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Tiny Antigua grabs the US by its illegal, online dice

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This Port Act is out of control

The Unlawful Internet Gambling and Enforcement Act of 2006, as the notorious amendment to the Safe Port Act is officially known, not only restated the validity of the Wire Act and the IHA - the problematic laws that had provided the basis for Antigua’s victories before the original WTO panel and on its subsequent appeal - but the new legislation also lashed out at ISPs, advertisers, and just about anyone who would benefit in any conceivable way from online gambling.

According to experts on gaming law, the vague language of the poorly drafted (and apparently unread) bill has greatly expanded the scope of who may be criminally liable for internet gaming transactions. In its eagerness to squeeze the online gaming market, while at the same time protecting horse tracks, riverboat gambling operations and Indian casinos at home, Congress cast a wide net over just what behavior is covered by the legislation - all the better to keep everyone in line. After all, since it is impossible for the US to exercise direct jurisdiction in places like Antigua or Costa Rica, why not go after the low hanging fruit it does have direct jurisdiction over?

As Professor I. Nelson Rose, an internet gaming law expert at Whittier Law School in Southern California, puts it,

The greatest danger here would seem to be with affiliates. Any American operator can be easily grabbed. This includes sites that don’t directly take bets, but do refer visitors to gaming sites. If the affiliate is paid for those referrals by receiving a share of the money wagered or lost, it would not be difficult to charge the affiliate with violating this law, under the theory of aiding and abetting. Being a knowing accomplice and sharing in the proceeds of a crime make the aider and abettor guilty of the crime itself. The federal government could also charge the affiliate with conspiracy to violate this new Act.

The other danger lies with search engines. Although California-based Google does not take paid ads, punching in “sports bet” brings ups many links to real-money sites. This new Act expressly allows a federal court to order the removal of “a hypertext link to an online site” that is violating the prohibition on money transfers. But what prosecutor would want to be ridiculed internationally for trying to prevent Google from showing links?

In spite of the broad stroke of the legislation, its primary focus is clearly to scare American companies away from having anything to do with offshore gaming companies, rather than actually prosecuting anyone. Nonetheless, it is only a matter of time before a federal prosecutor tests the limits of the act. Last week, the Queens’ District Attorney’s office, after a major internet gambling bust in New York City, announced that it was including the web design company that designed and set up the gambling site in the network of conspiracy and racketeering charges against the principals. The ISPs that hosted the site and the software companies that supplied the software are also under indictment.

Chris Costigan, the publisher of the gambling news site Gambling911.com, noted to El Reg that the New York City investigation into the gambling site Playwithal.com predated the Congressional legislation, but it’s hard not to see the federal prosecutors in the Southern District of New York licking their chops at the thought of the extra leverage provided by the possibility of casting an ever expanding Federal net.

Although the fear of doing federal prison time is a powerful disincentive for those under American jurisdiction, the economic squeeze on the internet gaming industry has also had the desired effect on what was Antigua’s second largest industry after tourism. The LA Times noted recently that more than 3,000 people in Antigua and Barbuda, or 10 per cent of the workforce, have lost jobs since the late 1990s, when U.S. politicians and social conservatives set their sites on taking down the online gaming community. Antigua’s gambling revenue, which topped out at $90m in 1999, fell to $20m last year. Only 44 of the 200 online gambling companies registered in Antigua since 1994 are still toughing it out after the recent collapse in online gaming activity in the wake of the recent American legislation.

Early next year, when the Dispute Resolution Body finally finishes with each side’s arguments, Antigua will undoubtedly win its claim that the US is still noncompliant with the prior WTO rulings in the case, but the question of how to compensate Antigua for its economic losses remains. What kind of leverage does a small country like Antigua and Barbuda have against the last superpower?

Under one provision of the WTO, a party is allowed to suspend its obligations (“concessions,” in WTO-speak) to another signatory if sanctions alone prove insufficient, and Antiguan authorities are already talking of following the example of Ecuador, which threatened to start selling black-market copies of EU merchandise, if the EU refused to comply with the original panel ruling on banana tariffs. Indeed, the EU and Japan have filed briefs supporting the Antiguan position.

That darling of the American political class, enormous American based intellectual property rights holders, such as Microsoft or Universal Studios, will be sore if the United States cannot come to some kind of resolution in its dispute with little Antigua and Barbuda. Furthermore, the fact that the primary proponent of the GATS round of trade talks would prove so stubborn when faced with an adversary ruling would seem to indicate that a rough road lies ahead for a more general worldwide liberalization of trade in services.

The vindication sought by Jay Cohen eight years ago may finally be at hand. ®

Burke Hansen, attorney at large, heads a San Francisco law office.

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