Offshore internet gambling is illegal in the US but it may not be for long.

I spent last week in Mexico City walking through ancient Aztec ruins and eating squash bottom quesadillas, though not at the same time of course. I didn’t appreciate waiting in line for more than an hour to get through immigration at the Mexico City airport but the US and Mexico haven’t gone borderless yet. They’re both members of the World Trade Organization (WTO) though and that brings us back to the subject of internet gambling.

We started that subject by looking at irregular betting patterns on the August 2nd match between Nikolay Davydenko and Martin Vassallo-Arguello in Sopot, Poland. The bets were laid on Betfair.com, an internet betting exchange based in England. We don’t know whether the match was fixed or not, though no one has come up with a plausible alternative explanation, but we do know that no US based citizens were betting on the match because offshore internet gambling is illegal in the US

It may not be for long. The small Caribbean island of Antigua has lodged a successful complaint with the WTO that could spell the end of the ban on offshore internet gambling.

If a US citizen wants to play fantasy football or bet on horses on a US based internet site, no problem. If a US citizen wants to gamble using an internet site based in Antigua, that’s illegal. In fact, Jay Cohen was sentenced to 21 months in jail for taking bets from US citizens on his Antiguan based site.

The whole point of trade laws is to give trade partners free access to each other’s markets. If the US has a service, then it has to allow its trade partners to offer the same service. The US doesn’t agree in the case of internet gambling but according to this excellent article in the New York Times, the US has run out of appeals in the case. The only thing left is to award damages to Antigua.

And herein lies the problem because Antigua has requested the following damages: it wants the right to ignore US intellectual property laws which means the right to reproduce US movies, books, music and other copyrighted material without having to pay royalties.

Not such a big deal, you say. Antigua’s population is what, about 70,000? True, but what if England did the same thing?

Several British citizens are currently in US custody after being indicted for taking bets from US citizens. They were executives of Betonsports.com, an internet gambling site based in England. If England took a complaint to the WTO and received the right to reproduce US movies and books without paying a dime, that would be a big deal.

Don’t hold your breath. England has been the US’s greatest ally in Iraq – at great political cost to former Prime Minister Tony Blair I might add. And though the new Prime Minister, Gordon Brown, might like to show his independence, he probably won’t go that far.

The potential is there though and lame objections from the US will not hold up. According to the Times article, the US claimed that it shouldn’t be required to allow internet gambling on moral grounds and offered up the example of Muslim countries that ban alcoholic beverages from their trade agreements. That’s pretty laughable considering that gambling is legal in many states in the US and a number of states depend on income from lotteries to help balance their budget.

It might not even take action by another country. US based entertainment conglomerates who want to protect their copyrights might pressure the government to end its ban. And it should end.

On the plane back from Mexico City I talked with a guy who races trucks on the Bonneville Salt Flats. He used to know a guy who had a racing team in NASCAR a number of years ago and race fixing was common back then too.

It’s possible to lay bets on who will be the leader at the end of each lap. The NASCAR guy had two racers who’d qualified in the first row but each driver had taken money from different gamblers to insure that he didn’t finish the first lap in front. Both of them tried to get behind the other driver to make sure they didn’t win the first lap. One of them eventually got on the other guy’s bumper and pushed him to the first lap lead.

Gambling has been around forever and will be around forever. Better to legislate it and reap the financial benefits than to pretend otherwise.

That goes for prostitution too but I might be pushing my luck on that one.

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Read more about gambling and the ATP and the Davydenko vs. Vassallo-Arguello match.