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Emily D. Swoboda

Insights: US and Antigua - The Elephant and The Fly

17 May 2007

The four-year dispute between the United States and the tiny twin-island nation of Antigua and Barbuda (Antigua) over U.S. restrictions on online betting--online horserace betting, in particular--took an unpredictably ugly turn recently when the United States Trade Representative (USTR) announced that it never intended to allow I-gaming services as part of market-opening commitments--the General Agreement on Trade in Services (GATS)--it made in the early 1990s.

Over the course of the case, through the initial 2005 ruling and a series of appeals, the World Trade Organization (WTO) has consistently ruled in favor of Antigua, ordering the United States to bring its laws in line with WTO trade regulations. But the United States has not only ignored the rulings, it has passed the prohibitive Unlawful Internet Gambling Enforcement Act, which bars U.S. banks from processing online gambling transactions.

So, IGN asked U.S.-based gaming lawyer Emery Ledger:

What are the implications of the United States' effort to clarify its position in relation to GATS? Is America essentially withdrawing gambling services from its commitments?

"When you're the elephant I guess you can do whatever you want as long as all you're dealing with are flies buzzing around you. But, when there's a formidable contender challenging you then you're going to have to wake up."

Emery Ledger: Antigua is the fly trying to bother the elephant--and, so, what does the U.S. do? They wag their tail and move on. They're not that concerned with Antigua. What I'm hoping happens, and hasn't happened yet, of course, is that a real member of the WTO--somebody who has some clout and some trading power and some trading leverage--says to the United States: "Look, you really are being the schoolboy whose trying to pick up his toys and move on. You're really being like a child here. You can't change the rules mid-stream."

It's not fair. It's unprecedented. And, you know, when you're the elephant I guess you can do whatever you want as long as all you're dealing with are flies buzzing around you. But, when there's a formidable contender challenging you then you're going to have to wake up.

I think that's probably what our next step is in all of this. We're at that stage where at least there's this body, the WTO, that says: "You're just a little fly, but you've got something here."

I can remember being in Costa Rica in 2005 and speaking with a judge from Antigua who said, "We're not going away," and she meant it. Meanwhile, the United States is saying, "We won the ruling. That WTO decision was in favor of the United States."

Lo and behold, now that the WTO has come back and we've been through part of the appeals process, the United States says: "Okay, we're going to change the rules now. We're going to clarify what we meant."

Well, the height of hypocrisy--everybody knows what's going on here. Everybody knows that it's very hard to distinguish and the United States has not been able to articulate the difference between horseracing and other forms of Internet gaming. They just have not been able to successfully articulate how they intend to keep out Internet gaming and allow other forms of recreational activity.

I'm really proud of Antigua because they said to the United States: "You are the elephant, but we're going to be recognized as the fly, and you're going to listen to us."

I read an article recently that said what the United States. is trying to change the goalposts. And I don't know if that's how I would describe what has gone on, because if that's all the United States is trying to do, I think, if they're just trying to move the goalposts a bit it will come back to haunt them.

I think what they're trying to do is re-write the rules. I think it's going to be a futile effort.

We're now in '07 and this has been going on for four years now. I think this is a bit of a stalling tactic by the United States and I don't think it's going to be successful. I think that Frank's position, as well as Shelley Berkley's position to study Internet gaming, is going to gain a foothold, because at the end of the day the United States is becoming a bit protectionist in a lot of areas of trade. We are now worried about China so much and I don't think that Internet gaming is the fight that they're going to want to fight when they're worried about other industries going overseas.

The only argument I've heard in favor of the United States is: Does anybody logically think that the United States would be a signatory to any agreement that is in violation of its own laws? That's a little bit of a cart-before-the-horse logic because we don't have clear precedent yet that the United States has signed anything contrary to its own laws, and that position is presumptive. I think the United States needs to figure out what it needs to do with I-gaming from a national level.

"The reason we don't have transparency is because you can't reconcile the U.S. position with logic."

With respect to the WTO, I think one of the biggest issues for the United States at this point is the carveout for horseracing. I have such a hard time reconciling horseracing carveouts and not allowing access to the U.S. market from Antigua. There's just no justification, and I'm trying to, like I do in criminal defense matters, I'm trying to figure out what the United States' next move is going to be.

Frankly, I'm at a loss to find a credible position for the United States to take, other than to say: "We are the bully, we are the schoolboy that owns the toy and we're going to walk away from the game." Clearly they're not going to walk out of the WTO, but I don't understand how they're going to reconcile their position in the history of their participation in the WTO with their current status.

People expect, because the country is somewhat of an imperial power, people expect the U.S. government to act ethically and logically and with full disclosure and transparency. The problem here is that I don't see on the horizon any real transparent position coming out of the United States other than from Barney Frank and the 60 or 70 co-signers of the proposal to study Internet gaming. And the reason we don't have transparency is because you can't reconcile the U.S. position with logic.

We are not, save for Utah and a few other exceptional states, a nation that is strongly opposed to gambling. We have the second biggest market now to Macau, China, but we've had the biggest gaming market for years and we've enjoyed the fruits of that success. Now I think it's time for the United States to decide if it's going to take the moral position that all gaming is bad and Internet gaming especially because that seems to be flying in the face of our history.

Emery Brett Ledger is the senior partner at Ledger & Associates, a Gaming Law Firm, based in Newport Beach, Calif. He earned his Juris Doctor Degree from Pepperdine University School of Law. Practicing gaming law since 1998, in addition to handling hundreds of state and federal criminal matters, Mr. Ledger brings a unique perspective to the interactive gaming industry. His practice is devoted to keeping gaming professionals in compliance with U.S. Law.

Insights: US and Antigua - The Elephant and The Fly is republished from
Emily D. Swoboda
Emily D. Swoboda