How Much Is NOT Having Internet Gambling Worth?

Besides Gaming Law, I sometimes teach a class called "Remedies." Here law students learn the very important lessons of how the real world works. Winning a legal battle is worse than worthless if what you collect is less than your attorneys' fees.

This is exactly what the U.S. is trying to do to Antigua in its dispute at the World Trade Organization (WTO) over internet gambling. The issue revolves around one of the more difficult questions taught in Remedies: How much should someone pay for destroying a business that did not yet exist?

A typical case would be a contractor who negligently causes a fire that burns down a building being constructed for a retail store. How much does the contractor owe the store owner for destroying a business that never existed?

At least in the case of internet gambling, we can get over the first step: How do we know the store would have made any profit at all? Some internet gaming sites do go bankrupt. Using the language of Remedies it is safe to say that it is not too speculative to believe businesses licensed by Antigua would have made money if they had been allowed to take online bets from Americans.

How much? Antigua claims it lost $3,400,000,000, a year. The U.S. puts the damages at $500,000.

One of the reasons for this striking disparity goes to the heart of the dispute: exactly what sort of internet gambling did the U.S. prevent Antigua from creating?

Antigua's position has always been that the U.S. discriminated against it because the U.S. sometimes allows people to make bets from their home by phone and computer. The U.S. position is that America never agreed to let in any foreign gambling, and federal law outlaws all interstate bets.

Under Antigua's view, the U.S. owes it for all the internet casinos, poker rooms, sports betting, bingo games, etc., that Antigua has licensed but cannot take bets from the U.S. That $3.4 billion. The U.S. says everyone knows America would never agree to let in foreign gambling, so the $500,000 is to get rid of a nuisance claim. They're both wrong.

The WTO ruled that the U.S. did agree to let in gambling. It ruled that the Interstate Horseracing Act allows people to bet across state lines on horse races.

But the WTO also ruled that the U.S. was justified in being afraid of remote wagering. It is only because federal law allows bets on horse races across state lines that it is discriminating against Antigua. So the only damages should be for bets on horse races that Antigua's licensed race books cannot take from the U.S.

Antigua is not the only country demanding damages from the U.S. The European Communities alone are talking about hundreds of billions of dollars.

If the U.S. were smart, it would immediately agree to pay whatever damages the WTO decides is proper, but only for bets on horse races. But we are talking about the Bush Administration here, known for its arrogance and incompetence. The Bush lawyers have never given an inch on anything involved with this dispute.

As a result, the WTO has now declared that all remote wagering laws of the U.S., both federal and state, that allow anyone to make a bet from their home, discriminate against Antigua. We're talking state lotteries, and sports betting because Nevada allows bets from within Nevada, and internet casinos-Nevada's statutes permit them even though none exist.

Fortunately, none of those findings are formally part of the WTO's final decision. So the U.S. has a chance to get out of the mess it created for relatively little money. And then fix its internet gaming laws. But my money is on arrogance and incompetence.