#272 - Adventures in the Law, Part VII - Charming Betsy and the Future of Online Poker

Charming Betsy? It sounds that would come out of Eddie Haskel’s mouth in the old LEAVE IT TO BEAVER reruns. It’s actually a legal doctrine that has drawn together a famous law professor, a series of international treaties, and a bid to save online gambling.

I’m getting my information on this from the BetOnSports case. BetOnSports was an online sportsbook founded by Gary Stephen Kaplan. The U.S. government went after the company, Kaplan (the founder), Carruthers (the CEO), and several others affiliated with the business, which was based in Antigua and then Costa Rica. The government has settled civilly and criminally with the company, which put it out of business. Kaplan and other individual defendants are still fighting, and have retained Alan Dershowitz as one of their lawyers.

Dershowitz, a Harvard Law Professor and author of several best-selling books about the legal system, is one of the best-known defenders of both civil liberties and high-profile defendants. His clients have included O.J. Simpson, Claus von Bulow, Mike Milken, Leona Helmsley, John DeLorean, Patty Hearst, and Harry Reems. His office number is 617-496-2187. Not a bad thing to keep handy, along with your passport, in case you ever get into some really bad trouble.

So Dershowitz and the other lawyers filed a motion to dismiss the case against the defendants using a legal theory known as the Charming Betsy Doctrine. The rule, which gives international treaties the same force of law as other laws passed by Congress, comes from the 1804 case of Murray v. The Schooner Charming Betsy. Supreme Court Chief Justice John Marshall, writing the opinion for the Court, said “an act of congress ought never to be construed to violate the laws of nations if any other possible construction remains.” The Third Restatement of Foreign Relations Law of the United States (the Restatements are like SUPER/SYSTEM or the STRATEGY GUIDE for lawyers, an attempt of a group of heavyweights in the field to distill and summarize the law) summarized Charming Betsy as follows: “If a domestic law of the United States may be interpreted either in a manner consistent with international law or in a manner that is in conflict with international law, a court in the United States will interpret it in a manner that is consistent with international law.”

It makes sense, doesn’t it? Most people not involved in international law or business don’t have a lot of experience with treaties, but they are ratified by Congress and have the same force of law. Some have more force than others because some treaties are specific, some are general, some merely set out generally agreed principles, some come without enforcement mechanisms so each country has to make its own judgment about whether it’s in compliance, etc.

But they are laws.

Dershowitz’s argument on behalf of the defendants is that the Wire Act and other laws forming the basis for the government’s case, in their application against internet services offered in foreign countries and accessible by U.S. residents, is inconsistent with a treaty the U.S. agreed to (and in some instances benefits from by enforcing AGAINST OTHER COUNTRIES), the General Agreement on Trade Services (GATS). The treaty, which was negotiated in 1994 and ratified by Congress in the Uruguay Round Agreements Act, limits restrictions on the supply of services from one treaty member to another. This treaty happens to be very specific in its enforcement mechanisms, so it’s not “advisory” or “self-executing” - the government can’t ignore it just because it doesn’t feel like following it.

Under the dispute resolution system set up for GATS, the World Trade Organization panels have ruled repeatedly against the United States regarding its restrictions on internet gambling provided by Antiguan businesses. Antigua has based a fair amount of its economy on the provision of consumer internet services - a lot of it online gambling - to customers around the world. The WTO ruled against the U.S. and gave it a year to comply. Antigua brought another action claiming the U.S. didn’t change its laws - including laws like the Wire Act that keep Antigua-based businesses from offering their internet gambling services to U.S. customers - and won that as well. The U.S. is out of appeals.

It would seem like the Wire Act, which pretty clearly concerns sports betting, is being interpreted inconsistently with the U.S.’s treaty obligations if it is being applied against an Antiguan or Costa Rican internet service provider. This isn’t to say that the existence of the treaty means the Wire Act (which was passed back in 1961) is somehow repealed - though the same legislative body, the U.S. Congress, that passed the Wire Act in 1961 ratified a treaty in 1994 that (based on the full record of the dispute resolution system) allowed signatories to GATS to offer internet gambling services in the United States.

The defendants’ brief in the Kaplan case does not say the Wire Act gets thrown out. Applying Charming Betsy, the Act has to be interpreted consistently with our international treaty obligations. The Wire Act (and the other laws alleged to have been violated) does not by its terms say it applies to foreign companies offering an opportunity to bet on sports in accordance with foreign laws. The Act was passed to thwart organized crime, which had a hold on sports betting throughout the country. The law can still be interpreted to keep me (with or without some mobster buddies) from setting up a sports book in Scottsdale and having people phone in bets from around the country (or e-mail me their bets using the internet).

But consistent with our international treaties and the rules of construction that have been around for over 200 years, those laws can’t be applied in a way inconsistent with GATS. Therefore, the Wire Act and the other laws CANNOT be interpreted as applying to foreign companies offering services to U.S. citizens.

The Magistrate in the case asked for briefs on this issue. That doesn’t mean the court is predisposed to grant the defendants’ motion, but it probably means the Mag. won’t say, “Treaty? What’s all this treaty business?” If the court concludes that Charming Betsy prevents the U.S. from using its laws in a way that contravenes GATS (which the WTO has already clearly and conclusively determined it has done, and our government has no recourse but to accept that conclusion), it would be a stunning victory for these defendants, who had their business taken away and turned against them (the plea agreement with the corporation requires it to cooperate in the case against the individual defendants).

If that happens, it will also likely be a big victory for online poker.