Deseret News (Salt Lake City): Is gambling Utah-bound?

WASHINGTON -- Utah politicos have long been proud of the fact the state has no legal gambling of any kind -- one of only two states in the country that can say so.

But those days could come to an end. A ruling in a legal dispute between the United States and the tiny island nation of Antigua could ultimately result in legalized Internet gambling in the Beehive State.

Racetracks and even casinos would likely not be far behind if the decision, expected in the next two weeks by the World Trade Organization, goes against the United States and if gaming companies decide to push the limits of free-trade agreements.

The state could do little, if anything, to stop them.

"That is a possibility," said Robert Stumberg, a professor at Georgetown University Law Center, "unless the United States renegotiates its present trade commitments on recreation and gambling services."

Antigua, which has replaced its sugar and banana economy with Internet gambling targeted primarily at Americans, complained to the WTO that the Americans were violating a 1993 trade agreement when the United States tried to stop Antigua from offering Internet gambling to American citizens. The trade agreement, signed by the United States, involved cross-border supply of gambling and betting services.

A WTO dispute panel ruled this past November that the United States was in violation of its international trade obligations. In other words, Antigua can't be stopped by the United States.

The WTO decision, in general terms, means that laws used by particular states to limit or forbid gambling are considered by the dispute panel as a violation of "market access" principles of the WTO's General Agreement on Trade in Services (GATS).

The U.S. appealed, and a ruling is expected by April 7.

"In trade-speak, Utah's prohibition amounts to the use of a zero- quota on the supply of Internet gambling services, and that's a violation of market access," said Peter Riggs, director of the Forum on Democracy and Trade.

If the WTO rules that the United States is seen as having a made a commitment on gambling, Riggs said, another part of the GATS agreement indicates the United States also made commitments to a "commercial presence."

"It's that commercial presence category which would allow foreign gambling companies to argue that they have a right to establish casinos, " Riggs said.

Rep. Sheryl Allen, R-Bountiful, has been watching what is commonly called the "Antigua case" in her role as chairwoman of the Committee on Economic Development and International Trade for the National Conference of State Legislators. She believes it has "very serious" ramifications not only for Utah's historic battle to keep gaming out but for the state to determine its own destiny.

"This is a states' rights issue, not a moral one," Allen said. "I am a states' rights advocate, and I am really concerned about ability of states to regulate things. It has far-reaching implications."

Allen agrees with the legal assessment that if the WTO appeal goes against the United States, it could ultimately result in full- blown gambling in Utah, although that is a worst-case scenario and probably down the road.

A negative ruling could mean that foreign companies would be entitled under international treaty to start gambling businesses in the United States. A refusal by the United States or any state could result in trade sanctions against the nation generally or against any state that ignored the WTO ruling, legal experts say.

To avoid sanctions, the federal government could be forced to supersede state law.

Rep. Chris Cannon, R-Utah, isn't too worried about that happening, calling the threat of sanctions a "toothless tiger." Any sanctions would likely involve higher tariffs on U.S. products, which is something that other nations, particularly those in the Caribbean, are not willing to do.

While trade sanctions by Antigua would not hurt the Utah or national economy, it is probable that many other nations, some of them economically powerful, would join in on the sanctions. The two countries with the biggest gambling investments are Great Britain and Australia -- critical U.S. trade partners.

So far, the WTO challenge relates only to Internet gambling, and no international gaming company has filed a challenge against U.S. trade policy to open a bricks-and-mortar casino in Utah or anywhere else it is not allowed.

But Allen believes it is only a matter of time and that for every creative move the state makes to block it, attorneys will try to figure out ways around it.

The core issue, she said, is not gambling but trade agreements and the failure of U.S. trade negotiators to recognize individual state rights and values.

"In the future, trade negotiations might not only force us to accept gambling but take away our regulatory authority over utilities and, on the extreme, take away the authority of local governments over zoning," she said.

That is why it is so critical, she said, that trade negotiators involve state lawmakers and attorneys general in international trade decisions.

And that's exactly why the United States is in the Internet gaming pickle with Antigua.

The WTO ruling, "in other words, says you'll just have to live with the consequences of what some would argue was sloppy drafting by the United States during the GATS negotiating process," Riggs said.

Riggs also sees the issue in terms of state rights, and the failure of trade negotiators to recognize differences between the states on attitudes toward gambling.

Antigua argued convincingly that the United States really couldn't claim a moral aversion to gambling because 48 out of 50 states allow some forms of legalized gambling, Riggs said. Furthermore, some states have made it legal to bet on horse races and to buy lottery tickets over the Internet.

"Antigua's argument starkly reveals why this WTO case is a state's rights issue," he said. "It argued public morals on a national level, brushing aside any argument regarding the rights of states under the U.S. federal system to regulate gambling in the interest of public morality."

People involved in researching the dispute find it ironic that Antigua, a small country with only 70,000 residents, had an economy based entirely on sugar and bananas.

But a WTO decision favoring the United States devastated Antigua's banana industry; at the same time sugar prices plummeted, leaving the country looking for economic diversification. And now Antigua is poised to wreak a different kind of havoc on national gaming laws.

E-mail: spang@desnews.com