Tiny Antigua Battles U.S. over Internet Gambling

ST. JOHN'S, Antigua and Barbuda — Pat Campbell was fresh out of high school with good grades when an Internet gambling firm offered her a job with an unexpectedly attractive salary.

"They were offering over $1,000 U.S. per month, and that was entry-level," said Campbell, 30, who wound up turning down the offer to pursue her studies and a career in journalism instead. "For a job without a college degree, that's very good money on Antigua."

A dozen years later, Campbell is glad she didn't take the job. After a boom in the late 1990s that saw more 100 Internet gambling firms create about 3,000 jobs on this eastern Caribbean island, a crackdown by authorities in the United States — the world's largest market for gambling — led to severe cutbacks.

Tiny Antigua and Barbuda — population 70,000 — battled back by filing a case against the United States with the World Trade Organization, sparking a David-vs.-Goliath conflict that has put a global spotlight on the explosive issue of wagering via the Internet.

U.S. lawmakers opposed to Internet gambling liken the industry to crack cocaine, warning that online wagering opens an unfettered avenue to addictive-prone gamblers. They are especially worried that computer-savvy kids might filch a parent's credit card, jump on a wagering site and lose thousands before Mom and Dad ever find out.

Congress outlawed Internet gambling in a bill signed by President Bush last year, sending shockwaves through a fast-growing industry that takes in an estimated $12 billion a year.

Even though Internet gambling remains legal across much of the globe, stock prices of European firms that offer online wagering plunged. Meanwhile, U.S. authorities stepped up their crackdown by arresting directors of the firms who crossed American soil.

On Antigua, where authorities turned to financial services and Internet gaming in the 1990s to diversify their economy after hurricanes devastated the tourism industry, the U.S. crackdown has been a stinging blow.

Employment in the sector — once 10 percent of all jobs on the island — has dropped by 80 percent to about 600, while the number of Internet gambling firms has dwindled to fewer than 40. Since 1999, revenues for the firms plummeted from nearly $1 billion to about $130 million, while license fees paid to the government fell from $90 million to $20 million.

"There's no other sector here that can absorb these workers," said Kaye McDonald, director of gaming for Antigua and Barbuda's Financial Services Regulatory Commission. "With the amount of Americans who continue to gamble, prohibition really doesn't work. We have adopted stringent regulations to protect the players, and that seems to me a better approach."

Antigua won its dispute with the United States before the WTO, which ruled that America violated the international trade body's rules by blocking the island's access to U.S. gamers. Instead of complying, American officials stunned many observers by announcing they would rewrite U.S. commitments to WTO agreements.

Antigua has responded with the only weapon allowed under WTO auspices, laying a claim for $3.4 billion in sanctions against the United States. While some doubt the tiny island has the clout to enforce the sanctions, other nations — including some from Europe — have lined up with claims, saying they have also been unfairly blocked from the U.S. market.

Antigua's lawyer, Mark Mendel, says the dispute with the United States has been "maddening" because so many forms of gambling — from horse tracks to Indian casinos and state-run lotteries — are allowed in America.

"The U.S. position has been completely hypocritical," he said. "I've seen one study that says no U.S. citizen lives more than two hours drive from a casino."

Mendel also points to a recent study showing Internet gambling is no more addictive than other forms of wagering.

Christine Reilly, executive director of Harvard's Institute for Research on Pathological Gambling and Related Disorders, said the study found that only 1 percent of several hundred European Internet gamblers suffered excessive losses.

"It's just a beginning, but right now it really doesn't seem more dangerous than other forms of gambling," she said. "But more research is needed. Any new technology makes people nervous."

American gambling firms, meanwhile, have been cautious on the emotional issue of wagering over the Internet. While limited online gambling is allowed within state boundaries in some places in the United States, the American Gaming Association has called for more study.

"We feel there's a vacuum of knowledge," said Holly Thomsen, a spokesman for the group, which represents the major U.S. gaming firms. "We need a thorough study looking at all the issues to see how best to protect children and problem gamblers and to see if it can be effectively regulated."

Rep. Barney Frank, D-Mass., has introduced a bill to make some forms of Internet gambling legal, but so far the measure is only in the hearings stage.

American officials have had little comment on the WTO dispute with Antigua.

Juan Millan, one U.S. trade lawyer, told reporters the U.S. decision to rewrite its WTO commitments instead of complying with the ruling "will ensure ... the original U.S. intent of excluding gambling from the scope of U.S. commitments."

Rewriting those commitments could take years, during which nations like Antigua will continue pursuing sanctions against the United States. The eventual outcome of the dispute is unclear.

For Antiguan officials, the U.S. attitude has been frustrating. Antigua worked closely with American officials to set up their regulatory system, and the island has steadily tightened its rules, requiring extensive reporting and transparency to guard against fraud or money-laundering. The gaming firms must also take steps to ensure that underage gamblers are blocked from using their sites.

"We want Antigua to be the place of choice for people who want to gamble over the Internet," said McDonald. "Our regulations allow no exceptions. Our operators have to present their internal controls for review every year. We are determined to protect the players."