In the wake of a trade ruling lending support to U.S. prohibitions on internet gambling, gaming industry insiders aren't predicting any slowdown in Americans' online-wagering activities.
Other developments on the legal and legislative fronts, including efforts by several states to legalize net wagering, could put pressure on federal regulators to loosen gaming restrictions, industry observers say. The passage of a sweeping gambling bill in the United Kingdom, they say, could also open doors for overseas betting sites.
"It's never going to be stopped," said Frank Catania, managing partner of Catania Consulting Group, which specializes in the gaming industry. "They can put all the mechanics in place and have threats go out to MasterCard and Visa.... It still won't work."
This year, global spending on internet gambling is expected to total $9.9 billion, up from an estimated $7.5 billion in 2004, according to Christiansen Capital Advisors, a research firm that tracks the gaming industry.
Catania is one of a number of gaming experts who believes the industry will emerge unscathed following a ruling issued this week by the World Trade Organization in a closely watched case brought by the Caribbean nation of Antigua against the United States. Antigua had argued that Washington should drop prohibitions on Americans placing bets in online casinos, saying the ban represented an unfair trade barrier.
In a statement of findings issued Thursday, the WTO said U.S. laws restricting online gambling are measures "necessary to protect public morals or to maintain public order."
But the trade group found that the U.S. government does discriminate against foreign wagering sites by permitting online wagering on horse racing only through domestic operators.
Because the ruling recognized some validity to arguments raised by both Antigua and the United States, each side claimed victory. U.S. trade officials said Thursday's appellate ruling was more favorable than a decision issued last year by a WTO panel that upheld more broadly Antigua's claims of unfair trade.
Acting U.S. Trade Representative Peter F. Allgeier said in a written statement that Thursday's decision serves the federal government's interests by "reversing key aspects of a deeply flawed panel report."
"This is also a victory for the federal and state law enforcement officers and regulators who protect the public from illegal gambling and its associated risks of money laundering and organized crime," Allgeier said.
But Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno, said his impression of the WTO ruling is that it is much more an Antiguan victory than a U.S. win. In particular, Eadington said, the U.S. government's willingness to permit online wagering on horse racing puts the country in a sticky situation.
"We have carve-outs to the basic prohibition on internet gambling," he said. "Those are the loopholes that the court found was inconsistent."
The WTO ruling comes as legislators in several states push for broader legalization of domestic online gambling and internet lotteries.
Last month, the House of Representatives of North Dakota passed a measure (.pdf) allowing state residents to vote on legalizing live internet poker. The proposal died a few weeks later after failing to pass the state Senate.
Members of the Georgia House of Representatives approved a measure in March that would allow residents to purchase lottery tickets over the internet. In Illinois, state Sen. John Cullerton recently introduced a similar bill.
Eadington also thinks Great Britain, which has been supportive of the burgeoning gaming business, may pressure the United States to soften its stance on internet gambling.
"The approach the British are taking with regard to internet gambling is to establish the industry as a bona fide, legitimate, regulated industry," he said.
The U.S. Department of Justice maintains that internet gambling violates the 1961 Interstate Wire Act, which prohibits betting over interstate phone lines. That position, according to Catania, has prevented states and territories from moving forward to legalize online betting.
Nearly four years ago, for example, the legislature of the U.S. Virgin Islands passed a bill to license internet gaming in the territory and to permit an online lottery. Catania said opposition from federal regulators has prevented internet gaming from taking off there.
At the same time, the federal ban hasn't stopped Americans who want to gamble online from doing so at overseas sites. Although major credit card companies and eBay's PayPal service won't process online-gaming transactions from the United States, plenty of alternative payment mechanisms exist, said Sue Schneider, president and CEO of River City Group, a gaming industry publisher.
Eadington believes the United States still supplies more customers for online gambling sites than any other country.
