It’s not just the temperature on the thermometer that is heating up as we enter into the summer months here in the U.S.; the war over the legality of sports betting has been growing hotter in recent weeks, setting the stage for explosive conflicts between powerful entrenched forces on both sides of the volatile issue.

Some of the incredible stories coming out in recent days:

• Federal prosecutors have seized $30 million of winnings from online poker players. Appealing directly to the banks used by the payment processing companies, the Feds have seized not the funds made by the poker sites, but the legitimate payouts won by U.S. based players. This should be a real wake up call for anyone who cares about their freedom and constitutional rights.
• The Governor of NJ has joined the fight to legalize sports betting in his state. What started as the David and Goliath story of a single state legislator against the U.S. Federal Government is quickly becoming an increasingly fair fight as various heavyweight lobbying groups and political players such as Governor Corzine enter the fray. Is it just a matter of time before other states take up the cause?
• The NCAA threatened to bar tournament games in the state of Montana due to its state-run fantasy sports league. Montana has responded with a rather weak attempt to appease the NCAA bullies.
• The WTO once again rules against the Unites States in a worldwide dispute over the online gambling ban in the United States. Unfortunately these rulings are consistently ignored by our government.
• The NFL is fighting tooth and nail to stop legalized sports betting in Delaware. The truth is that the NFL should be grateful for sports betting according to industry insiders. Meanwhile NFL owners just voted to allow NFL logos to appear on state lottery tickets.
• A guy got his hand chopped off for a gambling debt in NJ. Needless to say this kind of stuff doesn’t happen in the online gambling world where deposits are made up front.
• Finally, the state of Minnesota backs down on its ridiculous demand that the biggest Internet Service Providers block access for Minnesota citizens to certain gambling sites. This is the kind of thing they are doing in China my friends. Credit to iMEGA and the PPA for this small victory.

It’s an interesting time to be following the issue of online sports betting. The landscape could be very different by the start of the football season – though I wouldn’t bet on it.

American banking representatives met with members of Congress during a hearing to discuss the effects of the Unlawful Internet Gambling Enforcement Act of 2006 – which made it illegal for banks and other financial institutions to process online wagers. The banks are very reluctant to take on the responsibilities outline in the Act including monitoring web sites and making the legal determination as to what constitutes “illegal gambling”. I found a nice summary of the situation in the comments of a New York Times article on the meeting:

The U.S. paid untold billions (the Trade Office won’t say exactly how much) to Canada, Europe and Japan last December to settle the dispute created by this ban.
Antigua has received the World Trade Organization’s blessing to infringe $21M worth of U.S. copyrights annually to redress the losses Antigua’s economy has suffered since the law came into effect.
State-backed lotteries and lucratively-taxed casinos across the U.S. continue to collect much of their revenues from the poorer half of the populace, even as part of the rationale for this ban was preventing the pernicious influence of Internet gambling from sucking in the wage earners of struggling American families.
Congress is now making the banking industry testify as to why they’re not better able to tell the government exactly what your money is being spent on.
Are we having fun yet?
Kudos to Rep. Frank for carrying the torch of common sense.

CNet offers some nice coverage of the hearing including a post of an audio interview with pro-gambling representative Barney Frank.

Banks, credit card companies, and some Democratic members of Congress are predicting that forthcoming restrictions on Internet gambling will ensnare innocent customers and threaten the viability of e-commerce.

The criticism came at a congressional hearing on Wednesday devoted to the Unlawful Internet Gambling Enforcement Act, enacted in 2006 by a Republican Congress after pressure from social conservatives. The Federal Reserve and the Treasury Department published draft regulations last fall–which financial institutions say will disrupt perfectly legal transactions unless dramatic changes are made before the rules take effect.

Rep. Ron Paul, the libertarian-minded Republican presidential candidate, criticizes Net-gambling restrictions on Wednesday, saying ‘people should make their own decisions.’
(Credit: U.S. House of Representatives)
“Consumers will be placed at risk of having lawful transactions blocked,” said Rep. Luis Gutierrez, D-Ill., chairman of the House monetary policy and technology subcommittee. “It is easy to see how these regulations, if implemented in their current form, could wreak havoc on electronic commerce in the U.S.”

The 2006 law forces banks and other financial intermediaries to police money flows that could be related to Internet gambling. It never received a formal up or down vote in the entire Congress; instead, Republican congressional leaders simply glued it on to an unrelated port security bill that was approved nearly unanimously.

More at CNet.com.

The WTO finally awarded damages against the U.S. based on the failure to comply with previous rulings against it. The decision gives Antigua the right to ignore U.S. intellectual property rights – opening the possibility for Antiguan citizens to freely engage in the duplication of software, music and movies made in the USA.

Microsoft Word anyone?

The New York Times provides a nice summary:

In an unusual ruling on Friday at the World Trade Organization, the Caribbean nation of Antigua won the right to violate copyright protections on goods like films and music from the United States — an award worth up to $21 million — as part of a dispute between the countries over online gambling.

The award follows a W.T.O. ruling that Washington had wrongly blocked online gambling operators on the island from the American market at the same time it allowed online wagering on horse racing.

Antigua and Barbuda had claimed damages of $3.44 billion a year. That makes the relatively small amount awarded Friday, $21 million, something of a setback for Antigua, which had been struggling to preserve its gambling industry.

The United States argued that its behavior had caused $500,000 damage.

Yet the ruling is significant in that it grants a rare form of compensation: the right of one country, in this case Antigua, to violate intellectual property laws of another — the United States — by allowing it to distribute copies of American music, movie and software products.

“That has only been done once before and is, I believe, a very potent weapon,” said Mark Mendel, a lawyer representing Antigua, after the ruling. “I hope that the United States government will now see the wisdom in reaching some accommodation with Antigua over this dispute.”

Whether or not Antigua will actually go ahead and start pirating U.S. intellectual property remains to be seen. There are many ways the U.S. can apply pressure to prevent them from doing this. It will be interesting to see what unfolds in the upcoming weeks and months…

Just saw this update via News.com. I wonder if this is due to some behind the scenes efforts by the U.S. Government to avoid an international public relations disaster. It will be interesting to see what happens next week…

A World Trade Organization decision on the amount of retaliation that Antigua and Barbuda can impose on the United States in an Internet gambling trade dispute didn’t come out Friday as expected, a U.S. trade official said. “We understand the report has been delayed,” said Gretchen Hamel, a spokeswoman for the U.S. Trade Representative’s office.

The tiny Caribbean nation has been in a long-running fight to offer its Internet gambling services in the United States. The case is being closely watched by European Internet gambling companies, which were pushed out of the U.S. market by Congress last year. In an April 2005 victory for Antigua, the WTO said a U.S. law allowing only domestic companies to provide online horse-race gambling services discriminated against foreign firms. Antigua and Barbuda has asked permission to impose $3.44 billion a year worth of “cross-retaliation” on the United States. The United States says Antigua and Barbuda is entitled to only $500,000 in damages in the dispute.

Fellow U.S. citizens, prepare to see $100 BILLION of your tax dollars go to the WTO. As noted in a previous post, the U.S. government has been ignoring the WTO’s ruling on U.S. laws banning it’s citizens from doing business with offshore gaming companies. Based on this defiance, 151 WTO member countries will be voting on an appropriate penalty and seeking compensation for damages done. Don’t expect our friends in the EU or India to come to our defense either:

The European Union, along with India and five other countries, has filed notice that it intends to seek compensation.

“The US decision is a major threat to a rules-based international trading system,” said Nao Matsukata, former director of policy planning for the Office of the US Trade Representative.

“If more countries follow the US lead and do the same thing, the entire WTO system could implode and that would be extremely dangerous for US economic interests and for free trade generally.

I can’t say I disagree with the countries seeking compensation from the U.S. I blame the Bush administration and Congress for failing to act to prevent this situation. I really hope that if you enjoy sports betting and you plan on voting in the next presidential election that you vote for the only candidate that will work to grant you that liberty – the maverick Congressman from Texas Dr. Ron Paul.