Protection of Account Betting an Industry Priority

The Thoroughbred industry is lining up legal assistance in its effort to understand the ramifications of a World Trade Organization Appellate Body ruling that calls into question the fairness of the Interstate Horseracing Act of 1978.

The appellate body, in its decision concerning a position by Antigua that a United States ban on Internet gambling is inconsistent with U.S. trade obligations, upheld the U.S. protections. But it also noted inconsistencies in the IHA, which outlines parameters for the transmission of signals and allows for Internet pari-mutuel wagering.

The WTO adopted the appellate body ruling April 22. The U.S. now has 30 days to respond. After that, it could take the U.S. up to 15 months to comply with the ruling.

"We are currently interviewing a number of law firms that specialize in trade negotiations," said Greg Avioli, executive vice president of legislative and corporate planning for the National Thoroughbred Racing Association. "There are a number of alternatives the U.S. Trade Representative could take, one of which is the most troubling: Amend the IHA or pass a new criminal law superseding the current language in the IHA and prohibiting Internet betting on racing."

Industry officials argue pari-mutuel wagering is international and about to grow because of elimination of the 30% withholding tax on winnings on bets made by foreigners on U.S. races. Avioli said the NTRA believes it's appropriate to discuss "current business transactions" in the Thoroughbred industry that are international in nature.

The NTRA, American Horse Council, and others have regularly fought to protect exemptions for pari-mutuel wagering. The Justice Department maintained the IHA didn't authorize Internet wagering, so the industry was able to win passage of a federal statute to address that position.

"We're very confident in our current legal analysis that it does in fact allow (Internet wagering)," Avioli said of the IHA.

The WTO appellate ruling comes as Congress is preparing to take another crack at Internet gambling legislation.

"The industry has always been able to maintain the necessary protections," said the Alpine Group's Greg Means, chief lobbyist for the NTRA. "Because of the international nature of the (WTO), it adds potentially a layer of complexity. We're working on getting our hands around it politically, but it could be a challenge behind the backdrop of legislation to curb Internet gambling."

Beulah Park owner Charlie Ruma, who also operates the AmericaTAB account wagering service, called the WTO ruling a "confusing decision" and said industry officials must make their case to protect legal forms of wagering.

"How many people in the country are betting their dollars on poker with Internet betting companies that are all offshore?" Ruma said. "Are you going to keep American citizens from wagering? I don't think so. It'll never stop. If it stops in the U.S., companies like mine will go outside the U.S."

Ruma said AmericaTAB, an umbrella company with online wagering affiliates, expects to handle about $200 million this year. He said the regulated business and others like it should be protected.

In 2004, AmericaTAB and four other companies that hub through Oregon handled a combined $833 million. Other services hub through other states. Based on estimates, total account-betting handle on Thoroughbred racing through regulated services is about $3.2 billion, or more than 20% of annual handle.

"U.S. racetracks want to know they're doing business with companies regulated in the U.S.," Ruma said. "I think it's really a longshot to say account wagering in the U.S. would go away."