August 23, 2007

Split the Deck

by PG

A comment from John H. Jackson, a law professor at Georgetown, puzzled me as I was reading about the World Trade Organization's ruling against the U.S. ban on offshore-source online gambling: "Complying with the W.T.O. ruling, Professor Jackson said, would require Congress and the Bush administration either to reverse course and permit Americans to place bets online legally with offshore casinos or, equally unlikely, impose an across-the-board ban on all forms of Internet gambling -- including the online purchase of lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing."

Frankly I don't see why banning all Internet gambling would be such a hardship to the economy, but if it is, why not just remove the difference between what we allow for U.S.-based online gambling and what we'd allow for the offshore? That is, if the U.S. doesn't permit online casino-style gambling to be done by U.S. companies, it seems fair that it would not permit that particular type of gambling to be done by offshore companies either. There's a credible argument that casino gambling may be seen as particularly dangerous to our citizens because of its habit-forming repetitive nature, which is why bricks-and-mortar casinos are required to keep an eye on their patrons and to post prominent warnings about the dangers of a gambling addiction. If I were arguing the distinction, I would point out that real world casinos can monitor gamblers for signs that they should be cut off from play, whereas online casinos cannot. But if Antigua wants to run lottos, fantasy leagues and horse races, why not let them? Permitting a specific behavior by American companies and not by foreign ones looks like naked protectionism.

The possible legal solutions to the case aside, let it be noted that the American lawyer -- who convinced the islands to bring the trade complaint in the first place -- is a stone cold gangster:

But not complying with the decision presents big problems of its own for Washington. That’s because Mr. Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the American government refuses to accept the ruling: permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others. ...

In 2002, Mr. Mendel — who does not gamble and knew little about international trade — was little more than a corporate lawyer in El Paso specializing in securities law. His law partner, though, was friends with Jay Cohen, an operator of an offshore sports betting operation in Antigua who had been sentenced to 21 months in prison for taking bets over the Internet from Americans. Mr. Cohen asked his friend to see if there was anything his firm could do.

“I had not done any trade law whatsoever, but for whatever reason this issue really struck my curiosity,” Mr. Mendel said. Beyond the intellectual challenge, the case also offered the prospect of a set of deep-pocketed clients — the online casinos doing business out of Antigua.

So Mr. Mendel, 51, who recently moved his family and his practice to Ireland to be closer to Geneva, jumped in enthusiastically.

Washington responded to Antigua’s complaint by claiming it was within its rights to seek to block online gambling on moral grounds, just as any Muslim country would be within its rights under international trade agreements to ban the import of alcoholic beverages. The W.T.O. rejected this argument as inconsistent with American policy.

The general rule in the world of international trade agreements is that a country must treat foreign goods and services in the same manner as it treats domestic ones. The United States, the trade body found, permits online wagering through sites like, a publicly traded company that allows visitors to place bets at horse racing tracks around the globe.

And, of course, some form of casino gambling is legal in more than 30 states, and even local governments advertise gambling services when states encourage people to buy a lottery ticket.

“This isn’t a case of forcing gambling on a population that has decided they don’t like it,” Mr. Mendel said. “This is the world’s biggest consumer and exporter of gambling services trying to prohibit a small country from developing its economy by offering these same services. And we find that deeply hypocritical.”

Indeed, despite all the obstacles Washington has imposed, including making it a crime for banks and credit card companies to handle Internet gambling payments, millions of Americans still manage to play poker and place sports bets online. Many more would certainly do so if the obstacles were removed.

August 23, 2007 04:47 PM | TrackBack
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