When trade emissaries from the European Union arrive in Washington later this month to talk to officials in Congress, the Justice Department, and other executive branch agencies about online gambling and US laws, they'll have some difficult questions to ask, writes Eli Lehrer in The American Spectator this week.
In particular, the European delegation will seek answers about what Lehrer decribes as "…some gambling laws that rank among some the worst written sections of the United States Code."
And if things go poorly a trade conflict with vast implications for the United States banking sector could ensue.
Lehrer gives a succinct background to three federal laws – only one of them particularly clear – that govern Internet gambling in the United States.
He identifies these as the 1961 Wire Act, which limits nearly all [sports] gambling by telephone and telegraph but, for obvious reasons, says nothing about the Internet.
He opines that the only really clear law is the 1992 Professional and Amateur Sports Protection Act which bans all non-Nevada betting on sports other than animal racing and jai alai.
Finally, the 2006 Unlawful Internet Gaming Enforcement Act (UIGEA) which requires the financial services industry to enforce bans on financial transactions with online gambling companies but has been criticised for its lack of precision and practicality.
Lehrer summarises the events leading to key meetings with EU officials, detailing the activities of Department of Justice officials and noting the inconsistency of legislative carve-outs that enable U.S.-based horse betting websites, fantasy sports and online lotteries to operate freely.
"In other words, the Department of Justice appears to have selectively prosecuted non-U.S. operators in violation of World Trade Organization rules that bar discriminatory treatment," Lehrer writes. "Even more interestingly, several of the Internet gaming operators under investigation – 888.com and Partygaming.com – actually pulled out of the U.S. market as soon as UIGEA went into force."
Lehrer reveals that the EU has begun the process of creating a formal Trade Barriers Regulation complaint against the U.S. government, which U.S. Trade Representative Susan Schwab has, so far, brushed off.
A series of "interrogatories" – formal questions directed at American officials – appear to indicate the direction in which things are moving, says Lehrer. The questions, framed in an almost 5 000 word document, cover topics ranging from the way the United States has enforced laws to the size of the U.S. gambling industry. The document reads more like the outline of a legal brief than a simple set of inquiries… and it requests every detail of the operations of the U.S. gaming industry and asks U.S. regulators to justify nearly every action they've taken with regard to Internet gambling.
Whilst there is no certainty on how far the EU is prepared to carry the fight, the consequences could be serious, the writer opines.
"Since enforcement of the gambling laws falls almost entirely on the banking sector, it appears likely that the EU could well respond with banking sanctions directed at getting the U.S. to change its behavior. (Other than the horseracing sites — which serve an almost exclusively American clientele — there are no American [online] gambling sites to sanction.) Lehrer writes.
"Given the enormous volume of trade between the U.S. and Europe, almost $700 billion in 2007, even a tiny series of retaliatory measures would have severe implications for the U.S. economy.
The writer concludes that even if the EU decides not to pursue the issue, America's effort to regulate gambling at the federal level needs to end. "Thirty years ago, when casinos existed in only one state, federal laws cracking down on gambling represented the public will. Today, with gambling legal in 48 states, America's debate over gambling has ended with the side that favors legalization as the clear winner.
"The positive and negative consequences of widespread legal gambling have already touched every corner of American society. The risk of a serious trade dispute offers a new reason why the U.S. should do away with its federal gambling laws and let state legislatures and consumer preferences decide where – and if – Internet gambling needs government regulation."