05/30/2005 11:00PM

Ruling could turn wagering sideways


TUCSON, Ariz. - Pull a bottle of your best red from the rack, draw the cork, carefully decant and swirl it, savor its body and color, and then consider this:

Your wine may save Internet betting in those states that now prohibit it.

Don't take my word for it. The guys at Youbet.com are excited over the prospect, and they should know.

Wine, at first glance, may have little to do with wagering a bob or two online, but Youbet and others think it might open doors that have been closed until now. In Youbet's case, they go so far as to think it will enable them to send signals into nine states presently closed to them.

Here's why.

The U.S. Supreme Court, in a consolidated case involving actions in Michigan and New York, ruled on May 16 that both states were discriminating against small wine dealers.

One small winery in California brought the action in Michigan because the state allowed Michigan wineries to ship directly to customers, but required out-of-state wineries, even if licensed, to go through a wholesaler and retailer.

In New York two small wineries brought the case because the state allowed in-state wineries to ship directly to consumers, but required out-of-state wineries to open a New York branch office and warehouse.

The Supreme Court ruled the states cannot do this, because it discriminates against interstate commerce, a violation of the Commerce Clause, and such discrimination is not allowed under the 21st Amendment of the U.S. Constitution.

You really don't want to read Justice Anthony Kennedy's 30-page decision for the 5-4 majority in this case, or the 33-page dissent by justices John Paul Stevens, Sandra Day O'Connor, and Clarence Thomas. But Youbet.com's lawyers read every word of them and concluded it doesn't affect only wine sales, but applies also to interstate betting on horse racing. They intend to pursue that line of reasoning on the basis of this paragraph in the decision: "States have broad power to regulate liquor. This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers. If a state chooses to allow direct shipments of wine, it must do so on evenhanded terms."

Justice Kennedy also wrote that laws blocking some businesses from a market while allowing others to access it are in direct violation of the Commerce Clause. He wrote that laws of this type deprive citizens of their right to have access to the markets of other states on equal terms.

Jeff True, the western regional manager for Youbet.com, was quick to pick up the significance of the decision, at least as Youbet's lawyers - and other attorneys dealing with racing law - see it.

"We think this decision could go a long way in allowing us to operate in the nine states where we now are prohibited from doing so," True says.

If a state permits horse racing, Youbet's reasoning goes, it can't deprive its citizens of importing signals from another state.

That argument, of course, will be tested severely. Lawyers who opposed allowing importation of wine from other states argued that the 21st Amendment, which ended Prohibition, overrode the Commerce Clause.

While the high court disagreed with that in its decision, four of the nine justices - William Rehnquist, John Paul Stevens, Sandra Day O'Connor, and Clarence Thomas - dissented in the opinion, so the case is far from clear-cut.

Stevens and O'Connor say Congress's power to regulate commerce among the states includes the power to authorize the states to place burdens on interstate commerce. They argue that while the wine decision may represent sound economic policy choices, "it is not consistent with the policy choices made by those who amended our Constitution in 1919 and 1933."

So the battle is joined.

Meanwhile, let the lawyers fight it out. Continue making bets wherever you can. And finish off that bottle of wine, regardless of where it came from.