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British dependency eyes online U.S. bets

The Isle of Man, a British dependency in the Irish Sea, is reversing a 4-year-old policy that has deterred Internet casinos based there from accepting bets from U.S. residents.

The policy change, while affecting only a handful of Internet casinos, adds a wrinkle to an emerging trade battle between the United States and many other countries over Internet gambling.

Federal prosecutors maintain that U.S. laws prohibit online gambling.

And they have tried to curb the growing popularity of such gambling in the United States by threatening legal action against U.S. companies that do business with overseas Internet casinos, whose operations fall outside their jurisdiction. A number of U.S. banks do not allow the use of their credit cards for Internet gambling.

But despite the prohibitions, Americans still place more wagers online annually than residents of any other country. Internet casinos around the world and the jurisdictions that license them are eager for this business.

The Isle of Man makes domestic laws and relies on Britain for defense and foreign policy. Its decision to allow Internet casinos licensed there to take bets from Americans took effect Jan. 1.

The change is significant because the island, which began licensing such casinos in 2001, initially sought to attract blue-chip gambling operations by defining itself as a place with rigorous regulation.

That policy seemed to pay off at first, when some of the world's largest gambling operations, including MGM Mirage, purchased expensive licenses to operate there.

But business did not become as brisk as expected, and six major casinos, including MGM, relocated or closed their Internet operations altogether.

In December, the island's Council of Ministers, roughly equivalent to a Cabinet, voted to reverse the policy against accepting bets from the United States. Tim Craine, head of electronic business for the Isle of Man, said officials felt the change would help attract new casinos _ and the licensing and tax revenue they provide.

"There's a lot of business looking to relocate to a reputable, regulated jurisdiction," he said, noting that there were many online poker sites looking for a new jurisdiction.

"We're hoping to capitalize on that business" by changing the policy, he said.

Craine also said that the policy change only affected bets on casino games and poker. The island still bars casinos there from accepting sports bets placed from the United States.

He said it made that distinction on the basis that U.S. law prohibits sports betting online, but not casino wagering.

Federal prosecutors have said they believe that casino games are also prohibited under American law. And numerous state laws expressly prohibit gambling, even that conducted on the Web, if the activity is not expressly authorized.

The decision by the Isle of Man comes amid a trade dispute over Internet gambling between the United States and Antigua. The Antiguans have complained to the World Trade Organization that the United States is violating its trade obligations by prohibiting Internet gambling.

In November, the WTO issued a preliminary ruling in favor of Antigua. Last Friday, the office of the U.S. trade representative filed a notice of appeal, asserting that longstanding American trade policy and social mores were consistent with a prohibition of online gambling.

The deadline for Washington to file its first brief in the appeal is Friday, according to lawyers involved in the case. The WTO has 90 days from last Friday's notice of appeal to issue a decision in the case.

Last year, some $7.6-billion was lost in wagers over the Internet, an analyst said, about half of that by U.S. residents.

Many countries, including Britain, license and regulate online casinos. The level of regulation differs widely, with some countries enforcing more rigorous regulations as a way of helping the casinos establish themselves as reputable.

The policies also differ as to whether they accept bets from Americans. What they have in common is a desire to attract more Internet casinos, the analysts said.