Will ban end Internet gambling? Don’t bet on it

The biggest obstacle to enforcing the ban may turn out to be a free-trade dispute between the tiny Caribbean nation of Antigua and the United States that is pending before the World Trade Organization.

The United States is appealing an April 2005 decision by a WTO court in Switzerland that said while the U.S. could ban Internet gambling within its borders, it could not apply a prohibition inconsistently.

That is exactly what the ban passed by Congress does by including exemptions for horse racing, lotteries, fantasy sports that offer cash prizes and tribal gaming.

Mark Mendel, an El Paso, Texas, attorney who is representing Antigua in the WTO case, said he thinks the court will uphold its ruling on appeal sometime next year and that the U.S. can’t afford to thumb its nose at the world body.

“(Skeptics) say the U.S. is never going to follow an adverse ruling, that they’ll just tell you to forget it,” he said. “But the U.S. is the greatest user of the WTO, and they have a very large stake in the legitimacy of the organization, especially the dispute resolution process. We are gambling on the fact that … they are either going to have to satisfy us through negotiations or they are going to have to become compliant.”

Even if the ban is unlikely to be effective in the long run, the congressional action — widely seen as a bid by Sen. Bill Frist, R-Tenn., to bolster support from the Christian right in advance of a run for the White House in 2008 — has had a tremendous immediate impact on the online gambling world.

It had immediate repercussions across the Atlantic, forcing scores of publicly traded companies engaged in online gambling to announce they will no longer serve the U.S. market once the ban becomes law, including industry leaders like Party Poker, 888.com and BetonSports.

Even before the law had passed, authorities were trying to crack down on Internet gambling, arresting two British-based gambling executives on related charges as they passed through the United States.

David Carruthers, chief executive of BetOnSports, was charged with failing to pay billions of dollars in excise taxes. Sportingbet Chairman Peter Dicks was arrested on Louisiana charges of "gambling by computer" but freed after New York refused to extradite him.

The publicly traded sites have no choice but to withdraw or restructure now that Congress has eliminated ambiguity from U.S. laws, said Cory Aronovitz, founder of the Casino Law Group in Chicago and an adjunct professor at John Marshall School of Law in Chicago.

“Prior to this, attorneys could make a good faith argument that only sports books were illegal,” he said. “With the new definition, it’s hard for me to say poker or traditional casino games do not fit within a bet or a wager. … Clearly, at this point, you are violating the federal law.”

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