SOURCE: Bloomberg

The U.S. ignored a ruling that found it discriminates against foreign gambling companies by banning payments to gaming Web sites while allowing bets on its own soil, the World Trade Organization's highest judges said.

PartyGaming Plc shares jumped as much as 16 percent after the decision. Shares of SportingBet Plc, which said this week it plans to transfer its London offices to the Channel Islands because of U.K. regulation, climbed as much as 4.2 percent.

Antigua and Barbuda, a Caribbean nation of 80,000 people, challenged Bush administration efforts to close the estimated $12 billion global business to U.S. residents, who account for half of the market. The U.S. banned credit card companies from processing payments to betting sites such as SportingBet, Leisure & Gaming Plc, PartyGaming and Empire Online Ltd., which then ceased U.S. operations or sold them for nominal amounts.

Today's ruling ``offers hope to the global online gambling industry currently under siege by the U.S. Department of Justice,'' Antiguan Finance Minister Errol Cort said in an e- mailed statement. ``It vindicates all that we have been saying for years about the discriminatory trade practices of the United States.''

Appeal Rejected

Antigua, the smallest government ever to lodge a WTO complaint, scored an initial victory against U.S. online gambling restrictions when the WTO found in April 2005 that the U.S. had pledged to open the industry to competition 10 years earlier. Today's ruling rejects a U.S. appeal against that.

The U.S. agreed that today's ruling finds it failed to comply with the two-year old decision.

Still, the U.S. says the report allows it to maintain a ban on Internet gambling to ``protect public order and public morals'' as long as it doesn't discriminate against foreign companies, Gretchen Hamel, a spokeswoman for the U.S. Trade Representative's office in Washington, said in an e-mailed statement. ``We are currently reviewing our options,'' Hamel said.

The U.S. has argued that the prohibitions pre-dating the October law apply to both foreign and American betting services, and the WTO's decision only applies to gambling on horseracing, which is allowed to discriminate against foreign companies.

Ambiguity Remained

The U.S. ``had an opportunity to remove the ambiguity'' between legalized betting on horse racing across state borders and bans on other forms of gambling, the WTO judges wrote in today's 41-page decision. ``Instead, rather than take that opportunity, the U.S. enacted legislation that confirmed that the ambiguity at the heart of this dispute remains,'' today's report concludes.

The U.S. says that its latest law isn't covered by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was an oversight by the Clinton administration.

Income for the 32 registered online casinos in Antigua and Barbuda has fallen to $130 million a year from $1 billion in 2000, the Antiguan government says. The country developed online gambling to boost a tourism-dependent economy after several hurricanes in the 1990s.

Antigua successfully argued in its complaint that the U.S. protects a domestic gambling industry while failing to live up to its international commitments.

Credit Card Ban

Charlie McCreevy, commissioner for the European Union's internal market, labeled the U.S. law ``a protectionist measure'' on Jan. 30, saying the EU should complain to the U.S. after Congress passed the legislation barring credit card companies from processing payments. President George W. Bush signed the measure into law on Oct. 13.

At the time, U.K. Culture Secretary Tessa Jowell compared the U.S. law to the American alcohol ban of the 1920s, saying the measure may force online gambling underground into an unregulated black market.

``This is a smashing success for Antigua in every possible way,'' John Ashe, the Caribbean island nation's ambassador to the WTO in Geneva, said in a statement. The ruling clears up ``any lingering doubt that Antigua has obtained a clear and convincing win over the United States and it is now time for the United States to meet its international trade obligations.''

Antigua may seek sanctions in the form of withdrawing intellectual property protection for U.S. trademarks or copyright. Known as ``cross-retaliation,'' such sanctions are legal at the WTO when an economy can't afford to impose sanctions in the form of higher customs duties on goods.