As a result of a complaint filed by the Remote Gambling Association (RGA), the European Commission has found the United States to be in violation of its World Trade Organization (WTO) obligations due to its stance on internet gambling.
According to a statement posted on the European Commission’s website, “The report concludes that the U.S. measures constitute an obstacle to trade that is inconsistent with WTO rules. As a result, WTO proceedings would be justified.” However, the Commission may elect to forge an agreement with the Obama Administration rather than pursue WTO action. The RGA represents a bevy of European internet gambling companies, many of which are traded on major stock exchanges in London and Vienna. Its member roster includes Party Gaming, 888, Ladbrokes, Sportingbet, and Playtech, which owns and operates the popular iPoker Network.
The 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) drove publicly traded internet gambling sites out of the U.S. market in deference to shareholder interests. However, U.S.-based sites that permit online wagering on horse racing were allowed to flourish. In addition, sites like PokerStars and Bodog, which are not publicly traded, continued to solicit customers from the North American nation. The Commission’s final report assessed, “There are serious adverse effects for the E.U. They include revenue and stock market value lost by affected companies as a result of their absence from the U.S. market and also the threat of serious sanctions hanging over them that affect their normal operation outside of the U.S.”
The European Commission’s investigation was launched in March of 2008. In the end, its report outlines many of the ambiguities and shortcomings of the UIGEA, including the lack of a definition of “unlawful internet gambling” and the propensity of credit card companies and other payment processing companies to “overblock.” The latter has taken center stage in North Dakota and New Hampshire, where legal online lottery purchases have been stunted by UIGEA regulations. Moreover, the report dives into the specifics of the Professional and Amateur Sports Protection Act (PASPA), which allows sports betting in several U.S. states, including Delaware and Nevada. In total, the European Commission report spends countless pages assessing convoluted U.S. gambling laws.
As a result of withdrawing from the U.S. market, the stock price of publicly traded internet gambling companies took a nosedive. Party Gaming, 888, and Sportingbet lost 75% of their value for a sum of ₤5.7 billion between January of 2006 and October of 2006. In addition, bwin, which is traded in Vienna, lost €120 million as a result of exiting the U.S. market. In December of 2008, Party Gaming Co-Founder Anurag Dikshit admitted to violating the Wire Act of 1961 in a New York courtroom. On the same day as Dikshit’s agreement was struck, shares of Party Gaming shot up 27%. According to the Commission, the increase is evidence of how “uncertainty created by the [Department of Justice] investigations is affecting the business prospects of E.U. remote gambling and betting companies.”
Safe and Secure Internet Gambling Initiative spokesperson Michael Waxman told Poker News Daily, “We hope that members of Congress are paying attention to all of these very compelling arguments about why regulation is needed. We hope that, following Congressman Barney Frank’s leadership, members of Congress will start paying attention and move in support of regulation.” Frank’s Internet Gambling Regulation, Consumer Protection, and Enforcement Act (HR 2267) outlines a comprehensive regulatory environment for the internet gambling industry in the United States. It was introduced on May 6th and is up to 30 co-sponsors.
On the future of the European Commission’s activities, a recent Wall Street Journal article noted, “The E.U. said Wednesday it would hold off on filing a formal complaint in hopes of negotiating some sort of solution with the Obama Administration.”
