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Against All Odds
The United States imprisoned Jay Cohen for his gambling Web site based in Antigua.
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Back in the States, though, many leaders grew alarmed, citing a risk that computer betting would lure teenagers and fuel gambling addiction. A crackdown ensued. "You can't go offshore and hide. You can't go online and hide," said Janet Reno, the attorney general at the time.
In 1998, federal prosecutors charged several operators, including Cohen, with violating a 1960s-era law forbidding the use of phone wires for gambling. Convinced that the law didn't apply in Antigua, Cohen returned voluntarily to U.S. soil.
"No judge is going to let this stand," he recalled thinking. But a jury convicted him, the judge gave him 21 months, and the Supreme Court refused to hear the appeal.
Out of the blue, not long before Cohen entered prison in Nevada, a strange letter arrived. He has since lost it. The writer suggested that the U.S. government's position left it vulnerable to a trade complaint.
"Is there anything to this?" he asked a lawyer friend.
Turned out there might be: Several years earlier, Washington had pledged in a trade treaty to open the U.S. market in "recreational, cultural and sporting services" to global competition.
Cohen alerted the Antiguans. They hesitated to file a case, citing one of the biggest inequities in the WTO system: a dearth of funds and legal expertise that often shuts out small countries. Antigua's budget is $145 million a year, and a trade case promised to cost at least $1 million.
The gambling industry finally agreed to foot the bill. Antigua filed. "Did we not have a duty to our citizens to protect their jobs?" said Sir Ronald Sanders, who was then Antigua's ambassador to Britain and the WTO.
The United States had a seemingly strong defense -- the need to protect "public morals and public order." WTO member countries can ban goods and services that might harm their social fabric, a classic case being the prohibition of liquor imports in Muslim countries.
"Gambling in general, and remote supply of gambling in particular, raises grave law-enforcement and consumer-protection concerns," the U.S. trade representative's office said in a legal filing. Attorneys for the trade representative declined to make additional public comments.
There was, however, a hole in the U.S. position: The government tolerates Internet betting on horse races and, in some states, lotteries and other games. Numerous U.S. sites, including Youbet.com and Xpressbet.com, let users wager on races from the New Jersey Meadowlands to the Louisiana Downs.
This was blatant hypocrisy, the Antiguans claimed, contending that the U.S. position violated a trade principle called "national treatment." The principle essentially requires a government to treat foreign goods and services the same as domestic ones. To outlaw liquor imports, a Muslim country must ban domestic brewing, too.
