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WTO Ruling on Antigua-Based Web Gambling Sites

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WTO Ruling on Antigua-Based Web Gambling Sites

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WTO Ruling on Antigua-Based Web Gambling Sites

WTO Ruling on Antigua-Based Web Gambling Sites

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A recent World Trade Organization ruling could affect the U.S. government's ability to regulate Internet gambling. The WTO decision may allow law enforcement officials to apply U.S. law on online gambling companies headquartered on the tiny island nation of Antigua. Adam Davidson's reports.

MADELEINE BRAND, host:

This is DAY TO DAY from NPR News. I'm Madeleine Brand.

In the 1959 movie "The Mouse That Roared," the tiny country of Grand Fenwick goes to war with the United States and, to everyone's shock, wins. Well, in real life, something similar actually happened. The Caribbean country Antigua and Barbuda is one of the smallest in the world. Fewer than 70,000 people live there. And this tiny nation took on the United States not in war but in a major trade dispute. Antigua sued the US and won at least a partial victory, and as NPR's Adam Davidson discovered, it all began with a bookie from Long Island.

ADAM DAVIDSON reporting:

Eventually Jay Cohen went to federal prison, but his story starts 10 years ago at the Pacific Stock Exchange in San Francisco, where Cohen was a trader who had never considered opening a gambling business. His friend Steve Schillinger had fun setting up a sports betting scheme for other traders. He'd sell futures on teams so you could buy, say, a New York Yankees contract for a hundred dollars at the beginning of the season. The value of that contract could go up or down depending on how the Yankees were doing, and you could sell the contract at any time or buy more.

Mr. JAY COHEN: I wasn't doing this. I was just watching Steve and it was getting bigger and bigger. I said, `You know, this is getting really interesting. There seems to be a lot of demand for this. We should put this on the Internet.'

DAVIDSON: Soon Cohen and Schillinger were in business together. They talked to some lawyers who said there would be no risk if they set up a gambling company in some other country.

Mr. COHEN: Antigua came across as the place to be. I mean, they had offshore and online gambling regulations set by parliament. It wasn't just some shady backroom deal.

DAVIDSON: They moved to Antigua, set up the World Sports Exchange and started taking bets at the end of 1996. Things went great for a while. They made good money, got a lot of great press. One day, Cohen was talking to a New York Times reporter.

Mr. COHEN: And he called me back about five minutes later to tell me I had been criminally charged in a complaint in the southern district of New York.

DAVIDSON: Cohen decided to fight the case. He moved back to the US and expected quick victory. Two years later, he was convicted of violating the Wire Act for operating an offshore sports book and he was sentenced to 17 months in a federal prison in, of all places, Las Vegas, Nevada.

While he was in prison, "60 Minutes" aired a favorable story about Cohen's case. Cohen got some fan mail, including one letter from a man who made two points. The first was absurd. He wanted to set up a pregnancy due date betting service. The second point he made was that Cohen should get Antigua to sue the US government for violating world trade rules. His argument was this. US law requires all betting to be done in person like at a casino, but there's an exception: horse racing. If the US had outlawed all long-distance gambling, that would be fine according to WTO law, but by allowing some--horse racing--and forbidding others, they are discriminating against foreign casinos which by definition cannot engage in in-person gambling in the US. That means the US is giving preferential treatment to US businesses over foreign ones, and that violates WTO rules. Mark Mendel was Cohen's lawyer.

Mr. MARK MENDEL (Attorney): I don't think anybody other than whoever it was who sent that letter had even--this had even crossed anybody's mind. I mean, there was nothing in the press--you know, there was--we researched it heavily to see if somebody else had--you know, if this idea had even surfaced anywhere. And, you know, it hadn't.

DAVIDSON: Mark Mendel had never practiced trade law. He only had a vague idea of what the World Trade Organization did. He had this strange letter. So what did he do? He decided to convince the Antiguan government to let him take the case. Somehow, Mendel did it, and in 2003, he filed the case at WTO headquarters in Geneva. After the long WTO procedure, Mendel won the case and immediately called Cohen.

Mr. COHEN: I was elated. I mean, I can't tell you. I mean, it was like, you know, finally some vindication. I know history will vindicate me. I know, you know, in 50 or maybe even 10 years they're going to look back at my case and say, `We sent a man for prison for that? What? Are we nuts?'

DAVIDSON: This year, a WTO appellate body altered the ruling. Mendel and Antigua still declare victory, but the spokesman for the US trade representative told NPR that the new ruling has moved things in their favor. Since the WTO ruling is a bit unclear, the US and Antigua are now in negotiations. Jay Cohen is on probation in San Francisco. World Sports Exchange is still thriving in Antigua and on the Internet. Adam Davidson, NPR News.

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