WTO Ruling Raises Concerns over US States' Rights

Officials from various U.S. states are concerned that the WTO Dispute Settlement Body's ruling on the U.S./Antigua dispute over interactive gambling services could have far broader and more troublesome consequences than those directly related to Internet gambling. Last week the attorneys general from 29 states submitted a letter to U.S. Trade Representative Rob Portman to stress their concerns for state sovereignty and also to request more dialogue with the office of the trade representative with regards to negotiation of international trade agreements.

At the heart of the letter lies apprehension about the implications that the WTO ruling has for individual states' rights to regulate not just gambling but also a number of other services. Gambling is an area over which the states have maintained the sovereign authority to regulate however they wish, but if a new federal law were to arise out of an effort to implement the WTO ruling, then states could potentially lose those regulatory rights.

The attorneys general fear that the WTO's determination that the United States has indeed bound itself to the free exchange of gambling services under the GATS (General Agreement on Trade in Services) means that foreign gambling service providers have a right to establish a commercial presence in the United States--even in states like Utah and Hawaii, where all gambling is illegal. Even though the complainant, Antigua and Barbuda, was concerned only with gambling over the Internet when it raised its case, a GATS commitment to gambling services means that a number of U.S. state gambling regulations--such as state lottery monopolies and limitations on the number of casinos and slot machines-- could come under similar WTO scrutiny.

The attorneys general, therefore, urge the USTR to follow through on an earlier stated promise to withdraw gambling services from U.S. GATS commitments. According to the letter of the attorneys general, "We believe that under our constitutional system of federalism, states should continue to have the flexibility and sovereign authority to determine whether and under what conditions gambling occurs within their borders, without such decisions being subject to second guessing by WTO tribunals."

The attorneys general also worry that the WTO decision could threaten states' ability to regulate other "pernicious" activities, such as advertising, spamming, zoning and land use (such as toxic dumping). They, therefore, insist that U.S. negotiators attempt to "secure a rule change that makes explicit the right of a WTO signatory to ban undesirable activity in a GATS covered sector."

The authors also expressed much disappointment with the USTR's handling of current negotiations of GATS commitments and also its inability to consult with the states in areas where the states maintain sovereignty. The letter proclaims the authors' dismay that the USTR has actually proposed binding even more U.S. service sectors to the GATS, rather than "reevaluating current commitments in light of this troubled ruling." The authors emphasize the principle that the federal government may request, but not require, states to alter their regulatory regimes in areas where the states possess authority, and they stress the importance that the USTR maintain a broad range of contacts with a variety of state entities when negotiating GATS rules.

Click here to view the letter of the state attorneys general.