U.S. loses ruling on offshore betting

The U.S. has failed to change its ban on Internet betting to comply with a World Trade Organization ruling that said federal law unfairly targeted offshore casinos, the trade body said Friday. The ruling opens the door to possible sanctions against the U.S.

In a 215-page decision, a three-member WTO compliance panel sided with the twin-island Caribbean nation of Antigua and Barbuda, which has argued that Internet gambling is a lucrative source of revenue for islanders.

The Geneva-based trade referee has said Washington can have restrictions on online gambling as long as they were equally applied to American operators offering remote betting on horse racing.

London-listed gambling gaming companies’ stock rose after the announcement.

Washington claimed victory in the WTO’s initial ruling two years ago because the body recognized its right to prevent offshore betting as a means of protecting public order and morals.

But the U.S. acknowledged Friday that the latest decision was a setback. “The compliance panel did not agree with the United States that we had taken the necessary steps to comply with the WTO recommendations,” said Gretchen Hamel, a spokeswoman for the office of the U.S. trade representative. Washington has yet to say whether it will appeal the compliance panel’s findings.

To avoid the penalties, the government would have to either permit Americans to gamble on foreign-based sites or eliminate exceptions for off-track betting on horses, including over the Internet, as permitted under the 1978 Interstate Horseracing Act.

Congress caught the industry by surprise last year when it added a provision to a bill aimed at improving port security that would make it illegal for banks and credit card companies to settle payments to online gambling sites. President Bush signed the bill into law Oct. 14.

The arrest last year of two British Internet gambling executives traveling through the U.S. also highlighted the U.S. government’s escalation in its battle against the industry.

U.S. authorities said Friday that BetOnSports founder Stephen Kaplan was arrested late Wednesday in the Dominican Republic. Kaplan is named in a 22-count criminal case.