Net Bet Blog

A neat little summary article on the ongoing US-EU battle over internet gambling. The article gets it pretty much right. Whilst most readers will already be aware of these issues that are worth reiterating especially the section about "selective prosecutions". This is a disgrace and it is good that the is at least attempting to act.

The Risks of Gambling Regulation [American Spectator]

When trade emissaries from the European Union arrive in Washington later this month to talk to officials in Congress, the Justice Department, and other executive branch agencies, they'll have some difficult questions to ask. In particular, they'll ask about some gambling laws that rank among some the worst written sections of the United States Code. If things go poorly a trade conflict with vast implications for the United States banking sector could ensue.

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The EU is interested in the laws and their application because some European and Caribbean Internet gaming operators have already faced Wire Act prosecution for engaging in Internet gambling transactions before UIGEA went into effect in 2006. On the other hand, U.S.-based horse betting websites operate freely. In other words, the Department of Justice appears to have selectively prosecuted non-U.S. operators in violation of World Trade Organization rules that bar discriminatory treatment. Even more interestingly, several of the Internet gaming operators under investigation -- 888.com and partygaming.com -- actually pulled out of the U.S. market as soon as UIGEA went into force. Already, the EU has begun the process of creating a formal Trade Barriers Regulation complaint against the U.S. government. (U.S. Trade Representative Susan Schwab has, so far, brushed off the investigation.)

The next paragraph includes the rub - will the EU actually raise the stakes in this hand of cards? I suspect the EU will no have the will to follow it through especially given gambling garners little public support.

No certainty exists that the EU will ever decide to turn the dispute into a formal case before the WTO. That said, even the possibility has serious consequences: Since enforcement of the gambling laws falls almost entirely on the banking sector, it appears likely that the EU could well respond with banking sanctions directed at getting the U.S. to change its behavior. (Other than the horseracing sites -- which serve an almost exclusively American clientele -- there are no American gambling sites to sanction.) Given the enormous volume of trade between the U.S. and Europe, almost $700 billion in 2007, even a tiny series of retaliatory measures would have severe implications for the U.S. economy.

The better news is in the final paragraph that rightly points out that a regulated future is the only future. It all depends on how long we have to wait whilst EU companies continue to suffer at the hands of the well funded US sites such as Pokerstars and Fulltilt.

Even if the EU decides to stay quiet and never complains about UIGEA, it's pretty obvious that America's effort to regulate gambling at the federal level needs to end. Thirty years ago, when casinos existed in only one state, federal laws cracking down on gambling represented the public will. Today, with gambling legal in 48 states, America's debate over gambling has ended with the side that favors legalization as the clear winner. The positive and negative consequences of widespread legal gambling have already touched every corner of American society. The risk of a serious trade dispute offers a new reason why the U.S. should do away with its federal gambling laws and let state legislatures and consumer preferences decide where -- and if -- Internet gambling needs government regulation.

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