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Another twist in the long running Unlawful Internet Gambling Enforcement Act saga was unveiled recently by the European Union. A new EU report condemns the U.S. and claims that the UIGEA is in breach of WTO statutes. The American government’s decision to make online gambling transactions illegal forced countless European businesses out of the lucrative U.S. market.

In March 2008 the London-based Remote Gambling Association filed a complaint with the EU, claiming that U.S. was in breach of World Trade Organization rules. Last month the EU began to an internal investigation to decide whether or not the RGA complaint stood on solid legal ground. This report has now been released stating that “the US measures constitute an obstacle to trade that is inconsistent with WTO rules. As a result, WTO proceedings would be justified.”

The WTO arbitrated a similar case between the U.S. and Antigua last year. They agreed that the U.S. had breached trade agreements by blocking Antiguan companies from offering online gambling services to American people. The U.S. still refuses to pay the awarded compensation.

An outright ban on all online gambling companies may not have breached WTO rules, but the U.S. government’s inconsistency may be their undoing. Allowing some U.S. based companies to continue operations, while blocking EU businesses, breaks WTO free trade agreements. The report specifically identifies the case of horse betting, which is currently offered to American customers by a number of U.S. based websites. Meanwhile, European horse betting sites are refused entry to the market.

The report adds that, “There are serious adverse effects for the EU. They include revenue and stock market value lost by affected companies as a result of their absence from the US market and also the threat of serious sanctions hanging over them that affect their normal operations outside of the US.” The Wall Street Journal has reported that many gambling company executives now steer clear of the U.S, a number of their compatriots having been arrested. In many cases, legal proceedings are brought against company owners for gambling services offered before the UIGEA was passed in 2006.

The Wall Street Journal added that “the EU said on Wednesday it would hold off on filing a formal complaint (to the WTO) in hopes of negotiating some sort of solution with the Obama Administration.” Given the Antuiga case, the EU will feel that is has a strong chance of winning any WTO hearing – but the necessary investigation would be time consuming and costly. Negotiations with the Obama administration about lifting the online gambling ban seems a more likely alternative. The U.S. may also be keen to avoid an official hearing, given that compensation awards could be in the region of $100 billion.

This is all excellent news for Barney Frank, who’s pro-gambling bill is currently making its way through Congress. He came out firmly in support of the EU’s findings, stating that: “This is further argument for repealing the law which currently restricts the personal freedom of American adults to gamble online.” The 27 member nations of the European Union will certainly be hoping that Frank’s endeavors allow their businesses a route back into the U.S. market.