Online Gambling

Antigua vs. Hollywood

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Several weeks ago, I noted on my personal site a nifty little side issue related to the Internet gambling ban. It now looks to be panning out.

While Congress was pushing the gambling ban, which was really aimed at clarifying and strengthening a ban many in the federal government believed already existed, the tiny nation of Antigua was challenging the pre-2006, less clear incarnation of the ban in the WTO. Antigua is home to several Internet gambling companies.

In fact, Antigua had already won. The WTO permits countries to ban goods or services for "moral" reasons, but forbids such prohibitions if they give exemptions to domestic companies to provide the same goods and services. U.S. law—both before and after the Unlawful Internet Gambling Act—does exactly that. And so the WTO ruled in favor of Antigua.

The U.S. decided to simply ignore the WTO's ruling. That means Antigua will be permitted to retaliate. And because a move like slapping tariffs on U.S. goods will hurt Antiguans more than Americans, the plucky little country is considering a far more potent tactic: Ignoring U.S. copyright law. Imagine Antigua as the one-stop spot for knock-off designer fashions, music dowloads, pirated software, and bootlegged movies. Imagine also the delicious spectacle of Microsoft, Hollywood, and and RIAA doing battle with moral blowhards like Sen. John Kyl and Rep. Bob Goodlatte.

But it may not stop with Antigua. The significant new provision in the UIGA is the deputization financial institutions to block transactions between U.S. customers and gaming websites. Depending on how the Justice and Treasury departments write the regulations, that may include s banning all offshore web payment services like Neteller and Firepay. These companies are direct competitors to the U.S.-based service, Paypal, which long ago buckled to regulators and banned its customers to use the service for gaming (which is why Paypal's parent company, eBay, publicly supported the gambling ban). Neteller and Firepay are both traded on the London Stock Exchange.

If the tiny country of Antigua is proving to give the U.S. a major headache in its quest to enforce moral online habits, imgaine what a challenge from Britain or Canada might do.

Cato trade analyst Sallie James has more a more thorough analysis.

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  1. “If the tiny country of Antigua is proving to give the U.S. a major headache in its quest to enforce moral online habits, imgaine what a challenge from Britain or Canada might do.”

    Ahh, no. Canada has learned that it cannot win trade wars with the US, primarily because of the disparity in the sizes of the two economies and the degree to which the Canadian economy is dependent on trade with the US [~60% of the Canadian economy.] So even if a ruling goes in Canada’s favor, Canada can do nothing if the US chooses to ignore it.

    In summary, you’ve got us by the balls.

    [On the other hand, in the context of the recent Softwood Lumber dispute, there was an excellent article in the Economist about a year back – I don’t have a link – discussing how classical economic factors had mitigated the effects on the Canadian side. Essentially, the article showed how marginal producers had been taken out, leaving a larger share for more efficient producers.)

  2. Let’s have a Caribbean darknet!!!

  3. Essentially, the article showed how marginal producers had been taken out, leaving a larger share for more efficient producers.

    Yeah, less competition. That is always healthy./sarc

  4. I’m curious.

    Is Sam the Borat of economics? I mean, his posts on economics are always completely deadpan 100% wrong. Can anyone be so completely wrong all of the time without doing so intentionally?

  5. Sam Franklin

    Point taken. That’s the problem with trying to summarize.

    The point of the article was that the US softwood producers were benefiting less than they expected from the tariffs they supported, not that some Canadian producers also benefited.

    I should have made that clearer. As your comment implies, it does not excuse what was done to the marginal Canadian producers.

  6. “The U.S. decided to simply ignore the WTO’s ruling.”

    Again?

    Paging Senator Smoot…

  7. Finally, those Caribbean data havens from ISLANDS IN THE NET are coming to be.

    I now patiently await the fulfillment of NEUROMANCER’s “rastafarians in space tugboats” vision of space travel.

  8. Those industry roll-ups is good billables, ain’t they RCD!

  9. This is one crazy ass story that has way more to it then I ever imagined.

  10. This is a very interesting topic (thanks Radley). The U.S. has been able to wield considerable power worldwide through its influence, if not outright control, over the international financial system. This “tool” should be used sparingly, however (such as against the North Koreans, or drug cartels), or else the rest of the world will become motivated to come up with “work arounds”.

  11. This article cheered me up after the death of Milton Friedman….I think England would be more likely to make a case about the Internet gambling ban (which no matter how the regulations end up being written, will be largely unenforceable and almost totally irrelevant)since they’ve got a little more economic weight behind them with the EU. Antigua is great because the really don’t give a sh*t what the US thinks and really doesn’t have much to lose from extending the metaphorical middle finger. I’d love to see the movie studios trying to make a case for a naval blockade or pre-emptive military strike against a Caribbean banana republic over the issue of pirated DVD’s…

  12. This “tool” should be used sparingly, however (such as against the North Koreans, or drug cartels), or else the rest of the world will become motivated to come up with “work arounds

    I’m a professional sports handicapper and am very well acquainted with many of the management and ownership of some of the bigger offshore sportsbooks. They’ve already got so many “work arounds” ready to subvert any legislation that they’re actually *hoping* they get to use it. One sportsbook principle compared what the US government is trying to as “Wile E. Coyote trying to stop the Roadrunner, and we’re the Roadrunner”

  13. Grenada?

  14. The hit song from South Park II: “Blame Antigua! Blame Antigua!”

  15. I’d love to see the movie studios trying to make a case for a naval blockade or pre-emptive military strike against a Caribbean banana republic over the issue of pirated DVD’s

    If there is a Clinton presidency in 2009, they just might get it.

  16. The significant new provision in the UIGA is the deputization financial institutions to block transactions between U.S. customers and gaming websites.

    Deputize? No sir, fucking require. It’s not like financial institutions want to do that kind of crap. They require that we do it, then they make us pay for it, then they fine us if we don’t comply. Then our shareholders take it in the ass because expenses are up and we’ve got to cut back on dividends.

  17. So Antigua is to become the true Pirate of the Caribbean?

  18. Why stop at copyright? Why not other forms of intellectual property? Could the UK invalidate a few select US drug patents and permit their pharmaceutical companies to start pumping out cheap generic versions?

    Antigua’s solution is really ingenious. Barring any tit-for-tat response from the US, it doesn’t negatively affect their citizens (whereas a tariff would obviously cause prices to rise).

  19. Is Sam the Borat of economics?

    RC, you are awesome!

    Sam: Economic musings of troll for make benefit glorious monopsony of voices in head

  20. I don’t get it. Does Borat say that less competition leads to more efficient markets?

  21. Lamar

    I think part of RC & thoreau’s comments are directed at Sam’s sarcastic response to my initial post, which COULD be read to mean that less competition was a benefit.

    However, I have noticed some of Sam’s posts on other threads have not agreed with what I learned in Econ 101, to put it mildly.

  22. Sam has said that corn subsidies are private property, or something, and therefore property is theft.

  23. Um …. the purpose, the very purpose of market competition is to reduce the number of not-so-good producers, and leave the better-producers standing.

    BONK BONK ON THE HEAD!

    As long as more competitors are not barred from entering the market if the better-producers should falter, you end up with an increasing proportion of good-producers, whether or not the total number of producers increases or decreases.

    BONK BONK ON THE HEAD!

    There is no benefit to keeping the number of competing producers in a market constant, if it means preserving the shitty producers along with the best ones.

    BONK BONK ON THE HEAD!

    The bonks are presented to you by Market Economics 101. Take one if you need one.

  24. “The bonks” = “These bonks”

  25. “Sam has said that corn subsidies are private property, or something, and therefore property is theft.”

    Omigod, Thoreau, I think I just dumped. That is brilliant. It’s like saying, “My nemisis runs a limited liability company, so I went out and bought an extra liability company.” Thank You, New York! I’ll be here all week.

    Stevo Darkly: The competition was driven out by exogenous circumstances rather than by normal competition, though I guess that doesn’t really much matter.

  26. Here is what Milton Friedman said about antitrust in 1999:

    My own views about the antitrust laws have changed greatly over time. When I started in this business, as a believer in competition, I was a great supporter of antitrust laws; I thought enforcing them was one of the few desirable things that the government could do to promote more competition. But as I watched what actually happened, I saw that, instead of promoting competition, antitrust laws tended to do exactly the opposite, because they tended, like so many government activities, to be taken over by the people they were supposed to regulate and control. And so over time I have gradually come to the conclusion that antitrust laws do far more harm than good and that we would be better off if we didn’t have them at all, if we could get rid of them. But we do have them.

    Obviously this respected late economist initially agreed with me and came to change his mind. The point is we are not talking economics 101 here and there is some reasonable basis for believing that antitrust laws are needed or else Milton Friedman never would haveagreed with me on this. Personally, I think Friedman, PL and RCD are stuck in 1982, and what was good then isn’t good now. Anyone who thinks these issues are simple and selfevident is just a retard though.

  27. Before you get carried away with Doctor T.’s little joke, what I said was that corn subsidies translate into money and money is a form of property. That is a bit subtle for young Alex and he apparently doesn’t get it.

  28. When a serious scholar rejects my viewpoint after years of serious study, that means I’m right.

    Or something.

  29. And I would like to emphasize this portion of Friedman’s remarks:

    I thought enforcing [antitrust law] was one of the few desirable things that the government could do to promote more competition.

    When I repeatedly separate antitrust regulations as being different in kind from other business regulations, all I am doing is channeling “Milton Classic” (although I did not get this idea directly from him).

  30. and to get further into where Milton changed his stripes, he says:

    antitrust laws tended to do exactly the opposite, because they tended, like so many government activities, to be taken over by the people they were supposed to regulate and control.

    That may have been true in 1980. It probably was true in 1980. I believe that there are other answers to this problem than chucking the concept of antitrust. Probably the best way would be to “privatize” the prosecutorial function by taking it away from the DoJ and handing it to the private sector more.

  31. If you just ignore the farceswannamo guy maybe he’ll go away like the centerforadvancedsarcasm guy.

    Or am I so clueless that it’s already been shown that they’re the same guy?

  32. Self-identifying libertarian Richard Posner speaks on antitrust in the pages of Reason magazine:

    Reason: What is an example of a good antitrust action?

    Posner: The core of antitrust is forbidding cartels and their informal counterparts, the price-fixing conspiracies, and preventing mergers that either create a monopoly or that so concentrate a market that they facilitate price fixing in a form difficult to deal with directly. That is the core. In the controversial area, there are the alleged exclusionary practices: tie-ins, predatory pricing, bundling, vertical integration, exclusive dealing, full line forcing, price discrimination, predatory advertising–all sorts of things, an endless list. Very controversial. There is unquestionably a sum of these shenanigans that is a proper concern of antitrust. It seems there are a lot of cases that don’t make any sense at all. On the other hand, there are some cases where the defendant is a monopolist and, in rational self-interest, is engaging in a practice that could exclude equally or more efficient competitors.

  33. Or am I so clueless that it’s already been shown that they’re the same guy?

    Sadly, no. There definitely are two of them. 🙁

  34. Ryo: I like the idea there. If a country goes against its treaty obligations, the punishment ought to be to remove the protection of other treaties. That’s about the only enforceable penalty that can actually hurt any sovereign nation–and the stronger the nation, the more likely it’ll benefit from the protection of various suitable treaties.

    Maybe the British can arrest some American gun manufacturer who stops over in London in revenge for the gambling arrests.

  35. Posner may be a self-identifying libertarian, but merely listing the points of antitrust law he accepts without including any of his underlying reasoning isn’t convincing. It’s just an argument from authority.

    My libertarian form of an anti-competition code would be based on attacking those barriers to entry erected via force or fraud. Anything else would be kosher. The world’s worst cartels are tools of governments.

    Kevin

  36. For posterity’s sake, let’s hope that Antigua follows the US example of international threats. Threaten that the US is not in compliance. Make their case. Threaten force. Slowly use force. Then full invasion.

    The extent of the copyright thing is enormous: from Mickey Mouse to drug patents, Antigua could feed the world with legal knockoffs.

  37. For posterity’s sake, let’s hope that Antigua follows the US example of international threats. Threaten that the US is not in compliance. Make their case. Threaten force. Slowly use force. Then full invasion.

    You forgot the part where they learn after the invasion that their case was based on shoddy intelligence…..

  38. Or something.

    To put it in terms you can understand: Uncle Miltie was for antitrust before he was against it.

  39. Posner may be a self-identifying libertarian, but merely listing the points of antitrust law he accepts without including any of his underlying reasoning isn’t convincing. It’s just an argument from authority.

    What it means is that the tent is big enough to include Sam Franklin.

  40. Sam, I think you misunderstand the “big tent” metaphor. The classic version of it is:

    Better to have [Sam] inside the tent pissing out, than outside the tent pissing.

    If you want to stay in the tent, don’t piss in the tent.

  41. Appellate Judge Posner wasn’t pissing; young Milton wasn’t pissing and I am not pissing. That is where your claim . . . falls to the ground.

  42. Imagine Antigua as the one-stop spot for knock-off designer fashions, music dowloads, pirated software, and bootlegged movies. Imagine also the delicious spectacle of Microsoft
    http://www.mirei.com

  43. He he he lols. Are u a nit. People are so crazy i don’t believe. Why one can give a thought to such things well what if i post an article saying some bla bla bla.. will people start following that too.

  44. He he he lols. Are u a nit. People are so crazy i don’t believe. Why one can give a thought to such things well what if i post an article saying some bla bla bla.. will people start following that too.
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  45. These companies are direct competitors to the U.S.-based service, Paypal. But problem there is not support in bangladesh.i want this bank..
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  46. You know what would straighten out these murderous raping elephants? Five minutes with Chuck Norris.
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