The Bush Administration has again taken a bad situation and made it much, much worse.
As usual, the problem appears to be incompetence. Bush’s lawyers made arguments in response to Antigua’s complaint in the World Trade Organization (“W.T.O.”) that would have earned them, at best, a grade of “D” if this had been a law school class.
In April 2005 the Appellate Body of the W.T.O. issued a long opinion, which, all in all, wasn’t too bad for the U.S. The main finding were:
1) The U.S. had agreed (probably accidentally) to let in all forms of gambling from other W.T.O. countries, when it signed the General Agreement on Trade in Services treaty.
2) But the U.S. won on the argument that it had to prohibit people betting from their homes and offices because it has reasonable fears that remote gaming would harm Americans. The D.O.J. presented enough evidence to convince the W.T.O. that the federal statutes involved were necessary to protect American “public morals” and “public order.”
3) But then the U.S. lost on the minor issue of cross-border betting on horseracing. Congress not only had created an Interstate Horseracing Act (“I.H.A.”), it amended that Act in December 2000 to expressly allow individuals to bet on horseraces from their homes by phone or computer, so long as the bets were legal under state laws where they were made and accepted.
Bush’s lawyers raised the rather unique legal argument that Congress had not actually authorized interstate horseracing when it passed a statute expressly authorizing interstate horseracing. The D.O.J. argued that the Wire Act continued to outlaw all cross-border betting of all kinds, and that the I.H.A., being a civil statute, could not amend this criminal law. Besides being factually questionable, given the large, established interstate horseracing industry, the argument was legal nonsense. And the W.T.O. politely said so.
The W.T.O. held that the express language of the I.H.A. allowed cross-border betting between states of the U.S., but not with foreign nations. Since there was no way the U.S. could justify this discrimination against Antigua, the W.T.O. ordered the U.S. to make changes to fulfill its treaty obligations.
The remedy was simple: Change the Interstate Horseracing Act into an International Horseracing Act. It would take an act of Congress, but nobody should have cared if people from a state could bet with licensed O.T.B. operators who had been licensed by their own state, other states or other nations.
But the Republican-controlled Congress was not going to pass, and President Bush was not about to sign, a law that looks like it expanded legal gambling that would not directly raise one cent of tax revenue and might even hurt some U.S. businesses. Leaders of Congress, like then-Sen. Majority Leader Bill Frist (R.-TN), who later rammed through the Unlawful Internet Gambling Enforcement Act, did not want to be seen as having to change an American law to abide by a decision of foreign powers.
The W.T.O. required the U.S. to show that it was now in compliance with its treaty obligations by April 3, 2006. This is where the Bush Administration showed its unique aptitude for taking even the most fouled up situation and making it worse. Bush’s lawyers took the bizarre position that, even though the U.S. had done literally nothing, it was now in compliance – because it deserved to win the first time!
Imagine making the same losing arguments to the exact same judges.
So, of course, the U.S. lost.
But taking ridiculous positions can lead to more than losing a case. It is insulting to the judges, and can tempt a decision-maker to reexamine the entire record, to find more things wrong.
It did this, in a document of 41 pages of tiny print, which the W.T.O. took a year to write. The W.T.O. now declared that not only U.S. federal laws, but also the laws of many states discriminate against Antigua’s licensed Internet operators. And that the U.S. discriminates not only on cross-border betting on horseraces, but on all forms of remote wagering, even those purely intrastate and having nothing to do with horseracing.
The W.T.O. has the power to enforce its decision. One proposal is to exempt Antigua from all American copyrights, allowing it to sell movie and music DVDs and CDs without paying any royalties.
The U.S. is now left with only a few options – none of them good.
1) Congress could outlaw all remote wagering. Eighteen states allow people to bet from their homes, not only on horseraces, but also on dograces, sports events (in Nevada) and jai alai. It is unclear whether the larger multistate lotteries and linked progressive slot machine networks would also have to go. But, even if the federal government had this power, it would mean devastating these industries and throwing tens of thousands of people out of work.
2) Or, Congress could amend the Wire Act to expressly allow Antigua’s licensed sports and race books and casinos to take bets from the United States. We know that Pres. Bush would never sign such a law. And he can’t, if it means that the federal government will overrule a state’s policy toward gambling. The U.S. would drop out of the W.T.O. before it forced states like Utah to permit Internet gambling.
Ignoring the decision is not an option; not if the U.S. wants China and other nations to respect the W.T.O.
So, the U.S. is going to have to pay off Antigua. It will probably be cash. Fortunately, Antigua is small, so if will be only a few tens or hundreds of millions of dollars.
But what happens if the next complaint in the W.T.O. is filed by the European Union?
© Copyright 2007. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.
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