04/07/2005 11:00PM

Online betting here to stay


NEW YORK - An appeals court of the World Trade Organization issued a 138-page ruling Thursday in Geneva, Switzerland, that both supporters and opponents of Internet gambling are hailing as a landmark decision. Both sides in the dispute are claiming victory, and even the press can not seem to decide who prevailed.

"U.S. Limits on Internet Gambling are Backed," said the headline in The New York Times, while The Times of London's take was, "Antigua Wins Big in Online Gambling Case."

About the only thing both sides can agree on is that a revision of American laws on offtrack betting is now likely.

The matter stems from a David-and-Goliath faceoff between the United States Department of Justice and the tiny Caribbean island of Antigua, whose 108 square miles are home to about 75,000 people. A decade ago, Antigua began courting operators of offshore betting companies to relocate there. Several did, and provided sorely needed jobs and government revenue while transacting much of their business with American customers.

The Justice Department, howling about morality, responded by attempting to prosecute Americans involved in operating the companies and issued threatening memos to banks handling credit-card transactions and newspapers and Internet search engines carrying information and advertisements for these legal, regulated businesses. In 2003, Antigua filed a complaint with the WTO, saying that the U.S. was violating global trade laws.

The little island that could won a stunning victory when the WTO ruled in its favor last November, but the United States appealed that initial ruling, leading to Thursday's debated decision. The appellate panel ruled that the United States was entitled to an exception from WTO rules, under international law permitting special regulations if they are need to protect "public morals" and "public order."

In other words, there could be widespread moral decay and rioting in American streets if Americans, who bet billions each year in state-sponsored casinos and lotteries, were also allowed to bet on their computers with a company in Antigua. The government hung much of its argument on its usual money-laundering argument, claiming that allowing Americans to wager would uniquely enable organized crime to hide its assets, despite the lack of any evidence that the Antigua betting companies were involved in such activities.

The WTO appeals panel, however, did not entirely buy the government's case. It affirmed that the United States generally does have to allow gambling across international borders in a free-trade environment. It also specifically cited the Interstate Horse Racing Act as discriminatory for allowing in-home computer betting on racing but only allowing transactions through American-based companies.

The U.S. trade representative, Peter Allgeier, said in a statement that the most important part of the ruling is that it "affirms that WTO members can protect the public from organized crime and other dangers associated with Internet gambling."

Attorneys for the Antiguans say that they believe the ruling is less definitive than that and will at least end the prosecution of the Antiguan operators and the Justice Department's actions against Internet search engines, credit-card companies, and publishers.

Where the matter goes next is anyone's guess. The prospect of letting lawmakers tinker with the Interstate Horse Racing Act should make anyone queasy, as they are apt to get it wrong and end up erecting new hurdles to simulcasting and international betting. If the United States does not follow the WTO's ruling, it would theoretically face trade sanctions from Antigua, but this is like saying that a billionaire faces economic reprisals from his gardener.

There are two lessons here for the racing industry.

The first is to remain judicious, if not downright skeptical, in reacting to government pressure regarding gambling policy. Just because the Justice Department thinks every offtrack betting operation is a laundry for organized-crime receipts does not mean that racing should continue its recent policy of refusing bets from legitimate operators who have not been accused, much less convicted, of any wrongdoing.

The second is to swallow hard, acknowledge the arrival of the 21st century, and accept that the genie of online betting is never going back in the bottle. Rather than trying to block access to Internet wagering on its product, the industry should be considering why people are going online and offshore in the first place - lower prices and better technology - and begin offering a superior product of its own rather then demonizing its competitors.