WTO Appellate Body Upholds U.S. Laws Affecting Internet Gambling

April 7, 2005. The World Trade Organization's (WTO) Appellate Body issued its report [146 pages in PDF] titled "United States -- Measures Affecting the Cross-Border Supply of Gambling and Betting Services". This report reverses key parts of a previous WTO decision that determined that U.S. laws affecting internet gambling violate the U.S.'s treaty obligations.

On November 10, 2004, a Dispute Resolution Panel of the WTO released its report [287 pages in PDF] on Antigua and Barbuda's complaint that U.S. laws affecting internet gambling violate U.S. treaty obligations. The panel held that various federal laws, including the Wire Act, and various state laws, violate the General Agreement on Trade in Services (GATS). See, story titled "WTO Panel Instructs Congress to Amend Wire Act to Legalize Internet Gambling" in TLJ Daily E-Mail Alert 1,016, November 11, 2004.

The panel report directed the U.S. Congress and various states to amend their statutes to legalize the placing of bets in the U.S., and international money transfers and payments, that facilitate internet gambling provided in Antigua and Barbuda.

Antigua and Barbuda, two tiny Caribbean islands that comprise one nation, complained to the WTO. Its economy is based upon internet gambling, along with laundering drug money, and tourism.

The report of the Appellate Body "finds that the Wire Act, the Travel Act, and the Illegal Gambling Business Act are ``measures ... necessary to protect public morals or to maintain public order´´" and therefore do not violate treaty obligations.

The report of the Appellate Body also reversed the panel's findings regarding the state gambling laws.

However, the U.S. did not prevail on all issues. For example, the report of the Appellate Body also states that "the United States has not shown, in the light of the Interstate Horseracing Act, that the prohibitions embodied in those measures are applied to both foreign and domestic service suppliers of remote betting services for horse racing and, therefore, has not established that these measures satisfy the requirements of the chapeau". The U.S. will have to amend this statute.

Acting U.S. Trade Representative Peter Allgeier (at right) stated in a release that "This win confirms what we knew from the start -- WTO Members are entitled to maintain restrictions on internet gambling ... We are pleased that the Appellate Body has agreed with our position that the U.S. gambling laws at issue here protect public order and public morals. By reversing key aspects of a deeply flawed panel report, the Appellate Body has affirmed that WTO Members can protect the public from organized crime and other dangers associated with Internet gambling. This is also a victory for the federal and state law enforcement officers and regulators who protect the public from illegal gambling and its associated risks of money laundering and organized crime."