SOURCE: courier-journal.com

The United States has decided to withdraw gambling services from a global trade agreement, potentially resolving a dispute that clouded the legality of online betting on horse races in the United States.

The Caribbean nation of Antigua and Barbuda filed a complaint four years ago with the World Trade Organization claiming that U.S. law banning most online gambling -- but exempting horse racing -- violated trade rules. The WTO sided with Antigua.

But the issue appears to be moot, the National Thoroughbred Racing Association said, after the U.S. Trade Representative's office announced that it is changing its commitments in the agreement to remove one requiring foreign gambling providers to be given equal access to the U.S. market.

The change means that the United States can continue its efforts to block off-shore gambling companies from conducting business in this country. It does not necessarily have any impact on a U.S. company's desire to conduct gambling in other countries, as Churchill Downs Inc. Chief Executive Bob Evans has suggested the Louisville-based company may want to do eventually.

No other country had included gambling in the agreement, said Alex Waldrop, president and CEO of the thoroughbred racing association.

"It's a very practical solution to what was becoming a difficult problem …," Waldrop said.

Major racetrack operators like Churchill Downs and Ontario-based Magna Entertainment Corp. have had warnings on financial statements saying they couldn't predict the impact of unfavorable WTO rulings on their business. A recent Churchill statement said its business could be hurt if the government elected to restrict online horse wagering as a result of the WTO decision.

A Churchill spokeswoman said the company would defer any comment to the thoroughbred racing association.

Gambling services were included by the United States in the trade agreement during the Clinton administration as part of the 1994 General Agreement on Trade in Services treaty. U.S. officials have argued that gambling was never intended to be part of the treaty, but was interpreted as being included under "recreational services."

Juan Millan, a U.S. trade lawyer, told the Geneva-based trade body that the "modification will ensure ... the original U.S. intent of excluding gambling from the scope of U.S. commitments," he said.

Internet horse betting is an outgrowth of the Interstate Horseracing Act of 1978 that allowed interstate simulcast wagering. An amendment in 2000 allowed Internet wagering.

U.S. law bans most other Internet wagering, and the Justice Department argues that the overall ban on Internet wagering trumps the horse-racing exemption. The department has not, however, prosecuted horse betting as a matter of course.

Antigua seized on the exemption in bringing the issue before the WTO, seeking access to U.S. gamblers. The WTO agreed with Antigua that the United States' horse-racing exemption violated requirements that trade guidelines be applied consistently. U.S. law discriminated between off- and on-shore Internet wagering operators because it allowed Internet betting domestically on horse races, the WTO ruled.

On Tuesday, a WTO dispute board adopted the decision of an arbitration panel. The decision helps give Antigua the right to be compensated by the United States. The United States declined to challenge Tuesday's ruling, because it says that its legal maneuver effectively ends the case.

Trying to protect its right, Antigua is asking other countries to join it. Antigua also has threatened to target American trademarks, copyrights and telecommunications companies.

The former British colony in the Caribbean has been promoting electronic commerce as a way to end the country's reliance on tourism, which was hurt by a series of hurricanes in the late 1990s.

The European Union has stressed that it would act in support of its interests -- a reference to the British-based companies that lost millions of dollars because of U.S. gambling restrictions.

The Associated Press contributed to this report.