambling - or on regulation of the Internet.
British lawmakers this month took steps to lure online casino operators, which are often based in small locales like Antigua, Costa Rica and Gibraltar, to their shores by making it a legal, regulated business.
But in America, despite the presence of the world capital of gambling, Las Vegas, and the spread of casinos to Indian reservations and riverboats in many states, online gambling is technically illegal. Even though an estimated 20 million Americans - well over half of those betting globally - visit online gambling sites, the Bush administration wants to keep the ban in place, arguing that Internet gambling threatens public morals and contributes to the spread of crime.
Some continental European governments, too, are concerned about the spread of online gambling, but for a different reason - Internet betting threatens the entrenched casino and betting monopolies that are often run by or linked closely to national governments.
"Because of global trade agreements and the Internet, it's going to be harder and harder for governments to block this," said Andrew Tottenham, a London-based gambling consultant who is also the British representative for Caesar's Entertainment, the U.S. casino operator.
Gambling companies in Britain and elsewhere that are looking to step up their U.S. presence were hoping that a recent case before the World Trade Organization, pitting the tiny Caribbean country of Antigua and Barbuda against the United States, would provide some clarity. Instead, the final ruling this month appears to have created even more confusion, with both sides claiming victory.
Antigua, where dozens of online gambling companies are based, went to the WTO in 2003, contending that the United States had discriminated against foreign providers of so-called remote gambling, a term that includes Internet sites, and violated agreements on global trade in services by preventing them from marketing themselves in America.
In a preliminary ruling last year, a WTO panel agreed with Antigua.
But Washington appealed the decision, and in a final ruling this month, the WTO said the United States was within its rights to restrict remote gambling on the grounds of protecting "public morals" and "public order."
"U.S. restrictions on Internet gambling can be maintained," the acting U.S. trade representative, Peter Allgeier, said in a statement after the ruling.
At the same time, however, the trade organization left a possible window open for Antiguan and other Internet gambling companies, saying Washington had applied restrictions inconsistently, penalizing "offshore" operators. In some U.S. states, for instance, online betting on horse racing is legal. In others, lotteries can be entered by mail or telephone.
"If you fail one part of the test, you can't win the case," said Mark Mendel, a lawyer for Antigua. If the United States wanted to continue to restrict foreign operators, he said, it would have to block all remote gambling, something that he maintains is unlikely given the popularity and political connections of horse racing and lotteries.
Allgeier, though, maintained in his statement, "This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine."
Washington did not specify what actions it might take to comply with the ruling, though Allgeier noted pointedly that the U.S. trade representative "will not ask Congress to weaken U.S. restrictions on Internet gambling."
The Bush administration says the restrictions are aimed at curbing money-laundering and organized crime as well as at keeping betting out of people's homes, where children might become addicted to it. This month, prosecutors in New York charged 17 people with running an illegal gambling ring that used an Internet site based in Costa Rica.
But online providers say that is precisely why U.S. authorities should bring the industry onshore, where they can monitor it more closely, as is being done in Britain. It will be at least a year, analysts say, before the new British law is implemented, but it could put the country squarely at odds with Washington if Britain-based operators eventually use their newfound respectability to try to challenge the U.S. restrictions.
"The WTO case should serve as a solid precedent should another jurisdiction decide to take the U.S. to the WTO along similar lines," said Wes Himes, director of the Interactive Gaming, Gambling and Betting Association, a Britain-based trade group.
In the meantime, offshore operators like the Gibraltar-based PartyGaming, and the Costa Rica-based Paradise Poker, a subsidiary of the London-based Sportingbet, continue to grow. Though some online casino businesses, like the Internet casino subsidiary of the British betting shop Ladbrokes, say they decline to do business with U.S. bettors, plenty of Web sites are happy to take Americans' money.
Though Washington made it more difficult for American online gamblers a few years ago, persuading many credit card issuers to block such transactions, Internet payment systems like Neteller, based on the Isle of Man, have stepped into the breach. But PayPal, a similar payment system owned by eBay, will not process these transactions.
While the United States is the biggest market for Internet gambling - Tottenham, the consultant, estimates that 70 percent of all online wagers originate there - the business is growing in Europe and Asia.
British and Irish gambling companies are lobbying the European Commission to include the industry in new rules aimed at creating a single market for services across the 25-member bloc.
The European Court of Justice, in a decision two years ago involving the British bookmaker Stanleybet that was similar to the WTO's recent ruling, said that EU countries could block foreign access to their gambling markets, but only to protect citizens, not to defend state-owned gambling monopolies.
In Britain, the betting shops that seem to have a presence on every "high street" have long been allowed to offer online wagers on sports, for instance. The new gambling act, along with legitimizing and regulating online casino gambling, will permit the building of at least one Las Vegas-style mega-casino, too. A number of online gambling companies are considering initial public stock offerings, alongside a handful that are already publicly traded.
Industry lobbyists say lawmakers in several European governments, including France, are considering legislation similar to the new British Gambling Act, eager to wager on their own piece of this lucrative business as it gains financial clout and regulatory credibility.
"You used to be able to walk to about three beachfront bars in Antigua and meet most of the players in the online gambling industry," said John O'Malia, chief executive of the London-based Betbug, which offers gambling software. "Now you have to go to Piccadilly."
http://www.bookmakersreview.com/New...mbling:_New_arena_for_U.S.-European_conflict/
By Eric Pfanner / International Herald Tribune
The stakes are high, the ante is low, and a lot of bluffs may soon get called.
It's not Vegas, baby, but the freewheeling world of Internet gambling is a $7.5 billion business that is expected to more than double over the next five years.
Rapid growth and a low cost of entry are drawing in investors, but they also raise the prospect of trade battles among the United States, Britain and Continental countries that don't see eye to eye on gambling - or on regulation of the Internet.
British lawmakers this month took steps to lure online casino operators, which are often based in small locales like Antigua, Costa Rica and Gibraltar, to their shores by making it a legal, regulated business.
But in America, despite the presence of the world capital of gambling, Las Vegas, and the spread of casinos to Indian reservations and riverboats in many states, online gambling is technically illegal. Even though an estimated 20 million Americans - well over half of those betting globally - visit online gambling sites, the Bush administration wants to keep the ban in place, arguing that Internet gambling threatens public morals and contributes to the spread of crime.
Some continental European governments, too, are concerned about the spread of online gambling, but for a different reason - Internet betting threatens the entrenched casino and betting monopolies that are often run by or linked closely to national governments.
"Because of global trade agreements and the Internet, it's going to be harder and harder for governments to block this," said Andrew Tottenham, a London-based gambling consultant who is also the British representative for Caesar's Entertainment, the U.S. casino operator.
Gambling companies in Britain and elsewhere that are looking to step up their U.S. presence were hoping that a recent case before the World Trade Organization, pitting the tiny Caribbean country of Antigua and Barbuda against the United States, would provide some clarity. Instead, the final ruling this month appears to have created even more confusion, with both sides claiming victory.
Antigua, where dozens of online gambling companies are based, went to the WTO in 2003, contending that the United States had discriminated against foreign providers of so-called remote gambling, a term that includes Internet sites, and violated agreements on global trade in services by preventing them from marketing themselves in America.
In a preliminary ruling last year, a WTO panel agreed with Antigua.
But Washington appealed the decision, and in a final ruling this month, the WTO said the United States was within its rights to restrict remote gambling on the grounds of protecting "public morals" and "public order."
"U.S. restrictions on Internet gambling can be maintained," the acting U.S. trade representative, Peter Allgeier, said in a statement after the ruling.
At the same time, however, the trade organization left a possible window open for Antiguan and other Internet gambling companies, saying Washington had applied restrictions inconsistently, penalizing "offshore" operators. In some U.S. states, for instance, online betting on horse racing is legal. In others, lotteries can be entered by mail or telephone.
"If you fail one part of the test, you can't win the case," said Mark Mendel, a lawyer for Antigua. If the United States wanted to continue to restrict foreign operators, he said, it would have to block all remote gambling, something that he maintains is unlikely given the popularity and political connections of horse racing and lotteries.
Allgeier, though, maintained in his statement, "This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine."
Washington did not specify what actions it might take to comply with the ruling, though Allgeier noted pointedly that the U.S. trade representative "will not ask Congress to weaken U.S. restrictions on Internet gambling."
The Bush administration says the restrictions are aimed at curbing money-laundering and organized crime as well as at keeping betting out of people's homes, where children might become addicted to it. This month, prosecutors in New York charged 17 people with running an illegal gambling ring that used an Internet site based in Costa Rica.
But online providers say that is precisely why U.S. authorities should bring the industry onshore, where they can monitor it more closely, as is being done in Britain. It will be at least a year, analysts say, before the new British law is implemented, but it could put the country squarely at odds with Washington if Britain-based operators eventually use their newfound respectability to try to challenge the U.S. restrictions.
"The WTO case should serve as a solid precedent should another jurisdiction decide to take the U.S. to the WTO along similar lines," said Wes Himes, director of the Interactive Gaming, Gambling and Betting Association, a Britain-based trade group.
In the meantime, offshore operators like the Gibraltar-based PartyGaming, and the Costa Rica-based Paradise Poker, a subsidiary of the London-based Sportingbet, continue to grow. Though some online casino businesses, like the Internet casino subsidiary of the British betting shop Ladbrokes, say they decline to do business with U.S. bettors, plenty of Web sites are happy to take Americans' money.
Though Washington made it more difficult for American online gamblers a few years ago, persuading many credit card issuers to block such transactions, Internet payment systems like Neteller, based on the Isle of Man, have stepped into the breach. But PayPal, a similar payment system owned by eBay, will not process these transactions.
While the United States is the biggest market for Internet gambling - Tottenham, the consultant, estimates that 70 percent of all online wagers originate there - the business is growing in Europe and Asia.
British and Irish gambling companies are lobbying the European Commission to include the industry in new rules aimed at creating a single market for services across the 25-member bloc.
The European Court of Justice, in a decision two years ago involving the British bookmaker Stanleybet that was similar to the WTO's recent ruling, said that EU countries could block foreign access to their gambling markets, but only to protect citizens, not to defend state-owned gambling monopolies.
In Britain, the betting shops that seem to have a presence on every "high street" have long been allowed to offer online wagers on sports, for instance. The new gambling act, along with legitimizing and regulating online casino gambling, will permit the building of at least one Las Vegas-style mega-casino, too. A number of online gambling companies are considering initial public stock offerings, alongside a handful that are already publicly traded.
Industry lobbyists say lawmakers in several European governments, including France, are considering legislation similar to the new British Gambling Act, eager to wager on their own piece of this lucrative business as it gains financial clout and regulatory credibility.
"You used to be able to walk to about three beachfront bars in Antigua and meet most of the players in the online gambling industry," said John O'Malia, chief executive of the London-based Betbug, which offers gambling software. "Now you have to go to Piccadilly."
http://www.bookmakersreview.com/New...mbling:_New_arena_for_U.S.-European_conflict/
