Original URL: http://www.theregister.co.uk/2007/04/18/ntra_interview_wto_waldrop/

Delusional thoroughbred chief wants US out of GATS

Horseracing head keeps head in sand

By Burke Hansen

Posted in Law, 18th April 2007 09:10 GMT

House of Cards In a bizarrely rambling and ill-informed interview with Interactive Gaming News last week, National Thoroughbred Racing Association (NTRA) head Alex Waldrop advocated that the United States try to remove gambling services from the General Agreement on Trade in Services (GATS), thereby circumventing a string of negative rulings against the US at the WTO covering the provision of cross-border gambling services.

Never mind that the WTO resolved the status of gaming services and the GATS in the initial panel; even the hard-up Department of Justice (DOJ) has given up on that tack, choosing instead to do nothing and hope that the dispute somehow resolves itself. With trade partners such as China, Europe, and Japan breathing down the neck of the DOJ...well, good luck with that.

The dispute originated years ago in the aftermath of the arrest of Jay Cohen, the one-time head of the World Sports Exchange (WSE), who landed in federal prison after returning voluntarily to the US to fight charges that he had violated the Wire Act by operating an online casino out of Antigua. Although the company operated completely out of Antigua, where online wagering is legal, the Federal Court for the Southern District of New York felt that the WSE had marketed itself sufficiently in the US to fall under American jurisdiction.

Sensing a threat to one of the pillars of its economy, the tiny Caribbean nation of Antigua and Barbuda challenged the US over its gambling policies at the WTO.

The WTO panel ruled decisively against the US, and the WTO appellate body has systematically upheld that ruling with some modification. Although the US could have specifically excluded gambling when it negotiated the GATS, it did not; the ruling provided the important precedent that gambling businesses are indeed providing "services" within the meaning of the GATS. Those services are covered by the GATS, and not just for the United States as Mr Waldrop seems to believe.

It's a preliminary [ruling]...the proceeding is ongoing. It seems to be interminable. The unfortunate fact is that gambling should have never been included under the General Agreement on Trade in Services (GATS) in the first place. And the only logical solution, perhaps not a practical solution, is to withdraw gaming from GATS. We're the only country in the world, apparently, that included gambling. All other countries had the foresight to check the box and remove gambling from consideration. We neglected or failed or decided for whatever reason not to exclude, and not we're left with this very difficult decision. Not only difficult for the racing industry, but actually it doesn't bode well for other interests across the country because this ruling is based upon federal law, but it could just as easily have been based on state-law claims. It's not just the racing industry that's put in an awkward position by this.

Of course, another solution would be for the US to bring its policies into compliance with the WTO it worked so hard to create. Apparently, bringing American law into compliance with the WTO is not a logical solution for Mr Waldrop. Could that be why he's confusing an appellate report with a preliminary ruling?

The WTO chose to focus on the most clear-cut American violations of its WTO commitments, which involved large scale internet gambling on horseracing in the US, both by states and publicly traded companies. The horse racing industry is notoriously protectionist, and not only in the US.

In spite of the provincial character of the industry, however, it might be reasonable to assume that the public face of the American horse racing industry would be avidly following a landmark case covering his industry.

Right?

Maybe not.

"I haven't looked at it with any close detail. I mean I haven't analyzed it because, again, it's preliminary and it will be appealed," he said. "Keep in mind we're not a party to it, so we're just monitoring it. We're not monitoring it. We're not being consulted. We're not in any way directly engaged. But given the fact that it's preliminary, it's safe to say that we didn't scour it like we would the final, not appealable ruling."

Uh, I'll take Appellate Body Reports for $800, Alex. Never mind that the recent compliance report slammed the US for failing to comply with the appellate body report of two years ago – Mr Waldrop prefers to live in la la land, it seems.

Long shots may be the only way to make real money at the track, but as far as lawsuits go, they're money losers. Mr Waldrop would serve his industry better if pulled his head out of the sand and took a hard look at what the future has in store.

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