(01-28) 06:03 PST
SCOTT MILLER, The Wall
Jay Cohen, a self-described "nice
Jewish boy," quit his job as an options trader in 1996 and
headed for the Caribbean nation of Antigua and Barbuda to join the
Internet gold rush. Intrigued by the experience of a colleague, who
had collected office wagers on the outcome of the O.J. Simpson
trial, he started an online sports-betting site.
The Long Island native knew the site would
challenge U.S. laws against online gambling, but he was so confident
his foreign-based operation was legal he agreed to turn himself over
to U.S. authorities to prove his case in court.
Mr. Cohen lost, and he is now completing a
21-month prison sentence. But he is also hoping another court will
provide him with a moral victory. This week the World Trade
Organization is hearing arguments in a case brought by Antigua that
charges that the U.S. is violating its global trade agreements by
prohibiting Internet gambling. The WTO decision won't affect Mr.
Cohen's sentence, but he says a ruling favoring Antigua "would
highlight my incarceration for what it is: protectionism, the
jailing of the competition."
The case, to be decided in about a month,
is the first dispute in which a country has tried to apply global
trade laws to the Internet -- forcing the WTO's court to decide
whether services provided on the Web are different from the
traditional forms of those services. The European Union, Japan and
Canada are supporting Antigua's complaint. The court may also weigh
in on other issues, including whether the WTO can, as Antigua
requests, compel the U.S. to change gambling laws that reflect its
A ruling that the U.S. is violating trade
laws in the Internet case would have the same force as the WTO's
decision that U.S. steel tariffs were illegal. That finding
authorized Europe to impose retaliatory tariffs and prompted
President Bush to withdraw the U.S. levies. In this case, allowing
Antigua to slap tariffs on U.S. exports would have virtually no
impact on America's global exports, so the WTO could authorize
Antigua to violate U.S. intellectual property rights by, for
example, legally pirating American music or computer software.
Antigua, though, says it's only interested in opening the U.S.
market for online gambling.
The dispute is shaping up as a classic
David vs. Goliath trade battle. Tiny Antigua, with only 67,000
citizens, can't even afford to maintain an official presence at the
WHO's headquarters in Geneva. "The U.S. was hoping that our
industry would just wither and die or that we would run out of money
or resources," says Antigua's chief foreign affairs
representative, Sir Ronald Sanders. U.S. officials deny they're
unduly delaying the proceedings.
At the heart of the case is whether WTO
rules require the U.S. to allow foreign gambling companies access to
its market. Antigua argues that the U.S. should allow access because
of a 1991 United Nations list of service-sector industries deemed
open to free trade, including recreation and entertainment. By
keeping Antigua out, yet allowing a huge gambling industry of its
own, the U.S. is guilty of discriminating against foreign companies,
the Caribbean nation says.
But the U.S. argues that the WTO's landmark
1995 General Agreement on Trade in Services means the U.S. can keep
foreign gambling establishments out. What's more, the U.S. argues,
there are substantial differences between Web and casino gambling,
including the ability to prevent betting by minors, so it's well
within its rights to prohibit one form of gambling while allowing
In recent years, Web gambling has emerged
as the fastest-growing sector of the gambling industry. According to
Christiansen Capital Advisors LLC, total revenue at Internet
gambling companies world-wide last year was about $6 billion, up
from $651 million in 1998. By contrast, all other forms of betting
have grown slowly to $68.69 billion from $55.06 billion over the
same period. More than 1,000 sites now ply the Web looking for
bettors, and countries including Costa Rica, Panama, Belize and
Australia host Web addresses that target U.S. gamblers. Other
countries in Asia and some in Europe, such as Britain, allow some
forms of Internet betting aimed primarily at their own citizens.
In fact, Sir Ronald and others say it was
advice from the World Bank in the mid-1990s to diversify Antigua's
economy by building up Web-related industries that led the country
to pursue Internet gambling in the first place.
Lawyers following the case say it's hard to
tell which country has the upper hand, with much depending on the
fine points of WTO agreements. Some experts believe Antigua may be
able to demonstrate similarities between Web and casino gambling.
"There is not that much difference between slots that you would
play at a casino or at home," says David Schwartz, coordinator
of the Gaming Studies Research Center at the University of Nevada,
Las Vegas. But others expect the WTO's three-person panel to be
sympathetic toward the U.S. position that it has a right to protect
its citizens from what lawmakers have concluded is a social vice.
Meanwhile, in a federal prison in Nevada,
Mr. Cohen counts down the days. After a short stint in a halfway
house, he figures he'll be free by spring. If the U.S. wins in
Geneva, he'll probably return to his old job as an options trader.
But if Antigua wins, he wants to get back into online gambling.
"I am here for running a legal
business in a foreign country," he writes in response to
written questions. "If the U.S. were to change its laws, I
would go back in a New York minute."